1. Chapter 2 What drives Real Estate Markets?
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

2. Major Topics Real Estate economic and market terms
How Real Estate markets differ from other asset markets
How capital markets influence space markets
Short term and longer-term real estate demand drivers
Key demand and supply drivers by property type
Sources of data for market analysis
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

3. Key Terms Price Rent ‘Subject’ property Submarket Space Segmentation
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

4. Influences upon Rent & Prices
Macro factors:
Global influences
National influences
Micro factors
Local submarket
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

5. Rents and Prices: Real Estate Demand Curve
or Rent
As Price Decreases,
Quantity Demanded Increases
& vice versa
Quantity
or Space
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

6. Short Run & Long Run Supply Curves
Price
or Rent
Short Run
Supply Curve
Long Run Supply Curve
Quantity
or Space
Long Run Supply Curve is more Elastic
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

7. Supply is added when Price is above Pe
Kinked Supply Curve
Price
or Rent
Supply is added when Price is above Pe Pe
Quantity
or Space
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

8. Uniqueness of Real Estate Markets: Real Estate vs
Uniqueness of Real Estate Markets: Real Estate vs. Perfectly Competitive Markets
Durability
Large (Lumpy) Economic Unit
Information is costly
Transaction Costs
Unique Location and Heterogeneity
Government Intervention
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

9. Market Analysis and Time
Short Run: Less than one year
Intermediate: 2-3 years
Long Run: 4-5 years and longer
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

10. Market Analysis and Time
Short Run:
Supply viewed as essentially fixed
Extreme “seasonality” especially in residential markets
Interest Rates
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

11. Market Analysis and Time
Intermediate to Long Run:
Employment Trends
Will export base employment be main driver of regional growth?
Regional Demographic Trends
Supply Constraints
Regional Transportation Costs
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

12. Direction of Rent & Prices
We have no choice but to forecast the future.
However, there is enough disagreement over the exact rental rate trend which creates opportunities for people
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

13. Connection Between Capital Markets & Physical Markets
Interest Rates
Capital Availability
The importance of local real estate fundamentals
Capital driven business decisions often ignore the supply demand equation - hence can be very risky
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

14. Space & Asset Market Space Market
Local Regional National Global Economy and Trends
Supply Landlords
Demand Tenants
Occupancy and Rents
New Construction
Asset Market
Market Required Rate of Return given Risk Profile
Cash Flow Pro-Forma
Development Industry
Owners Sellers
YES
Profitable?
Cost Including Land
Property Value
Investors Buyers NO
Capital Markets
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

15. Inevitable Real Estate Cycles
Characteristics of Real Estate that leads to cycles:
Large economic and physical size
Need for debt
Government regulation
Typical Real Estate Cycle
Construction begins and accelerates as you move up the curve while vacancy continues to decline
Vacancy increases yet construction continues unable to stop
Vacancy increases at a decreasing rate, some construction
Vacancy declining and no construction
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

16. The Internet, Transport Cost and Real Estate Markets
Growth of internet:
“Death of distance?”
“Location, Location, Location”?
Implications?
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

17. Market Analysis
Determine Dominant Demand Drivers for specific property type
Determine Dominant Supply Drivers for specific property type
Property Types:
Residential Single Family
Residential Multifamily
Industrial
Office
Retail
Hotels
Parking Lots
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

18. Sources of Demand Data Note: web sites may have changed.
Government and Trade Associations:
Lend Lease Real Estate Investments
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

19. Sources of Demand Data Note: web sites may have changed.
Building Permit data:
Current Market Information:
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

20. END
“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner