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FINC 475 > Chapter 4 Lecture > Flashcards

Chapter 4 Lecture Flashcards

1
Q

how do you estimate rent for office space?

A

comps

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2
Q

The amount of rentable area on one whole floor; sometimes called the footprint

A

floor plate

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3
Q

capital stacks

A

LU

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4
Q

most critical aspect of any investing

A

market research

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5
Q

imperative that you are knowledgable about both _____ and _______

A

space and capital markets

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6
Q

vast majority of RE jobs require some level of _____

A

market research

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7
Q

Why market research is needed?

A
  • Investment analysts and portfolio managers =>Day in day out decisions - for rational acquisition decisions, - for managing the existing investment portfolio, - to facilitate operating management decisions
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8
Q

Why do we need to research?

A
  • Tenants need to know a fair price to pay (and owners to charge) - Owners need rent and expense information

=> To forecast cash flow

=> To determine if property performing properly

  • Investors need sales data to determine valuation levels in capital market

=> To decide if to buy or sell

=> To be able to borrow money against asset

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9
Q

appraisal

A

LU

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10
Q

broker opinions

A

LU

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11
Q

_______ (city) is the best grocer anchor in the USA

A

Houston

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12
Q

property economics

A

LU

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13
Q

cannibalization models

A

LU

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14
Q

______, ______, and ______ data changes

A

rent, values. economic

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15
Q

research is a forward looking process

A

Use historical information to start

Make “intelligent” or at least informed predictions about the future

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16
Q

period from idea to getting rent checks

A

gestation period

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17
Q

market analysis: 3 primary types of data to track down

A

market data

property data

financial data

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18
Q

market data: 3 categories

A

demographic

  • objective

economic

  • objective

lifestyle (psychographics)

  • subjective (need to hire people to do psychographic analysis)
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19
Q

Market data: demographics

A
  • means “to describe the people”
  • includes population statistics
  • includes household statistics by:
  • used to understand potential demand for commercial real estate
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20
Q

demographics includes population statistics by:

A

age, race, sex, education & occupation

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21
Q

demographics includes household statistics

A

income tenure (own or rent)

house value

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22
Q

demographics used to understand potential demand for commercial real estate

A

=> ie walmart (middle income, households)

=> ie harley davidson (older, higher income males)

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23
Q
A
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24
Q

Market data demographic: used at different __________

A

geographical levels or delineations

  • general market analysis
  • site analysis
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25
Q

city level statistics generally used

A

general market analysis

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26
Q

data on smaller geographic levels preferred (want to get down to neighborhood level)

A

site analysis

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27
Q

market data: economic

A
  • primarily employment by industry
  • employment indicators provide insight into the nature of the demand for space
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28
Q

employment data is usually described in 3 ways:

A
  • workforce characteristics
  • type of employment
  • total employment
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29
Q

attributes that describe the workforce

A

workforce characteristics

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30
Q

attributes that describe the workforce, including:

A
  • percentage of population employed
  • educational levels
  • skills in the existing workforce
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31
Q

categorized by the kind of work performed

A

type of employment

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32
Q

categorized by the kind of work performed, i.e.:

A

white collar

  • executive, professional, and service

blue collar

  • manufacturing, skilled trades, and service
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33
Q

the total amount of employers, employees, and total earnings in a specified area

A

total employment

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34
Q

Standard Industrial Classification System (SIC)

A

Developed by US Census Bureau, used from 1930-1997

Focused on manufacturer’s end-product

  • Underrepresented telecommunications and software
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35
Q

North American Industry Classification System (NAICS)

A
  • Developed as byproduct of NAFTA
  • Focuses on the production process and is much more detailed
  • 350 more industries than SIC
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36
Q

market data: lifestyle (psychographics)

A
  • refers to intangible characteristics of a local economy
  • are not quantifiable, but may have significant effect on population size
  • influences demand for commercial real estate
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37
Q

lifestyle characteristics include:

A
  • recreational opportunity
  • intellectual and education opportunity
  • cultural trends and values
  • community identity
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38
Q

an abundance of recreational opportunities or lack of opportunities can affect

A

pop size and subsequently demand

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39
Q

i.e. colorado is known for its outdoor sports and rec activities and draws people with those interests

A

recreational opportunity

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40
Q

areas with large numbers of colleges and universities may draw a more highly educated work population than areas with fewer such facilities

A

intellectual and education opportunity

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41
Q

some communities become popular and attract people following a trend

A

cultural trends and values

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42
Q

i.e. group of artists move to an inexpensive (didnt get last words)

A

cultural trends and values

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43
Q

some communities have a distinct identity that may attract certain people or businesses

A

community identity

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44
Q

i.e. research and technical areas draw research and professional workers and businesses

