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Decision Questions
Where to locate a branch office?
What size or type of building to develop on a specific site?
What type of tenants to look for in marketing a particular
building?
What the rent and expiration term should be on a given lease?
When to begin construction on a development project?
How many units to build this year?
Which cities and property types to invest in so as to allocate
capital where rents are more likely to grow?
Where to locate new retail outlets and/or which stores should
be closed?
Side
Supply Side
Of the Space Usage Market relevant to some
R.E. decision.
micro-level analysis
project
Broader, more
market
submarket
E.g., forecast of supply & demand (&/or rents and vacancy
rates) in Jakarta office market.
Vacancy rate
Market Rent
Quantity of new construction starts
Quantity of new construction
completions
5. Absorption of new space
Vacancy Rate:
o Overbuilding:
Rent:
Construction:
Supply side variable
Starts & completions
o
o
Starts Pipeline
Completions Additions to supply side of market
Absorption:
Change in occupied space
Demand side variable
Gross absorption = Total new lease signings
(Source: Lend Lease Real Estate Investments, Real Estate Outlook: 1999, based on
data from Jamison Research and Lend Lease Investment Research. Lend Lease,
reproduced by permission. )
Trend extrapolation:
Take advantage of inertia in space
market (past partly predicts the future)
Structural Analysis:
Model the structure of the market
(underlying determinants of supply &
demand, e.g. population growth and
employment growth)
Forecast the underlying determinants
(e.g., economic base analysis like we talked
about in Ch.3), then use model to predict
space market.
DEMAND SIDE
Decision implicatons?
Demand Drivers
Population
Household formation (child rearing
ages)
Interest rates
Employment growth (business &
professional
Population occupations)
Residential multifamily
(Apartment renters)
Retail
Office
Industrial
Market Dynamics
The