FIN3351_Ch.6_Notes

FIN3351_Ch.6_Notes - Chapter 6: Forecasting Ownership...

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I. Introduction o Multiple Factors Affect Real Estate Demand Needs for access (“linkages”) “location, location, and location” Non-locational factors Housing (style, design, size; financing available) Commercial (tenant mix and character; parking facilities) Offices (style, design, floor plate size; amenities and services; electrical and communications service) II. Market Research: Slipperiest Step in Real Estate Valuation o Market segmentation - Differences in preferences or needs among market subgroups The importance of market segmentation: it should focus only on the relevant market segments for the property involved o Implication of market segmentation: Market research must focus on relevant market segments Corollary 1 : Most real estate data irrelevant in studying any particular property Corollary 2: Most important data for a particular market segment may not be readily available III. Real Estate Market Research as Storytelling o Story - when a household buys a home, analysts make assumptions and all of their market research and assumptions for a particular household is called a story. Clues about market segments can come from industry literature (Urban Land Institute) Initial collection of data should depend on the assumptions about segmentation Object: Estimate critical market parameters (rental rates, sales projections, etc.) o A story needs to answer the following questions: 1. What is the real estate product under consideration? 2. Who are the customers? 3. Where are the customers? 4.
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FIN3351_Ch.6_Notes - Chapter 6: Forecasting Ownership...

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