Real Estate Market Research 360

1. Real Estate Market Research360 Matt Disston 714-356-6538 mattd@dmgnet.com

2. Markets Research "The best teachers are those that show you where to look, but don't tell you what to see." -- Alexandra Trenfor Never forget, the road that comes into a market, also leads out. -- Matt Disston

3. Grading Rubric • Midterm exam 20% • Group Project 40% • Final 30% • Attendance/Participation/ Assignments 10% ______ 100%

4. Code of Conduct • Code of Conduct • All participants in the course are bound by the The University’s Student Conduct Code is Washington Administrative Code 478-120 (http://app.leg.wa.gov/WAC/default.aspx?cite=478-120). • Academic Honesty Policy • The University is an institution of learning, research, and scholarship predicated on the existence of an environment of honesty and integrity. As members of the academic community, faculty, students, and administrative officials share responsibility for maintaining this environment. It is essential that all members of the academic community subscribe to the ideal of academic honesty and integrity and accept individual responsibility for their work.

5. Code of Conduct Academic Honesty (continued) • Academic dishonesty is unacceptable and will not be tolerated at the University of Washington. Cheating, forgery, dishonest conduct, plagiarism, and collusion in dishonest activities erode the University's educational, research, and social roles. • Students who knowingly or intentionally conduct or help another student engage in dishonest conduct, acts of cheating, or plagiarism will be subject to disciplinary action at the discretion of the University.

6. Disability Services • Disability ServicesIf you need support or assistance because of a disability, you may be eligible for • accommodations or services through the Disability Service Center at UC Irvine.  Please  • DSC’s website: Students (http://depts.washington.edu/uwdrs/ ). The DSC will work with your instructor to make any necessary accommodations. Please note that it is your responsibility to initiate

7. Assignment and Group Project Objectives • Two assignments will be assigned: • The first involves researching sources of and performing a demographic analysis for a market within the Metropolitan Statistical Area (MSA) using existing data. • The second assignment involves preparing a market profile, identifying dynamics of competitive nodes, pricing, trade area, and calculation of support • Discuss/illustrate potential sources of demand. Students will present recommendations in the last class. • Students will work in teams of two on these assignments. You must turn in a hard copy of all assignments prior to the assigned deadline. Students will choose the land use and market area to be analyzed. Assignments sent via email won’t be accepted without prior approval.

8. Final Group Project • Utilizes assignments 1 and 2 • Focus on a land use and project of your choosing • Residential • Retail • Commercial office • Industrial/R&D/Flex • Mixed use (careful, this involves several land uses) • It can be existing, proposed, real or an opportunity you think exists

9. Final Group Project Assignment 1: • Choose your project • Describe the location • Dynamics/activities/land uses nearby • Transportation characteristics • Visibility • Entitlement requirements • Physical/environmental characteristics

10. Final Group ProjectAssignment 1 (cont) • Describe the general MSA market dynamics – General tabular analysis -- Big to small (State, county, selected local cities, site market or trade area) • What are the trends in the past five years • Population • Households • Employment • Income/purchasing power (Retail) • Location of development nodes/major retailers • Opportunities and constraints of the site/project

11. Final Group ProjectAssignment 2 • Identify the market support • Type of user/customer • Income within market/trade area • Profile existing competitive projects • Price/rent/sales • Amenities/specialty characteristics • Competitive visibility and transportation strengths and weaknesses • Absorption • Calculate/project demand • Estimate/project competitive supply • Recommendations

12. Marketing ResearchDefinition • Market research is the formalized process of obtaining information to be used in marketing decisions. • Product: Information! • not decisions, • not a marketing plan, • not a SWOT, • not a new business • Article

13. Real Estate Market Research • Objective: • Understanding the market research approach • Understanding the real estate process and where market research fits in • Finding macro and micro economic data • Applying data to the opportunity • Making real estate decisions

14. General Research Process • Establish the objective with the client – select the marketing opportunity/problem -- What is the customer’s “marketing pain”? • Express the objective(s) in terms of “researchable questions” • Agree on the measurements to use and the information needed to answer the “researchable questions” – what is the research design • Determine how to collect the information -- Data collection methodology • Design the data collection forms – questionnaire, competitor product specification sheets • Determine the sampling method/collect data • Analyze the data • Write the report Marketing Research – Methods http://www.dmgnet.com/uci/lectures/Market Research Process.pdf

15. Real Estate Market ResearchVocabulary • 4Ps • Product • Price • Placement • Promotion • Market share • Market segment • Measures of central tendency • Mean • Median • Mode • Economics • Per capita (Measurement) • Primary data • Secondary data • Experimental data • Segmentation • Targeting • Positioning • Entitlement • Infrastructure • Feasibility • Marketing “pain”

