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• What areas of knowledge describe real estate?
• Legal• Market/economics• Financial• Investment• Real estate services
Chapter 1Chapter 1IntroductionIntroduction
Supply and demand for real estate knowledge• Educators
• Universities• Industry organizations
• CCIM, AI, NAR
• Industry• Corporations• Small shops
Chapter 1Chapter 1IntroductionIntroduction
In a commercialized area, why is there a bank or gas station on every corner?
Look at a map; why do major cities located where they are?
Why are all fast food restaurants about the same size?
Chapter 1Chapter 1Thoughts…………….Thoughts…………….
Why are Home Depot and Lowe’s located across the street from one another?
Who owns the larger pieces of real estate we see from day to day? (malls, skyscrapers)
What does the lease look like for a grocery store in a shopping center?
Chapter 1Chapter 1…….. …….. More ThoughtsMore Thoughts
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
What is a market?General real estate markets:
– Space– Asset
Important to analyze both in any setting
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Types of space?– Residential– Office– Retail– Lodging– Industrial– Agricultural
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Idealized Supply & Demand Model– Many buyers and sellers– Knowledge of the market– Products are identical or similar– Supply is flexible in short term– Purchases are small and frequent– Space is not a factor in the analysis
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Real Estate Supply– Real estate improvements - buildings and other
structures – Supply is fixed in the short run– Supply of services is responsive – Additions to supply are small– Additions based on future demand– The cost and availability of financing
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Impact of UniquenessDefining real estate markets
– Geographic Location Neighborhood
– Property type District
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Real Estate Demand Factors– Income– Employment– Population
Shift in demand– Increase in use of existing properties– Increase in prices and rents– Increase in construction and supply
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Asset market– Real estate exists in several capital asset
markets– Owners of income producing real estate receive
cash flows– Investors compete on available real estate
where the prices are set
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Market Analysis: supply & demand analysis on specific property type– Construction– Vacancy (natural)– Absorption– Rents/price levels– What is key for each property?
Chapter 2Chapter 2Real Estate MarketsReal Estate Markets
Residential Market Characteristics– Heavy use of debt– Government intervention– Psychological benefit– Type of investor
Pure Mixed
Causes of urban growth– Comparative advantages– Economic Base
Chapter 3Chapter 3Urban EconomicsUrban Economics
Chapter 3Chapter 3Urban EconomicsUrban Economics
Comparative advantages– Transportation (Ports, Rail, Air)– Education (Austin, Boston, North Carolina)– Natural resources (Iron & Steel)– Environment (utilities, tax rates, culture)– Climate (Florida)– Leadership (pro/anti growth)
Chapter 3Chapter 3Urban EconomicsUrban Economics
Economic Base– Export activities– Pop. serving activities
Types:– Financial– Retail– Manufacturing– Technology
Location of People– Why do people locate where they do?– Jobs and Employment– Climate (Snow Birds)
Chapter 3Chapter 3Urban EconomicsUrban Economics
Chapter 3Chapter 3Urban EconomicsUrban Economics
Highest and Best Use Concept• That use of the land likely to produce the
greatest long-term economic return to the owner.
• Vacant land• Land with improvements
– Interim use– Adaptive use – warehouse lofts
• Returns to owner versus returns to society
Chapter 3Chapter 3Urban EconomicsUrban Economics
Highest and best Use is defined in the Dictionary of Real Estate Appraisal, 3rd edition, page 171, as: – "The reasonably probable and legal use of
vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability."
Chapter 3Chapter 3Urban EconomicsUrban Economics
Bid-Rent Curve: relationship of land rent and distance from the center of the community
Determines highest and best use with respect to distance
Chapter 3Chapter 3Urban EconomicsUrban Economics
A city may grow in several ways– Vertically– In-filling– Extension of settled areas
Models of urban growth– Concentric circle– Axial growth– Sector growth– Multiple nuclei growth
Filtering
Chapter 3Chapter 3Urban EconomicsUrban Economics
Neighborhood Life Cycle– Gestation
Time from idea to completion of development
– Youth Increase in commerce and services
– Maturity Not much change
Chapter 3Chapter 3Urban EconomicsUrban Economics
Neighborhood Life Cycle– Incipient decline
Due to filtering
– Clear decline Costly to maintain
– Accelerating decline/abandonment– (Gentrification)
Chapter 3Chapter 3Urban EconomicsUrban Economics
Summary– Comparative advantages– Economic Base– Bid-rent curve– Models of growth– Neighborhood life cycle
