Chapter 6:

Real Estate Market Analysis

 R.E. “Market Analysis”
is a collection of practical analytical tools and
procedures designed to help answer
decision questions, such as:
 Menjawab pertanyaan2:
– What size or type of building to develop on a specific
site?
– What type of tenants to look for in marketing a
particular building?
– What the rent and expiration term should be on a given
lease?
– When to begin construction on a development project?
– How many units to build this year?
– Which cities and property types to invest in so as to
allocate capital where rents are more likely to grow?
– Where to locate new retail outlets and/or which stores
should be closed?
Market Analysis biasanya memerlukan
pemahaman prediksi kualitatif dan
kuantitatif dari :

Demand Side
 Supply Side

– atas Space Usage Market yang berhubungan

dengan pengambilan keputusan bisnis .
 Dua Jenis Utama Market Analysis:
 Specific micro-level analysis
– Diterpkan pada single property, site, atau Pengguna
– Contoh., feasibility analysis atau site analysis untuk
sebuah projek pengembangan.
 Karakterisasai sebuah Pasar Ruang yang lebih
luas dan umum.
– Diterapkaan pada segmen atau sub-market pasar
ruang.
– Seperti: forecast supply & demand ( dan atau sewa
dan tingkat kekosongan) in Jakarta office market, atau
Pasar Perkantoran Klas A di Jakarta Pusat
 Analisis pasar yang umum difokuskan
pada
Lima Indikator utama pasar RE:
1.  Vacancy rate
2.  Market Rent
3.  Quantity of new construction starts
4.  Quantity of new construction
completions
5.  Absorption of new space
 Vacancy Rate:
      Persentage stock ruang yang tidak dihuni
      Vac.Rate = (Empty M2)/(Total M2) = 1 –
Occup.Rate
      waspadai sub-lease space:
o    Raung yang tersewa namun tidak dihuni adalah vacant.
      Vacancy Rate merupakan indikator equilibrium
(keseimbangan antara supply & demand dalam
pasar ruang )
 Rent ( sewa ):
  Sewa baru di pasar RE
  merupakan salah satu variable equilibrium
  Merupakan variable penting pasar ruang
  Waspadai “asking rent” vs “effective
rent”
 contoh:
$10 sewa /m2/bln tapi dengan1 tahun
abatement bagi penyewaan 5 tahun:
o    apakah ini merupakan “effective rent”?
 “real rent”
– sewa yang telah disesuaikan dengan tingkat
inflasi (sebagai indikator kecenderungan
pasar)
 Construction:
      Supply side variable
      Starts & completions
o    Starts  “Pipeline”
o    Completions  Additions to supply side of market
Don’t forget projects in permitting & planning stage too
      Consider net addition to supply:
o    Construction Completions minus Demolition &
Conversion Out
o    Include re-habs & conversions in also
 Absorption:
 Perubahan dalam tingkat hunian ruang
 Variable dari sisi demand
 “Gross absorption” = Total sewa baru yang
ditandatangani
o    termasuk perpinbdahan sewa ruang dalam pasar
 “Net absorption” = Net increase atas ruang terhuni
 Net absorption lebih merupakan indikator permintaan
pasar
 (Vacant SF)t = (Vacant SF)t-1
+ (Constr)t – (Net Absorption)t
 Variable indikator pasar:

 Vacancy, Rent, Construction, Absorption

Dapat digunakan sebagai karakterisasi dan

pemahaman pasar sesaat, dan forecast
bagaimana hal ini berhubungan dengan
pengambilan keputusan RE.
 Contoh, ukuran Months Supply :

Vac  Constr
MS 
NetAbsorp / 12
MS < Typical Construction Project Duration
 Tight Market
 ruang bagi projek pengembangan baru
MS > Typ.Constr.Duration
 pasar lesu
 Definisikan cakupan market
analysis…
 Segmentasi Geographic/Jenis Property
(sub-markets)
Kerangka Waktu kajian (historis, forecast
untuk kapan?)
 Metodologi Market analysis
      Simple trend extrapolation vs Structural
analysis
 Trend extrapolation:

 Take advantage of inertia in space market

(past partly predicts the future)
 Consider trends and cycles
 Potential to use statistical techniques (time-
series analysis: autoregression, ARIMA,
VAR, vector error-correction)
 Potential to bring in capital market factors
as predictors
 Structural Analysis:

 Model the structure of the market

(underlying determinants of supply &
demand, e.g. population growth and
employment growth)
 Forecast the underlying determinants (e.g.,
economic base analysis ), then use model
to predict space market.
 Formal analysis requires:
o    Demand model (including elasticities)
o    Supply model (including elasticities & lags)
o    Equilibrium model (including landlord behavior)
  Useful for gaining fundamental understanding of
the market, and making long-term forecasts
  Used more primarily in consultants reports and
academic studies
 Widely used decision-making tool:
Basic short-term (1-3 yr) structural market analysis:
SUPPLY SIDE DEMAND SIDE

Inventory existing supply Identify sources of space usage demand

Quantify relationship between

demand sources and quantity of
space usage

Inventory construction pipeline Forecast demand sources

Forecast of new supply Forecast of new demand

Forecast space shortfall or surplus

Decision implicatons?
Major drivers of the demand side of the space market:
Property Type Demand Drivers

Residential single family         Population

(Owner occupied)         Household formation (child rearing
ages)
        Interest rates
        Employment growth (business &
professional occupations)
Residential multifamily         Population
(Apartment renters)         Household formation (non-child-
rearing ages)
        Local housing affordability
        Employment growth (blue collar
occupations)
Retail         Aggregate disposable income
        Aggregate household wealth
        Traffic volume (specific sites)

Office Employment in office occupations:

        Finance, Insurance, Real Estate
(FIRE)
        Business & professional services
        Legal services
Industrial         Manufacturing employment
        Transportation employment
        Airfreight volume
        Rail & truck volume

Hotel & convention         Air passenger volume

        Tourism receipts or number
visitors
 Market Dynamics
 The real estate cycle may be different from and
partially independent of the underlying business
cycle in the local economy.
 The cycle will be much more exaggerated in the
construction and development industry than in
other aspects of the real estate market, such as
rents and vacancy.
 The vacancy cycle tends to slightly lead the rent
cycle (vacancy peaks before rent bottoms).
 New construction completions tend to peak when
vacancy peaks.