IntroLecture_fa10

IntroLecture_fa10 - Course Introduction Real Estate Space...

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Course Introduction Course Introduction Real Estate Space and Asset Markets
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What is a “market”?… What is a “market”?… A mechanism for the voluntary exchange of goods and services among owners .
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Two types of markets relevant Two types of markets relevant to commercial property: to commercial property: 1. The Space Market . . . For the usage (or right to use ) “real property” . AKA “usage market ”, or “rental market ”. (e.g., tenants & landlords exchange money for leases.) 2. The Asset Market . . . For the ownership of “real property” . AKA “property market ”. (e.g., TIAA-CREF exchanges my pension $ for an office bldg.)
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1. The Space Market… 1. The Space Market… Supply: Property Owners ( Landlords ) Demand: Property Users ( Tenants ) MARKET Resulting equilibria: Rents (e.g.$/SF) Occupancy
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Concept: “ Concept: “ Segmentation Segmentation ” in ” in the Space Market… the Space Market… A market is “segmented” if it breaks up into sub-markets , or market segments . Within each sub-market or segment, the same good may have a different equilibrium price . The real estate space market is highly segmented. Why?…
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Demand side: Demand side: Users require specific types of space. Users require specific locations (or types of locations) Users desire specific levels of building quality for their operations
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Supply side: Supply side: Buildings are of specific physical types (warehouses high-rise offices). Buildings of a specific type may be of varying quality (Class A, Class B) Buildings are in specific locations (and they can’t move!).
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Property type: Property type: Residential (apartment) Office Industrial (warehouse)
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