Finance 454: Real Estate Market Analysis

1. 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

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

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

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

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

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

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

9. Class Schedule DATETOPICASSIGNMENT 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 & Ch 6 Economic Base Analysis Mar. 5 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

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

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

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

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

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

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

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

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

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

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

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

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

22. Vacant Land • 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

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

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