FIN3351_Ch.5_Notes

FIN3351_Ch.5_Notes - Chapter 5: Market Determinants of...

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Chapter 5: Market Determinants of Value I. Introduction o Ways to minimize market risk Avoid projects with high market risk Most hotels and motels Restaurants and entertainment facilities Avoid projects with prospective major change Lease rollover for major tenants Major renovations Study urban markets o Urban Real Estate Markets Derive from the Urban Economy Urban growth causes real estate market growth Urban decline causes real estate market decline Urban change causes real estate market change Urban land use patterns dictate real estate location patterns. o Demand for Access: The Gravity that Creates Cities Demand for access causes urban clustering (ex: NY apartments) Competition for access creates the patterns of urban land uses II. The Creation, Growth, and Decline of Cities Linkages – how land use types differ in their locational needs o Where Cities Occur Preindustrial – Fortress or religious center Transition points in trade routes From river to ocean (New York, New Orleans, Hamburg, Rotterdam)
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Intersection of rivers (Pittsburgh, St Louis) From water to rail (New York, Chicago, Minneapolis, St Louis) From rail to rail (Chicago, Atlanta) Natural Resources Mining (San Francisco, Denver, Pittsburgh) Oil (Houston, Dallas, Beaumont-Port Arthur) o The Economic Base of a City Economic Base: Activities that bring income into a city Export activities: Products or services provided to the outside world (most manufacturing; higher education and research, advanced health care) Activities that attract money (retirement, tourism) Indicators of an economic base: (1) major employers, (2) population, (3) income, (4) employment Secondary (Local) Activities: Activities that recirculate income in a city (local
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FIN3351_Ch.5_Notes - Chapter 5: Market Determinants of...

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