AG HBU Possible Exam Questions Flashcards
What is Frictional vacancy?
The amount of vacant space needed in a market for its orderly operation. Frictional vacancy allows for move-ins and move-outs.
Page 253
What is Equilibrium vacancy?
The amount of vacancy that would be expected for a given market when it is at equilibrium. Also known as normal vacancy or natural vacancy.
The vacancy rate for a market at equilibrium (balance of supply and demand)
Page 253
If the market vacancy rate is xxx equilibrium vacancy, the market is undersupplied.
below
Page 253
If the market vacancy rate is equal to equilibrium vacancy, the market is in xxx.
balance
Page 253
If the market vacancy rate is above equilibrium vacancy, the market is xxx.
oversupplied
Page 253
In a residual demand analysis, normal/equilibrium occupancy/vacancy is the xxx used to determine if the market is xxx or xxx.
benchmark
oversupplied
undersupplied
Page 253
Normal/equilibrium vacancy is used to:
- estimate supportable (adjusted) demand.
- determine if the market is above or below equilibrium at a given point in time.
Page 253
Residual demand refers to a comparison of xxx to determine the xxx.
supply and demand
amount of oversupply or undersupply
Page 253
xxx considerations: An office building competes primarily with other office buildings in its own node, so the subject property’s location within the node is critical to determining its competitive position.
Intranodal
Page 292
xxx considerations: Office nodes compete with each other with regard to tenant appeal and, on a secondary level, an office building competes with buildings in different nodes. In both cases, the strength of the competition is the key element of comparison to consider.
Internodal
Page 292
Using regression analysis applied to the eight years of data, predict absorption for the upcoming year (Year 1) as well as for five years in the future (Year 5), and calculate the correlation coefficient.
Set up the problem using “years ago” as the x (independent) variable but input the numbers as negatives to represent time in the past. The HP- 12C requires that the dependent variable be input first, followed by the independent variable.
18th row: Put in time 1 and then input g ŷ, r. The regression program will calculate the y value (the amount of leased space) for one year in the future (we eyeballed this value at about 150,000).
19th row: Put in time 5 and then input g ŷ, r. The regression program will calculate the y value (the amount of leased space) in the fifth year following the current quarter.
20th row: The correlation coefficient (abbreviated as r) is a measure of the relationship between two variables and the degree to which they change together. The higher the correlation coefficient, the tighter the fit between two variables, in this case time and amount of office space leased. A line that fits perfectly has a correlation coefficient equal to 1.00 or –1.00. On the HP-12C calculator, the correlation coefficient is calculated whenever
x or ŷ is calculated and is displayed by pressing the ~ key. The correlation coefficient for this problem is 0.97, indicating a good fit.
Page 107
The correlation coefficient expresses xxx
… the amount of variation in the dependent variable caused by a change in the independent variable. As the factor moves away from 1.00 (or –1.00), other factors may be influencing the change.
Page 108
Project citywide employment growth in five years based on the historical average annual growth using linear regression.
If linear regression is used with the full data set, citywide employment growth is projected to be an additional 14,665 jobs.
Page 300
xxx
Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of the above-grade area. This includes mezzanines and basements if and when typically included in the market area of the type of property involved …
Gross building area (GBA)
Page 276
Net rentable area (NRA):
The amount of space rented to the individual tenants excluding common areas.
Page 191
xxx
For office or retail buildings, the tenant’s pro rata portion of the entire office floor, excluding elements of the building that penetrate through the floor to the areas below. The area of a floor is computed by measuring to the inside finished surface of the dominant portion of the permanent building walls, excluding any major vertical penetrations of the floor. Alternatively, the amount of space on which the rent is based; calculated according to local practice.
Rentable area
Page 276
xxx
1. For office buildings, the actual occupiable area of a floor or an office space; computed by measuring from the finished surface of the office side of the corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished surface of the dominant portion of the permanent outer building walls. Sometimes called net building area or net floor area.
