Finance 454 Real Estate Market Analysis A Short

Finance 454: Real Estate Market Analysis A Short Course in the Analysis of Residential and Commercial Real Estate Markets Wayne Foss, DBA, MAI, CRE, FRICS Foss Consulting Group Email: wfoss@fossconsult. com

Introduction n Student Introduction n Name Academic Level Real Estate Experience What do you expect to get from this course? Future Goals Instructor Introduction 2

Course Syllabus n Objectives g n To develop an analytical approach to identifying and solving real estate problems Course Coverage techniques of real estate market analysis g development of market analysis theories g forecasting techniques g n Prerequisites g Fin 351 or equivalent 3

Course Syllabus, con’t. . . n Required Textbook u Market Analysis for Real Estate, Fanning, Stephen F. F F n 1 st Edition, (2005) The Appraisal Institute Course Project u Market Analysis of a Commercial or Residential Site Group Project (3 to 4 students to a group) F Property of my choice F length approximately 30 to 50 pages including exhibits F presentation of findings in class F 4

Course Syllabus, con’t. . . n Examinations u Type F 50% Multiple Choice or True False • Closed Book, Closed Notes F 50% Short Answer or Problems • Open Book, Open Notes u u u No Partial Credit Calculators are permitted, computers are not Make-up examinations are not permitted F Unless there an extraordinary circumstance 5

Course Syllabus, con’t. . . n Final Grade Weighting Policy u u Mid-term Final Exam Course Project Class Participation F Total: 30% 35% 30% 5% 100% 6

Course Syllabus, con’t. . . The Final Course Grade will be based on the following Scale: 7

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Class Schedule DATE TOPIC ASSIGNMENT Jan. 29 Introduction Feb. 5 Real Estate Market Analysis Ch 1 -5 12 Real Estate Market Analysis Ch 7 -10 19 Data Sources for Market Analysis Ch 10 26 Population Forecasting & Economic Base Analysis Ch 6 Basic Concepts and Real Estate Marketability Analysis Ch 11 12 Highest and Best Use Decisions Ch 16 19 Mid-Term Examination 26 Field Assignment – Projects Mar. 5 - - 9

Class Schedule DATE Apr 2 9 TOPIC Spring Break – Yahoo! Market Analysis for Shopping Centers ASSIGNMENT Ch 12, 18, 19 16 Shopping Centers, continued 23 Market Analysis for Housing: Subdivisions Ch 15 30 Market Analysis for Office Buildings Ch 13 Market Analysis for Vacant Land Ch 17 May 7 14 Case Presentations of Project Papers 21 Final Examination 10

Market Analysis n Market Analysis is the study of real estate market conditions for a specific type of property u A Market Study F u A Marketability Study F u u Macroeconomic Analysis that examines general market conditions of supply, demand, pricing, demographics of a specific area or property type Microeconomic study, examines the marketability of a given property or class of properties. Investment Analysis Feasibility Analysis 11

Six Step Market Analysis Process n n n Step 1: Define the Product u (property productivity analysis) Step 2: Define Users of the Property u (market delineation) Step 3: Forecast Demand Factors Step 4: Inventory and Forecast Competitive Supply Step 5: Analyze and Interaction of Supply and Demand u (residual demand study) Step 6: Forecast Subject Capture 12

Levels of Market Analysis n Inferred Demand Studies u Level A F u Level B F n more descriptive than analytical relies upon broad based surveys Fundamental Demand Studies u Level C F u employs fundamental forecasting techniques Level D F use of primary research and surveys 13

Property Productivity Analysis n Site and Improvements u n Legal and Regulatory u n Site analysis Zoning and General Plan constraints Location u u Linkages Urban Growth 14

Highest and Best Use Decisions n Highest and Best Use Analysis u u u Land or Site as though vacant Property as Improved Systematic Approach to analysis F n n Legally Permissibility, Physically Possible, Financial Feasibility, Maximally Productive Timing Feasibility Rent 15

Population Forecasting n Definitions of: u u n Curve Fitting, then extrapolation u n Projections (prediction) Forecast Six Alternative Curves Forecasts using building permit data 16

Economic Base Analysis n n Use is to determine the concentration of an industry in a given place Definitions of: u u n Economic Base Development of Location Quotients Types of Data utilized u Basic versus non-basic employment 17

Sources of Demand n Employment u u n Manufacturing Services (Office Users) Population Growth u u Housing Units Shopping 18

Shopping Centers n n Types of Shopping Centers u Tenant Mix and Size Trade Area u defined in terms of: Primary, Secondary, Tertiary F Driving time F Total Sales F 19

Market Analysis for Housing n n Market delineation to determine its components Segment housing demand by: u housing type u ability to pay 20

Office Buildings n n Building Types Office Building Terms u u u n Gross Building Area Rentable Area Rented Area Net Occupied Space (Useable) Efficiency Ratio Segment office demand by: u type of office building u location F ie: CBD vs. Suburbs 21

Vacant Land n n Physical and Legal determinants of use access linkages land use patterns and community growth development of a land use plan including timing for potential development 22

Case Presentations and the Market Analysis Report n Case Presentations u u n 3 to 4 students to a group 15 to 20 minute presentation of findings The Market Analysis Report u u Complete Self-Contained Format 30 to 50 pages 23

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So That’s An Introduction to Real Estate Market Analysis Wayne Foss, DBA, MAI, CRE, FRICS, Fullerton, CA USA Phone: (714) 871 -3585 Fax: (714) 871 -8123 Email: wfoss@fossconsult. com 25