REAL ESTATE QUESTION 4

1 GUIDANCE FOR WEEK THREE REAL ESTATE 431 : COMMERCIAL REAL ESTATE INVESTMENT INSTRUCTOR : TRACY GREEN , M.P.A., B.A. Readings 1. Read Roos, Chapter s 10 thru 12 . Additional Resources AIR Commercial Real Estate Association http://www.airea.com/HOME/Home.aspx CCIM Institute http://www.ccim.com/ National Association of Realtors http://www.realtor.or g California Association of Realtors http://www.car.org The National Bureau of Economic Research http://www.nyber.org Weekly Overview During week 3 you are required to read Chapter s 10 thru 12 . The se chapters will give you an overview on finding, analyzing and negotiating real estate deals. Analyzing commercial real estate deals includes site analysis and being knowledgeable about sub markets. Site analysis involves the compilation of al l economic, social, political, legal, and environmental forces that influence the productivity of a given site, whether improved or not, and with consideration to current and/or alternative uses. If this sounds a little like “highest and best use” analysi s to those of you familiar with appraisal terminology, it is similar, except that site analysis 2 might be more focused. For example, site analysis might determine the appropriateness or feasibility of a specific location for the intended use of a specific business. Site analysis might involve a comparison of three or more sites for competitive advantages for a specific development concept or use. Site analysis might involve an exploration of alternative uses for a given site at the present time, or be bas ed on likely trends in the future, that is “a site looking for a use.” A submarke t is an arbitrary grouping of either the demand side of a market (buyers or tenan ts) or the supply side of a market (the market within which the subject parcel or property competes). While it is not necessary to define submarkets in purely geographical terms, and certainly cyber -markets could be defined in submarket groupings without regard to location, geography tends to be a primary determinant of submarket definitions for the real estate industry. From the demand side, the submarket is the typical profile attributes of the potential users of space for a specific property use. For example, the profile of potential users for an independent - living, high -amenity, adult -only apartment complex could be defined by age, wealth, income sources, and geographic location from which such a market of users could be drawn with some degree of conf idence. From the supply side, the submarket is the based upon the attributes of those properties that may compete with the proposed or current use, including geography as one of the important attributes. For example, a parcel with a proposed upscale hous ing development may compete with properties of a similar price range, similar in size, similar in amenities, and within a certain geographic area from which the dominant source of potential buyers come.

Some submarkets may involve a relevant geographic ran ge of only a few miles in radius, such as a convenience -oriented “strip” shopping center or single family housing, while others such as industrial parts distribution warehouses might involve a submarket of 300 miles or more. 3 In addition to demand and supp ly factors, as well as the legal constraints of zoning or building codes, the suitability of a given site for the proposed use is important, which is where physical analysis comes into play. Site size, shape, topography, soil type, geology, vegetation, wildlife, surface and subsurface water, utility access, access and traffic flows, noise, air pollution, and climate all must be considered in a systematic site analysis. One of the important tools for combining physical analyses with market analysis is through the use of geographic information systems that integrate several layers of information. REFERENCES Larsen, J. E. (2007). Real Estate: Building Strong Foundations. New Jersey: Wiley. Miller, N. G. . and Geltner, D. M. (2005 ). Real Estate Principles for the New Economy . M ason, OH: Cengage. Nemeth, C.P. (2011). Reality of Real Estate (3rd ed.). Boston: Pearson Prentice Hall. De Ross, D. (2008). Commercial Real Estate Investing . New Jersey: Wiley.