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.
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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)
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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
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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
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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.
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Residual demand refers to a comparison of xxx to determine the xxx.
supply and demand
amount of oversupply or undersupply
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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
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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.
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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.
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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.
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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)
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Net rentable area (NRA):
The amount of space rented to the individual tenants excluding common areas.
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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MultiUnit:
- Garage parking often included
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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
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Multi-Unit
- Lack of unit amenities such as balconies, central a/c, and individual washer/dryer
- Lack of structured parking
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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
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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
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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
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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
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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
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
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
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
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
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
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