16. Real Estate Market ResearchVocabulary • Leverage • Equity • Debt • Baby boomer • Gen X, Gen Y, Millennial • Purchasing Power • “A project is feasible when the real estate analyst determines that there is a reasonable likelihood of satisfying explicit objectives when a selected course of action is tested for fit to a context of • Employment • Household • Tenure • MSA (CMSA) • GLA • Gross, modified gross, net, triple net leases specific constraints and limited resources.” – Graaskamp • Market research is like driving a car looking in the rear view mirror and only being able to see a few yards ahead.

17. Real EstateVocabulary • Product • Urban limit line • Encroachment • Greenfield • Premiums • Lease • NNN • Modified Gross • Gross • Full Service • Capture rate • Transfer of sales • Absorption • Single Family Detached • Single Family Attached • Stacked Flat • Apartment (rent) • Condominium (for sale – misnomer) • Units per acre (ac. = 43,560 s.f.) • Master Planned Community • Subdivision • Infill • Entitlement • Permit process • Market Rate • “Spec” (Speculative)

18. Real Estate Vocabulary • Second home project • Seniors Housing • Affordable Housing • Median Income • Medium • Low • Very Low • LIHTC • Student housing • Workforce Housing • Credit tenant • GLA • “CAM” charges • Mixed use

19. Supply/Demand

20. Three Types of Data

21. Experimentation • Examples of simple experimental design: • Experiments require a dependent and independent variable

22. Real Estate Development • 8 step process • Idea inception • Idea refinement • Feasibility • Contract negotiation • Commitment • Construction • Completion • Asset management

23. Real Estate DevelopmentFood for Thought • Real estate development is both a wholesale and retail business • Developers can be optimistic and lemmings • If something looks different, it is! • Use your intuitive skills • Mistakes can teach more than successes • Time costs money • Understand the customer’s marketing pain • Development is a rigorous, team sport. Most important team members are your land use lawyer, engineer and architect. • Choose team members who know the jurisdiction, market, site, environmental issues, market trends and sensibilities. • Real estate is both a global and provincial business.

24. Where to StartWhat are the most important requirements of a project successfully complete a real estate project? • Money? • A plan? • A product? • Marketing research? • You need A Customer! • No (Well some money) • No • No • No (Nice try!)

25. Customers • What does your customer want/need? • Find their marketing pain • What is the the product life cycle? • Find similarities: (Primary data) • Who uses the product? • What similar characteristics describe them? (segment) • When are they a customer? • What are the conditions of the purchase? • How did they discover the product? • How could/did they become your customers? • Why didn’t everyone purchase?

26. Quantitative Research • Tactical vs Strategic research • Tactical – aimed at a specific issue. Answers a specific question. • What percentage of our customers are over 21? • Do people prefer red or green? • Strategic – may not have specific answer to test. Aimed at identifying the trends, characteristics and similarities in the data. • Looking for trends in a database – What are the biases in the data? • What are existing customers doing? • What are the shopping “bundles” our product experiences?

27. Measurement • Measurement is the assignment of numbers to characteristics according to rules. • Operational • Conceptual • Range of variables • True characteristics • Additional stable charactersitics • Short term characteristics • Situational characteristics

28. Primary DataFieldwork • Describe the project • Size • Product type • Number of units by type /market segment /s.f. • Public programs • Affordable housing • Workforce housing • College housing • Seniors • Site and location • Available services • City characteristics/Zoning • Topo/drainage/dev. issues • Accessibility/Visibility • Qualitative and quantitative • Surrounding land uses • Immediate and general • Shopping and services • Market area definition • Why? • Demographic characteristics • Economic conditions • Demand • Competitive supply • Planned development • Price/absorption projection

29. Where to Start • Focus on the customer (Know what they want) • For example: • SFD – • families need higher bed/bath counts • Investors need visibility and healthy rental market • Seniors want amenities (golf, views, vacations) • SFA • Starter homes • Amenities according to customer preference • Move up from rental—tax savings • MF • Flexibility • Near work/school • Amenities

30. Where to Start • Retail • Location • Trade Area Demographics/Income/Expenditure/Ethnicity • Access/Visibility/Traffic/ • Growth Characteristics • Competition • Office • Presence (CBD vs Suburban) • Space accommodation/flexibility • Amenities • Cost/Deal • Industrial • Suitability • Access • Cost