2. The area that is actually used by the tenants measured from the inside of the exterior walls to the inside of walls separating the space from hallways and common areas.
Usable area
Page 276
xxx
In office buildings, the areas of the building that provide services to building tenants but that are not included in the office area or store area of any specific tenant. These areas may include, but shall not be limited to, main and auxiliary lobbies, atrium spaces at the level of the finished floor, concierge areas or security desks, conference rooms, lounges or vending areas, food service facilities, health or fitness centers, daycare facilities, locker or shower facilities, mail rooms, fire control rooms, fully enclosed courtyards outside the exterior walls, and building core and service areas such as fully enclosed mechanical or equipment rooms. Specifically excluded from building common area are floor common areas, parking space, portions of loading docks outside the building line, and major vertical penetrations. (BOMA)
Building Common Area
Page 276
xxx
The total horizontal surface of a specific floor; the total area of all floors in a multistory building, computed from the outside building walls of each floor with balcony and mezzanine areas computed separately and added to the total.
Floor Area
Page 277
xxx
In an office building, the areas on a floor such as washrooms, janitorial closets, electrical rooms, telephone rooms, mechanical rooms, elevator lobbies, and public corridors that are available primarily for the use of tenants on that floor. In essence, area represents all of
the area on the floor that is common to that respective floor with the exception of those areas that penetrate through the floor, such as the elevator shaft and stairwell. The significant point to be made is that this area is not part of the tenant’s usable area. (BOMA)
Floor common area.
Page 277
xxx
1. In appraising, the ratio between the rentable and gross area of a building.
2. In land utilization, the ratio between the value of the product flowing from the site and the expense of the labor and capital that produced it.
3. In economics, the ratio between the ends produced (output) and the means used (input).
Efficiency ratio
Page 277
xxx
A rental arrangement whereby the tenant’s rent is intended
to be inclusive of all expenses associated with occupancy; depending on region, this rent can include the tenant’s share of real estate taxes, insurance, operating expenses, and reserves for replacement.
Full-service rent
Page 277
xxx properties can be rated in a number of ways, but the most popular today is to categorize by xxx. The term xxx refers to a system of rating properties based upon their overall xxx This xxx ranges from the rare xxx building to the more common xxx properties.
Office
Class
Class
appeal in the market.
appeal
Trophy
Class A, B, and C
Page 269
Trophy Class
One of a kind property
High quality:
- construction
- condition
- design
- credit tenants
- management
Rare
Page 269 (office only, not multiunit, page 185)
Class A building characteristics
Typically best in the market
Excellent location and access
Numerous amenities/support facilities
High-quality construction materials—energy efficient, green
Excellent building condition
High-quality design and space
layout
High-quality credit tenants
Excellent professional management
Rents competitive with those for new buildings
Page 270 (office), also page 185 (Multiunit)
Class B building characteristics
Good:
- location and access
- quality construction materials
- building condition (some functional and external obsolescence)
- design and space layout
- good quality tenants
- professional management
Many amenities/support facilities
Rents lower than those for new, Class A buildings
Page 270
MultiUnit:
- Garage parking often included
Page 186
Class C building characteristics
Average/Adequate
- location and access
- quality construction materials
some deferred maintenance and obsolescence
- design and space layout
-quality tenants
- professional management
Older with some deferred maintenance and obsolescence
Some amenities/support facilities
Rents lower than those for Class B buildings
Page 270
Multi-Unit
- Lack of unit amenities such as balconies, central a/c, and individual washer/dryer
- Lack of structured parking
Page 186
An office building has a gross building area of 100,000 square feet, a net rentable area of 95,000 square feet, and a building usable area of 85,000 square feet. What is the building area that is associated with exterior walls and vertical penetrations?
Rentable area includes all space
except exterior walls and vertical
penetrations.
100,000 – 95,000 = 5,000 square feet
Page 278
An office building has a gross building area of 100,000 square feet, a net rentable area of 95,000 square feet, and a building usable area of 85,000 square feet. What is the building’s efficiency ratio?
