Real Estate Economics

1. Real EstateEconomics Chapter 8 Real Estate Markets Page 37

2. Ch 8 – R. E. Economics • Business Real Estate Markets • Overall economic characteristics • Industrial real estate markets • Commercial real estate markets • Rural Real Estate Markets • Agricultural real estate markets • Recreational real estate markets

3. Commercial or Business mixed use • Commercial • Wholesale plumbing supply • Retail • Macy’s • Industrial • U. S. Steel • Non-owner occupied residential • Multi-user residential apartment building • Research • Genetech • Office building • Transamerica Pyramid • Non-owner occupied commercial • Motel 6 Page 37

4. Market characteristics • S upply • Existing amount available • Rate of new construction • Conversions and demolitions • D emand • Prosperity, recession, recovery, depression • P rice • Market rates for usage, competition Page 37

5. Commerical and Industrial • 1. tied to movements in the business cycle • GDP demand for business - RE increases • GDP drops demand for business RE • 2. Supply side = • Long planning & construction period to build • “pipeline effect” • Commercial market cycles between periods of: • Under supply • Over demand Page 37

6. 3. Users of business properties • Are more Knowledgeable • Spend time analyzing lease vs. buy • Analyze the price Page 37

7. R.E.Agent’s role • Residential salesperson/leasing agent • Negotiator • Commerical specialists: • Property managers (leasing agents) • Industrial expert • Income propertyappraiser • Real estate attorney Page 38

8. Industrial company managers: • Seek a physical location that will • Minimize costs • Maximize sales Page 38

9. Industrial location factors • Transportation • Labor costs • Proximity to raw materials or resale markets • Community attitudes • Taxes • Energy sources • Utilities such as water & sewage • Pollution controls • Climate • Cost and availability of sites • Adequate and affordable housing for employees

10. Trends In Industrial Real Estate Markets Industrial Parks Large Low-Level Buildings Instead of Multiple-Story Factories Located Near Airports, Freeways, Renovated Water Ports

11. Commercial real estate • Access & linkage/nearness to other compatible businesses • Local community • Comparative advantage • Customer convenience • Uniqueness Page 38

12. Central Business District (CBD) 1. loss of national retail stores 2. fewer large office buildings 3. decrease in government buildings Page 38

13. Retail • Suburban shopping centers • Malls, strip malls • Big box outlets • Costco, Wal-Mart • Sam’s club, Price club • Lowe’s, Home depot Page 38

14. Types of Shopping Centers Neighborhood Community Regional

15. Foreign Investment $ GBV Top Ten states in 1990 In Billions of Dollars - $GBV = Gross Book Value of Property, Plant and Equipment

16. Farmland use • Supply: which crops will grow at what cost? • Demand: which crops does the consumer desire? • Price: what will the consumer pay? The more profitable crops are planted. The less profitable crops are eliminated. Page 39

17. Value of Agricultural Land • Soil productivity • Water • Growing season • Shape • Size • Topography • Federal crop programs (subsidy) • Environmental regulations • Other government controls Page 39

18. Demand for Recreational R.E. • Discretionary income • Income in excess of basic necessities • Leisure time • Time not engaged in making money • Prosperous economy • High employment, and leisure time with discretionary income 4. Transportation & fuel • Priced reasonable Page 39