A

community identity

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45
Q

gather self

A

primary source

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46
Q

call tenants and ask what paying (time consuming)

A

primary source

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47
Q

go to courthouse to determine tax levels

A

primary source

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48
Q

go to city for utility costs

A

primary source

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49
Q

interview prospective employees for salary data

A

primary source

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50
Q

use someone else’s data

A

secondary source

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51
Q

talk to a broker about recent lease and sales transactions

A

secondary source

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52
Q

obtain published market data sources on rents and values

A

secondary source

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53
Q

go to government for statistical data

A

secondary source

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54
Q

i.e. census data

A

secondary source

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55
Q

i.e. stacking

A

primary source

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56
Q

stacking

A

LU

57
Q

research process

A
  1. identify the problem 2. global economic trends 3. regional trends 4. determine neighborhood or trade area - analyze demand and competition (supply) - estimate addition to supply 5. compare your property to competition
58
Q

2 main possibilities in market analysis

A
  1. a site-> alternative use?-> productivity analysis-> market activities-> appraisal analysis -> use/value 2. a use-> market need->market analysis-> market appeal and use-> appraisal analysis-> site and value
59
Q

six step process for market analysis

A

define delineate demand supply s&d forecast

60
Q
  1. physical 2. legal 3. location
A

six step process for market analysis: define

61
Q
  1. market area 2. market techniques
A

six step process for market analysis: delineate

62
Q
  1. segmentation 2. tastes/preference 3. historical trends 4. forecast
A

six step process for market analysis: demand

63
Q
  1. existing stock 2. pipeline 3. potential competition 4. attributes and characteristics of competition
A

six step process for market analysis: supply

64
Q
  1. competitive environment 2. residual
A

six step process for market analysis: s&d

65
Q
  1. methods 2. logic 3. capture
A

six step process for market analysis: forecast

66
Q

Maximum net benefit from research occurs when pursued to…

A

point where marginal benefits equal marginal cost

67
Q

Maximum net benefit from research occurs when pursued to point where marginal benefits equal marginal cost: ________ must identify point of maximum benefit

A

decision makers

68
Q

the extent of market research: justified by…

A

market stability and degree of investment complexity

69
Q

Figure 4.2

A

LU

70
Q

preparing the research report

A
  • summarizes procedures employed and describes conclusions reached - everything in research report should be explained in terms of its bearing on the conclusion - report format is determined by nature of research problem and needs of user
71
Q

ex. describing profile of typical tenants

A

descriptive research

72
Q

ex. estimating proportion of people in a specific population who behave in a particular manner

A

descriptive research

73
Q

describes aspect of problem

A

descriptive research

74
Q

requires planning and catalog system

A

descriptive research

75
Q

cross-sectional or time series

A

descriptive research

76
Q

permit reliable generalizations to be drawn after examination of a limited portion of the total pool of information

A

statistical research

77
Q

descriptive statistics

A

LU

78
Q

inferential statistics

A

LU

79
Q
  • relate information to geographic location; series of map overlays - computerized systems
A

geographic information systems (GIS)

80
Q

______ and ________ data are gathered and analyzed on a geographic basis

A

demographic, economic

81
Q

Demographic and economic data are gathered and analyzed on a _________ basis

A

geographic

82
Q

lifestyle information is gathered by _______ who often use the same _______

A

private firms, geographic areas

83
Q

two basic types of areas in which data is collected and reported

A

formal (or geographic) functional data

84
Q

defined by political boundaries such as cities, counties, etc…

A

formal (or geographic)

85
Q

data from census or proprietary data from secondary sources

A

formal (or geographic)

86
Q

areas are contiguous over space and data can be easily collected

A

formal (or geographic)

87
Q

Defined by economic interactions and connections such as trade areas

A

functional data

88
Q

These areas usually identify important economic links that exist between customers and businesses and between businesses in different political-geographic sub-areas

A

functional data

89
Q

These areas are not necessarily contiguous over space, thus making data collection potentially more difficult

A

functional data

90
Q

differences between formal and functional areas can be ____

A

subtle

91
Q

segmentations of formal regions

A
  • state - county - metropolitan statistical area (MSA), defined by OMB - consolidated metropolitan statistical area (CMSA) - primary metropolitan statistical area (PMSA) - place, used by US census bureau - minor civil divisions (MCDs) - census tract - census block group - census block - zip codes - designated market areas (DMA)
92
Q

Are continuous political jurisdictions that contain both incorporated municipalities and unincorporated areas

A

county

93
Q

_____ counties in the united states

A

3,141

94
Q

Area in and around a major city A city with a population of at least 50,000, OR An urbanized area with a population of at least 50K with a total metropolitan population of 100K

A

metropolitan statistical area (MSA)