Efficiency ratio =
NRA ÷ GBA =
95,000 ÷ 100,000 = 95%
NRA = net rentable area
Page 278
How many units must be absorbed in the current market to reach normal/ equilibrium occupancy?
A. 45
B. 50
C. 55
D. 100
B. 50
1,000 × 0.95 =
950 – 900 = 50
Page 265
If no additional units come on line, how many months will it take for the market to
achieve normal/equilibrium occupancy?
A. 12
B. 13
C. 15
D. 30
C. 15
(1,100 – 900) ÷ 5 = 40 units/year demand increase; 50 ÷ 40 × 12 = 15
Page 265
Tenants by xxx—those who choose to live in rental units and usually occupy their units for an extended period.
choice
Page 193
Tenants by xxx—those who seek rental accommodations either because their lives are in transition or they cannot yet afford to purchase a house. They usually are transitory and less interested in a long-term commitment.
circumstance
Page 193
A kitchen counts as xxx
Bedrooms must have xxx Bathrooms are xxx
…one room.
…a closet and a single entrance door.
…not included in total room count.
Page 191
The efficiency ratio is the ratio of xxx xxx xxx to xxx xxx xxx.
net rentable area to gross building area.
Review Quiz
Which statement is true regarding subject capture analysis in a Level B
marketability analysis?
A. Capture analysis does NOT consider the results of property productivity analysis.
B. Capture analysis is concerned with the expected performance of the subject property.
C. Capture analysis is NOT concerned with the performance of the subject property’s primary competition.
D. Capture analysis is only concerned with the performance of the subject property.
B. Capture analysis is concerned with the expected performance of the subject property.
Part 3, page 74
The pro rata share method is applicable to which steps in the market analysis process?
A. all six steps
B. demand analysis and supply analysis
C. property productivity analysis and demand analysis
D. residual demand analysis and subject capture
D. residual demand analysis and subject capture
Part 6, page 147
The four multiunit property types are xxx, xxx, xxx, and xxx.
two- to four-unit, garden , mid-rise , and high-rise
Review Quiz
An office building has exterior dimensions of 100 feet by 50 feet on each of its three levels, excluding decks. The open-air decks extend out from the exterior and add 1,000 square feet. The exterior walls are 600 square feet (200 square feet per floor). The vertical penetrations (stairs, elevator shafts, and mechanical flues) total 400 square feet. The common area halls and lobby are 900 square feet. The restrooms and janitor closet are 500 square feet. What is the rentable area of
the building?
A. 12,600 square feet
B. 13,100 square feet
C. 14,000 square feet
D. 15,000 square feet
C. 14,000 square feet
(100 ft. × 50 ft. × 3 = 15,000 − 600 − 400 = 14,000)
Course handbook guidance: Part 10, item IV
Based on the data series below, what is the projected fifth year absorption using regression analysis? (Answer is rounded to the nearest whole unit.)
A. 118
B. 120
C. 125
D. 127
C. 125
Course handbook guidance: Part 4, item VI
Which of the following is NOT one of the key variables that are used to segment office markets?
A. building class (Trophy, Class A, Class B, Class C)
B. location (node or other geographic area)
C. market rent range
D. most likely users/tenants (general commercial, medical/dental, government, R&D, etc.)
C. market rent range
Course handbook guidance: Part 10, item II.B
Given the information in the table below, what is the increase in occupied space over five years?
A.125,000
B. 138,000
C. 139,500
D. 150,000
A. 125,000
(1,450,000×0.92)−(1,300,000×0.93)
Course handbook guidance: Part 11, item IV.D
The market area currently includes 11,456 apartment units. There are four projects proposed for construction over the next three years. The following is a summary of the four projects and their probabilities:
What is the estimated number of apartment units in three years?