31. Where to Start • Hotel • Resident • Cost • Business • Proximity • Facilities • Cost • Tourist • Proximity • Amenities • Service • Convention • Facilities • Access • Amenities • Cost

32. Real Estate DevelopmentIntroduction to the real estate development process • Players • Owner • Developer • Jurisdiction • Financier • Bank • REIT • Pension fund • Venture capitalist • Wealthy investor • Non-profit • Agency

33. Real Estate DevelopmentIntroduction to the real estate development process(cont.) • Consultants • Attorney • Engineer • Architect • Market research/financial analyst • Environmental analyst • Land Planner • Landscape architect • Traffic/Transportation analyst • Public relations/Community liaison • Subcontractors • Public • Neighbors • Customers

34. Real Estate Development Introduction to the real estate development process(cont.) • Customers – marketing pain • Who are the customers? • Office • Industrial • Residential • For sale • Rental • Retail -- retailer • Goals and objectives • Public goals • Private objectives • Building an interdisciplinary team • Team takes little or no risk; Architect/Market-Finance,

35. Real Estate Market Research • Ch 1 • Why market research? • Preliminary project planning • Financial analysis inputs • Demonstrate demand • Attract equity investors • Create a marketable, competitive product • Does the project fit? • Meet with public acceptance (entitlement to use) • To gain public sector approvals • Infrastructure accommodation • Project Ops & Cons

36. Real Estate Market Research • Who uses Market research? • Developers • Government officials • Investors/Lenders • Tenants/Buyers Chapter 2 • Approach to market research • Describe the regional setting • Describe the market area • Natural features • Built barriers • Traffic • Population density • Political boundaries • Neighborhood boundaries • Development nature, size, mix etc.

37. Real Estate Market Research • Primary/secondary trade area • Competitive clusters • Inspecting the site • Sites Ops & Cons • Proximity to amenities • Supply/Demand • Compare to competition • Capture rate • Absorption • Recommendations • Iterative process

38. Real Estate Market Research • The identification of characteristics of demand and supply as they pertain to the product/land use being considered. • Typically, supply-side analysis considers: • Macroeconomic trends (MSA, County, Absorption, Vacancy, Rents, Prices) • Local market indicators (Construction trends/activity) • Competitive performance (Local competitive absorption/pricing trends) • Supply -- Residential • Single family detached • Subdivision • Small project – parcel development • Single family attached • Subdivided lots • Townhome/condominium • Multi-family (Apts)

39. Real Estate Market Research • Demand • In some cases real demand exists that cannot be demonstrated based on household growth or income gains. • Deteriorated housing • Non-competitive housing • Population • Households • Age • Income • Lifestyle/HH composition • Ethnicity/Cultural bias • Retail - Income - Expenditure

40. Real Estate Market Research Chapter 3 - Supply/demand • Economics • Population • Characteristics relative to the product • Employment • Characteristics relative to the product • Income/expenditure • Visitation • TO tax • Housing tenure • Data sources • Useful links

41. Real Estate Market Research • Economic diversity/trends • Key drivers • Compare statistics to larger region (State) • Major employers • Labor force profile • Visitor trends • Occupied hotel rooms • Estimates bu market segment • Patronage at attractions • IACVB (Convention and visitors bureau) • Consumers • Demogrphics • Income trends • Expenditure • Supply side performance

42. Seattle-Tacoma MSA

43. Market ResearchProcess -- MIS Research Schematic: Marketing Environment Internal Information Marketing Research Department External Information Organized Information Guidance Decisions Recurrent MIS Marketing Manager Monitoring Requested Requests and Refinement

44. Secondary DataPopulation

45. Secondary DataEmployment

46. Secondary Data Census Tracts

47. Real Estate Market Research • Employment – NAICS (Used to be SIC code) • Industrial • Office • Medical • R&D/Flex • Tech • Self employed • Transient lodging • Business • Convention • Residential

48. Real Estate Market Research • Retail – existing shopping centers • Super regional • Regional • Community • Neighborhood • Power centers/category killers • Specialty • General Merchandise/Discount • Services • Commercial office • Nodes • Neighborhood • Medical

49. Real Estate Market Research • Industrial • Manufacturing • Warehousing • Special use • R&D/Flex • Live/work • Transient lodging • Hotel • Motel • B&B • Air B&B

50. Real Estate Market Research • Ch 4 • Product and community types • Single family subdivisions • Master Planned communities • Infill development • Second homes • Affordable housing • Age restricted housing • Market rate rental development • Student/workforce housing • Single family characteristics • Bed bath count • AC • Size • Heat source • Green elements • Multi family • Size • Amenities • Design • Tenure • Characteristics