Mid Term

Question 1

Four urban structures models

Answer 1

1. Concentric circle
2. Axial
3. Sector
4. Multiple nuclei

Question 2

Concentric Circle Model

Answer 2

• pure bud rent
• zones radiate outward
  1. CBD
  2. Transition (industry, manufacturing, slums)
  3. Lower income (renters who work in CBD or transition)
  4. Higher income ( owner occupied, specialized commercial)
  5. Suburbia

Question 3

Axial Model

Answer 3

• emphasizes importance of transportation
• land in urban area that is well served by transportation facilities has a comparative advantage over land that is not
• land will develop along transportation routes

DC

Question 4

Sector Model

Answer 4

• Affirms part of bid rent
• has CBD but wedges that radiate outward
• Wedges depend on distance from CBD and adjacent land use to guide land use

Question 5

Multiple Nuclei Model

Answer 5

• Certain activities require specialized facilities
• many similar activities benefit from close proximity to one another
• Certain dissimilar activities are detrimental to each other
• Some activities must seek less desirable low price sites

Combo of axial and sector

Question 6

What causes structures to decline in value?

Answer 6

Obsolescence

1. Physical obsolescence
2. Functional obsolescence
3. Economic obsolescence

Question 7

Physical Obsolesence

Answer 7

• the building is falling apart
• this causes the structure value to decline
• happens over time

Question 8

Functional obsolescence

Answer 8

The building no longer meets its audience’s needs well

Not a physical thing a preference and taste thing

Small closets

Question 9

Economic Obsolescence

Answer 9

The current use is no longer the highest and beat use for the property

Usage value at HBU increases widening the gap between property value and usage value

Question 10

The Neighborhood Lifecycle

Answer 10

Gestation, Youth and Maturity

Incipient Decline

Clear Decline

Accelerated Decline and Abandonment

Rejuvenation or Gentrification

Question 11

The Neighborhood Lifecycle

Growth, Youth, and Maturity

Answer 11

Property values are rising

Residents’ incomes are rising

Turnover is low

New residents are economically and socially similar to those already present

Owner occupied

Question 12

The Neighborhood Lifecycle

Incipient Decline

Answer 12

Those leaving the Neighborhood are replaced by less affluent families

“Filtering” occurs (houses get passed down to lower income families)

Prices decline

Causes - physical obsolescence, external changes, aging residents, construction of more desirable areas

Question 13

The Neighborhood Lifecycle

Clear Decline

Answer 13

Housing has become sub standard (Owners make only minimal repairs)

Housing densities increase

Public services to support increased density are increasingly inadequate

Rents as opposed to owners

Question 14

The Neighborhood Lifecycle

Accelerated Decline and Abandonment

Answer 14

Mass exodus by families with economic means to leave

Unemployment higher than average

Landlords cease making repairs and often abandon their buildings

Virtually abandoned at terminal stage

Question 15

The Neighborhood Lifecycle

Rejuvenation or Gentrification

Answer 15

Land values have decreased so much that large segments of the Neighborhood can be bought up cheap and revitalized or rebuilt

Displacement of people who live there

Question 16

Space Market

Answer 16

Transactions for the rights to use land and buildings

Suppliers - property owners who are willing to sell space to users

Demanders - people, firms, other entities that are willing to pay to use the space

Question 17

Asset Market

Answer 17

The market for he ownership of real estate assets

Question 18

What is an asset ?

Answer 18

A source of cash flows

Question 19

How are the space and asset market linked?

Answer 19

Through occupancy and rent in the space market and cash flows in the asset market

Increases in occupancy and rents leads to increases in cash flow from real estate assets which increases the value of real estate assets which incentivizes developers to add new inventory to the space market

The only way to balance the space market is through the asset and development markets

Question 20

How do supply and demand interact in the real estate market ?

Answer 20

Rents - price

Occupancy - quantity

Question 21

What info is most useful in predicting rent growth?

Answer 21

Current occupancy numbers

The relationship between current occupancy and long run average occupancy

The direction in which occupancy is moving (increasing or decreasing)

Question 22

Indicators of trouble in the real estate cycle

Answer 22

An increase in unsold inventory or vacancy (phase ll to phase lll)

Occupancy falls below the long run average (phase lll to phase lV)

Interest rates rise

Question 23

Locale

Answer 23

The place and all the things happening around the place

Question 24

Ricardo’s Law of Rent

Answer 24

Prices drive rent

Question 25

Pricing Power

Answer 25

Scarcity and productivity If land is abundant landowners have little power More scarce and productive land is the more people can charge for it

Question 26

What makes real estate so special ?

Answer 26

``` Fixed location Uniqueness Interdependence of land use Long life Long term commitment Large transactions Long gestation period ```

Question 27

Usage value

Answer 27

The value the operator places on using the property The amount of profit they attribute to the locals and structure provided by the property

Question 28

Highest and Best Use

Answer 28

The use of a parcel which will produce the highest return or price to the owner The unique pairing of 1) a piece of land with 2) a building which perfectly capitalized on the land’s unique characteristics and therefor maximizes cash flows to the operator on the site The more the operator makes the more the owner makes Whatever you or a piece of land is uniquely good at relative to all other things you could be doing

Question 29

Comparative Advantage

Answer 29

What you are especially good at as a result of your unique characteristics

Question 30

What characteristics give locales comparative advantage ?

Answer 30

``` Transportation facilities Education facilities Created environment Natural resources Climate Leadership Labor force Laws and regulations ``` TECNCLLL TECNCL^3

Question 31

Six stages of development

Answer 31

Feasibility and acquisition Design Financing Construction Marketing and leasing Operations and management

Question 32

Stages of Pre Development Feasibility Analysis

Answer 32

Site Market Analysis Project and Product Design Cost Analysis Financial Analysis

Question 33

Demand Drivers For Residential Single Family (Owner Occupied)

Answer 33

Population Household Formation (child rearing ages 30s and 40s) Interest Rates (Mortgages) Employment Growth (business and professional occupations as opposed to manufacturing jobs) Lending Environment (can people get loans)

Question 34

Demand Drivers for Residential Multi Family (Apartments)

Answer 34

Population Housing Formation (non child rearing 20s) Local Housing Affordability ( how quickly can people move up the residential ladder, can kids move out of parents' house) Employment growth (service sectors)

Question 35

Demand Drivers for Retail

Answer 35

Aggregate disposable income Aggregate household wealth (do people have houses they can borrow against?) Traffic volume Basically can people buy stuff

Question 36

Demand Drivers Office

Answer 36

Employment in office occupations (finance, insurance, legal) Educational levels in the areas (will companies be here because of an educated workforce?)

Question 37

Demand Drivers Industrial (Warehouses)

Answer 37

Manufacturing employment Transportation employment Airfreight volume (do planes already come in and out of here, FedEx and Memphis) Rail and truck volume (are there already built up rail yards and people who can drive trucks?)

Question 38

Demand Drivers for Hotel and Convention

Answer 38

Air Passenger Volume Tourism Receipts or number of visitors