A. 11,456
B. 11,859
C. 11,963
D. 12,262
C. 11,963
[11,456+(230×1.0)
+(116×0.75)
+(300×0.50)
+(160×0.25)]
Course handbook guidance: Part 9, item I.B and Part 12, item I.B
Which of the following is an indication the market is in equilibrium?
A. Market rent is above feasibility rent.
B. Residual demand is equal to zero.
C. Supportable demand is less than supply.
D. Vacancy is declining.
B. Residual demand is equal to zero.
Course handbook guidance: Part 9, item II.A
There are currently 750,000 square feet of office space in the subject’s node. The average occupancy rate is 90%. The subject is 90,000 square feet and is 5% vacant. What is the subject’s current capture rate within its node?
A. 11.4%
B. 12.0%
C. 12.7%
D. 13.0%
C. 12.7%
(90,000×0.95)÷(750,000×0.90)
Course handbook guidance: Part 12, item III.B
For each of the following scenarios, select the appropriate level of marketability study (Level A, Level B, or Level C). Hint: see 2.6 Exhibit in the Course Handbook.
Small, complex property in a stable market
Large, simple property in an unstable market
Small, simple property in a stable market
Large, simple property in a stable market
Large, complex property in a stable market
Small, simple property in an unstable market
Large, complex property in an unstable market
Small, complex property in a stable market: B
Large, simple property in an unstable market: C
Small, simple property in a stable market: A
Large, simple property in a stable market: B
Large, complex property in a stable market: C
Small, simple property in an unstable market: B
Large, complex property in an unstable market: C
Course handbook guidance: Part 2, Levels of Market Analysis, item V
- The four factors that create value in real property are
A. location, quality, condition, and utility.
B. rental rates, occupancy rates, operating expenses, and capitalization rates.
C. supply, demand, demographics, and income.
D. utility, desire, effective buying power, and scarcity.
*D. utility, desire, effective buying power, and scarcity.
Course handbook guidance: Part 1, item I.F
Based on the graph, what is the likely result of a new employer moving to town?
A. The demand curve shifts to the left and equilibrium rent decreases, which constrains the increase in demand.
B. The demand curve shifts to the left and equilibrium rent increases, which accelerates the increase in demand.
C. The demand curve shifts to the right and equilibrium rent decreases, which accelerates the increase in demand.
D. The demand curve shifts to the right and equilibrium rent increases, which constrains the increase in demand.
D. The demand curve shifts to the right and equilibrium rent increases, which constrains the increase in demand.
(Constraints=bedingt)
Course handbook guidance: Part 1, item I.G
If supply remains constant, what is the effect of a decrease in interest rates that shifts demand away from apartments and toward owner-occupied housing?
A. The demand curve shifts to the left and equilibrium rent decreases, which exacerbates the decrease in demand.
B. The demand curve shifts to the left and equilibrium rent decreases, which limits the decrease in demand.
C. The demand curve shifts to the right and equilibrium rent increases, which exacerbates the decrease in demand.
D. The demand curve shifts to the right and equilibrium rent increases, which limits the decrease in demand.
B. The demand curve shifts to the left and equilibrium rent decreases, which limits the decrease in demand.
(Exacerbates=verschärfen)
Course handbook guidance: Part 1, item I.G
What is the result of demolition of two large apartment communities?
A. The supply curve shifts to the left and equilibrium rent decreases, which reduces demand.
B. The supply curve shifts to the left and equilibrium rent increases, which reduces demand.
C. The supply curve shifts to the right and equilibrium rent decreases, which increases demand.
D. The supply curve shifts to the right and equilibrium rent increases, which reduces demand.
*B. The supply curve shifts to the left and equilibrium rent increases, which reduces demand.
Course handbook guidance: Part 1, item I.G
What will happen if a large number of new units are constructed, all other things being equal?
