Supply and Demand in the Space Market David M. Harrison, Ph.D. Texas Tech University

Shape of RE Space Market Supply Curve Why might LRMC be Rising? Costs more to build the next unit than the last one Why might LRMC be Falling? Costs less to build the next unit than the last one David M. Harrison, Ph.D. Texas Tech University

Long-run Equilibrium Rent Note: You need to forecast changes in both future demand and future supply, and consider than the “kink point” moves out with increases in the current stock of supply. David M. Harrison, Ph.D. Texas Tech University

Evaluating Changes in Demand Starting in Equilibrium: Starting with Excess Supply: Notes: David M. Harrison, Ph.D. Texas Tech University

Evaluating Changes in Demand Starting with Excess Demand: What About LRMC? Notes: David M. Harrison, Ph.D. Texas Tech University

House Prices and Inflation David M. Harrison, Ph.D. Texas Tech University

More Market Definitions Asset (Property) Market – Vreal estate assets Further Delineating Capital Markets Public Markets – Private Markets – Debt Markets – Equity Markets – David M. Harrison, Ph.D. Texas Tech University

R.E. in U.S. Capital Markets David M. Harrison, Ph.D. Texas Tech University

Size of U.S. Real Estate Markets David M. Harrison, Ph.D. Texas Tech University

Size of U.S. Real Estate Markets David M. Harrison, Ph.D. Texas Tech University

The Real Estate System David M. Harrison, Ph.D. Texas Tech University

Asset Markets and Property Values Commercial property prices are typically quoted in terms of “Cap Rates” David M. Harrison, Ph.D. Texas Tech University

Cap Rate Determinants Opportunity Cost of Capital Growth Expectations Risk David M. Harrison, Ph.D. Texas Tech University

Market Segmentation Space Market Asset Market Segmented due to type and location specificity Asset Market Generally not segmented. Money is money, and financial capital easily flows from one project to another. Asset prices adjust such that expected returns are the same for properties with the same risk, across different property market segments David M. Harrison, Ph.D. Texas Tech University

The Development Industry Development is a creative, entrepreneurial process characterized by… R.E. Development is therefore dealing with the dynamic “cutting edge” of the physical built environment. This makes development the most cyclical branch of the real estate industry. David M. Harrison, Ph.D. Texas Tech University

Construction Starts David M. Harrison, Ph.D. Texas Tech University

Negative Feedback Loops Mechanisms within a system that tend to dampen the changes in the system, helping to keep it in control, preventing it from spiraling out of control. David M. Harrison, Ph.D. Texas Tech University

Feedback Loops in the Real Estate System David M. Harrison, Ph.D. Texas Tech University