95
Q

are noncontiguous and often combine several counties

A

metropolitan statistical area

96
Q
  • Meets the requirements of an MSA - Has population of at least 1 million - Area a combination of 2 or more MSAs - Has separate component areas that can be identified by their economic and social integration
A

consolidated metropolitan statistical area (CMSA)

97
Q

Consists of the component areas of CMSAs

A

Primary Metropolitan Statistical Area (PMSA)

98
Q

Designate incorporated (and some unicorporated) cities and towns. Are not geographically contiguous

A

place

99
Q

Represent political and administrative subdivisions of counties in 28 states

A

minor civil divisions (MCDs)

100
Q

Are the largest contiguous geographic areas below the county level for which census data is available

A

census tract

101
Q

Are agglomerations of census block groups containing, on average, approximately 4,000 persons

A

census tract

102
Q

Are agglomerations of census blocks with approximately 3 or 4 block groups on average per census tract Block groups are smaller than tracts

A

census block group

103
Q

census tract and census block are based on ____

A

population

104
Q

Are the smallest geographic area for which census data is collected. May be as small as a city block depending on population density

A

census block

105
Q

Are U.S. Postal Service mailing codes that typically reflect transportation patterns

A

zip codes

106
Q

Are television or broadcast market areas as defined by Nielson Media Research

A

designated market areas (DMA)

107
Q

market data sources

A

city-data.com texas real estate center US census bureau (census.gov) - the american housing survey (AHS) - the economic census - the decennial censes of housing - the decennial census of population bureau of labor statistics (bls.gov) proprietary market data

108
Q
  • Every 4 years - Collects data on housing such as: apartments, single-family homes, mobile homes, vacant housing units, household characteristics, income, housing and neighborhood quality, housing costs, equipment and fuels, size of housing unit, recent movers
A

the american housing survey

109
Q

every 5 years

A

the economic census

110
Q

property data: includes information on ______ properties or parcels

A

specific

111
Q

property data: not in _______ formats and can be more ________

A

standardized, difficult to obtain

112
Q

property data: may contain the following data:

A
  • type of property (industrial, retail, office, resid.) - value (assessed value, sales price or rents) - size (total and vacant square meters) - location (geographic coordinates, zoning, etc.) - business specific (sales, employees, etc.)
113
Q

property data: uses

A
  • gaining information of specific properties - calculating market rents and vacancy rates (from market or submarket) - determining proximity to competitors and linkages - study relationships between properties and regional characteristics
114
Q

appraisal district

A

LU

115
Q

property data: sources

A

primary, secondary, proprietary

116
Q

i.e. personal survey

A

property data: primary source

117
Q

i.e. county assessor

A

property data: secondary source

118
Q

i.e General market or submarket information such as rent and vacancy rates

A

property data: secondary source

119
Q

i.e. Economic development councils, Local planning commissions, Brokerage firms, Lenders, Consulting firms

A

property data: secondary source

120
Q

includes specific data such as sales information and number of employees

A

property data: proprietary source

121
Q

i.e. dunn & bradstreet, torto wheaton, etc.

A

property data: proprietary source

122
Q

demand factors

A

“multiplier” effect on economy economic base analysis

123
Q

Corporations decide to locate in a given area and the number of new jobs in the area increases

A

“multiplier” effect on economy

124
Q

Corporations decide to vacate an area and the number of jobs in that area decreases

A

“multiplier” effect on economy

125
Q

Concerned with evaluating the “multiplier” effect of job gain/loss on a local economy

A

economic base analysis

126
Q

how significant certain jobs are in a certain area

A

location quotient

127
Q

Most real estate economists use ______ as the primary predictor of real estate demand

A

employment

128
Q

Employment causes demand for

A

workers industrial and commercial space

129
Q

Demand for workers creates:

A

Creates demand for goods and services Creates demand for housing

130
Q

brings in dollars from outside, like manufacturing

A

basic industry

131
Q

need them but they just circulate dollars within the city

A

non-basic jobs

132
Q

better to have _______ (basic v. non-basic) jobs in the area

A

basic

133
Q

Examples: bars, fast food, doctors, high school teacher, barbers,

A

non basic jobs

134
Q

example: in college station: education In Austin: Technology (dell), state of texas, education

A

basic jobs

135
Q

explaining why a city exists is an ____

A

art

136
Q

Demands for goods and services creates:

A

Creates demand for more workers Creates demand for more commercial space (retail and office)

137
Q

Demand for more workers creates

A

Creates demand for more housing

138
Q

____________ Employment - Comprised of all those activities that produce goods and services for consumption outside the community - Type of employment that drives the local economy and brings money to local market

A

LU slide 49

139
Q

_________ employment Refers to all activities that produce goods and services for the local economy This type of employment circulates money that is already in the local market and is also known as service employment

A

LU slide 50

FINC 475 (18 decks)

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