A. The supply curve will shift to the left and equilibrium rent will decrease, which will increase demand.
B. The supply curve will shift to the left and equilibrium rent will increase, which will increase demand.
C. The supply curve will shift to the right and equilibrium rent will decrease, which will increase demand.
D. The supply curve will shift to the right and equilibrium rent will decrease, which will reduce demand.
*C. The supply curve will shift to the right and equilibrium rent will decrease, which will increase demand.
Course handbook guidance: Part 1, item I.G
Office demand in a market is expected to increase from 1,000,000 square feet currently to 1,050,000 in five years. The current supply of office space is 1,100,000 square feet and is expected to grow to 1,250,000 in five years. What is the likely trend in rents over the next five years?
A. Rents are likely to decrease. (Occupancy rate will decline.)
B. Rents are likely to increase.
C. Rents are likely to stay about the same.
D. Cannot be determined.
*A. Rents are likely to decrease. (Occupancy rate will decline.)
Course handbook guidance: Part 1, item I.G
Are there appraisal assignments that do not require a highest and best use determination? Can you identify several?
Use value (value of a property for a specific use)
Investment value (value of a property to a particular user)
Insurable value
Competitive market area:
The geographic area that encompasses the subject property’s most direct competition; a subset of the market area.
Page 69
Fox Flight Subdivision is in Center County, just outside a major city. The city’s
steady employment gains over the past decade appear to be supporting
residential demand in Center County.
Historical and current household figures for the county are from the following
sources:
A. Project the number of households in the county in 5 years based on the average annual growth rate and
B. Just using census data and Linear Regression
A.
Census data =
1,554 new households/year [(179,359 – 140,516) ÷ 25 years = 1,554/year] x 5 = 7,770
CoG data = 1,459 new households/year x 5 = 7,295
Dept. of Planning data = 1,579 new households/year x 5 = 7,895
Sources produce a range of 7,295 to 7,895 households in five years.
B. see attachment = 190,663
The pro rata share method allows the analyst to account for the following:
xxx of the market area
xxx competition
Historical performance
—e.g., if the subject property is one of 10 projects, then all else being equal, it should capture 10% of the demand.
Future
—e.g., if 10 new projects are to become additional competition for the 10 that exist, the subject property should then capture only 5% of the demand, again if all else is equal.
What is the first step in the six-step process? A. demand analysis
B. market study
C. property productivity analysis
D. supply analysis
C. property productivity analysis
Practice Test Section 1
Garden apartments, also known as x
x stories
Often x buildings
Units per building?
Elevator?
Construction?
Can have x hallways
Density?
Common area?
Amenities?
Parking?
low rise
2-3 stories
multiple buildings
At least 5 units but more often 10 or more units per building
Without elevator
Frame construction
interior or exterior
Density of 10 to 20 units per acre
Often have common area
Amenities such as open space, tot lots, swimming pool, and laundry
Typically include surface parking at one to two spaces per unit
Mid-rise apartments
x stories
Elevator?
X construction
Density?
Parking?
Amenities?
Three to eight stories, or more, depending on area
Elevator provided
Usually of steel and masonry construction
Densities of more than 20 units per acre
Often include above- or below-grade structured parking—can be related to number of bedrooms
Often include unit amenities such as balcony, washer/dryer, unique features
High-rise apartments
X stories
Elevator ?
Construction?
Density?
Parking?
Amenities?
Eight stories or more, depending on the area
Elevator provided
Usually of steel and masonry construction
Densities well in excess of 20 units per acre
Often include above- or below-grade structured parking—can be related to number of bedrooms
Often include unit amenities such as balcony, washer/dryer, unique features
Rental rates can be
Unregulated (market rate)
Regulated (rent control)
Subsidized
Page 187
In a Cooperative ownership, renters own …
an interest
Page 186
What is the supportable office demand for the community?
A. 857,143 sq. ft.
B. 950,000 sq. ft.
C. 1,045,000 sq. ft.
D. 1,157,895 sq. ft.
D. 1,157,895 sq. ft.
1,100,000 ÷ 0.95 = 1,157,895
Practice Test Section 4
If supportable demand in Year 5 is 1,263,158 square feet, what will normal/ equilibrium vacancy be in Year 5?
A. 50,000 sq. ft.
B. 60,000 sq. ft.
C. 63,158 sq. ft.
D. 66,482 sq. ft.
C. 63,158 sq. ft.
1,263,158 – 1,200,000 = 63,158
will be in the test with the exact same numbers!
Practice Test Section 4
An office building has a gross building area of 100,000 square feet, a net rentable area of 95,000 square feet, and a building usable area of 85,000 square feet. What is the building’s common area?
A. 5,000 sq. ft.
B. 10,000 sq. ft.
C. 15,000 sq. ft.
D. 20,000 sq. ft.
B. 10,000 sq. ft.
Rentable – usable = common area
95,000 – 85,000 = 10,000 sq. ft.
Practice Test Section 4
Based on the mean, how many new, general rental, garden-style units would be expected over the next five years?
A. 10
B. 40
C. 50
D. 100
C. 50
20 + 15 + 25 = 60 ÷ 6 = 10 × 5 = 50
(divided by 6 (not by 4) since we do want to consider each year where there could have been a new unit)
Practice Test 3
Based on regression analysis, how many new, general rental, garden-style units would be expected over the next five years (rounded)?
A. 10
B. 40
C. 50
D. 83
B. 40
Practice Test Section 3
How many units must be absorbed in the current market to reach normal/ equilibrium occupancy?
A. 45
B. 50
C. 55
D. 100
B. 50
1,000 × 0.95 = 950 – 900 = 50
Practice Test Section 3
If no additional units come on line, how many months will it take for the market to
achieve normal/equilibrium occupancy?
A. 12
B. 13
C. 15
D. 30
C. 15
(1,100 – 900) ÷ 5 = 40 units/year demand increase; 50 ÷ 40 × 12 = 15
Practice Test Section 3
The results of the Highest and Best Use are reported in xxx
three categories: the physical use, the timing of that use, and the most likely buyer and user of the use.
Page 355, 401
Conclusions regarding the highest and best use of a property should specify the xxx
physical use, the timing of the use, and the most likely user of the property.
Review Quiz, page 379
The subject property is a 1-acre site for which the appraiser has determined that a 20,000-square-foot office building is a legally
permissible and physically possible use. The current construction cost is $200 per square foot, and the local market typically expects entrepreneurial incentive of 10% based on construction costs for a project of this type. The as-if- completed value is estimated at $250 per square foot of building area.
A. Is the use of the site for office development financially feasible?
B. Would the conclusion be different if the value of the as-if-completed property
were 10% less and the cost to construct the building were 10% more?
A.
As-if-completed property value:
20,000 sq. ft. × $250 = $5,000,000
600,000
Building cost: 20,000 sq. ft. × $200 =
Plus entrepreneurial incentive @ 10% =4,400,000
Less total cost to construct
Indicated site value
400,000
Since the site value is positive, the use of the site for office development is
financially feasible.
need to sort out answer
A 60,000-square-foot medical office building only partially utilizes its 9.0-acre site.
It measures 30,000 square feet on each of its two floors. The required parking is 5.0 spaces per 1,000 square feet of building area, and each parking space requires 375 square feet excluding landscaping. Landscaping requirement is 30,000 square feet. A 2.0-acre area facing a side street could be legally subdivided and sold off; the remainder cannot be legally subdivided. What is the amount of surplus land?
A. 2.35 acres
B. 3.04 acres
C. 3.72 acres
D. 5.04 acres
B. 3.04 acres
Total site area (9.0 × 43,560) = 392,040
Building main floor -30,000
Parking requirement (60,000 sq. ft. ÷ 1,000 × 5.0 × 375) -112,500
Landscaping requirement - 30,000
Excess land (43,560 × 2.0) -87,120
Surplus land (sq. ft) = 132,420
Surplus land (acres) = 3.04
Course handbook guidance: Part 14, item VI
