Mid Term Flashcards
Four urban structures models
- Concentric circle
- Axial
- Sector
- Multiple nuclei
Concentric Circle Model
- 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
Axial Model
- 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
Sector Model
- 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
Multiple Nuclei Model
- 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
What causes structures to decline in value?
Obsolescence
- Physical obsolescence
- Functional obsolescence
- Economic obsolescence
Physical Obsolesence
- the building is falling apart
- this causes the structure value to decline
- happens over time
Functional obsolescence
The building no longer meets its audience’s needs well
Not a physical thing a preference and taste thing
Small closets
Economic Obsolescence
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
The Neighborhood Lifecycle
Gestation, Youth and Maturity
Incipient Decline
Clear Decline
Accelerated Decline and Abandonment
Rejuvenation or Gentrification
The Neighborhood Lifecycle
Growth, Youth, and Maturity
Property values are rising
Residents’ incomes are rising
Turnover is low
New residents are economically and socially similar to those already present
Owner occupied
The Neighborhood Lifecycle
Incipient Decline
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
The Neighborhood Lifecycle
Clear Decline
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
The Neighborhood Lifecycle
Accelerated Decline and Abandonment
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
The Neighborhood Lifecycle
Rejuvenation or Gentrification
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
Space Market
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
Asset Market
The market for he ownership of real estate assets
What is an asset ?
A source of cash flows
How are the space and asset market linked?
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
How do supply and demand interact in the real estate market ?
Rents - price
Occupancy - quantity
What info is most useful in predicting rent growth?
Current occupancy numbers
The relationship between current occupancy and long run average occupancy
The direction in which occupancy is moving (increasing or decreasing)
Indicators of trouble in the real estate cycle
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
Locale
The place and all the things happening around the place
Ricardo’s Law of Rent
Prices drive rent
Pricing Power
Scarcity and productivity
If land is abundant landowners have little power
More scarce and productive land is the more people can charge for it
What makes real estate so special ?
Fixed location Uniqueness Interdependence of land use Long life Long term commitment Large transactions Long gestation period
Usage value
The value the operator places on using the property
The amount of profit they attribute to the locals and structure provided by the property
Highest and Best Use
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
Comparative Advantage
What you are especially good at as a result of your unique characteristics
What characteristics give locales comparative advantage ?
Transportation facilities Education facilities Created environment Natural resources Climate Leadership Labor force Laws and regulations
TECNCLLL
TECNCL^3
Six stages of development
Feasibility and acquisition
Design
Financing
Construction
Marketing and leasing
Operations and management
Stages of Pre Development Feasibility Analysis
Site
Market Analysis
Project and Product Design
Cost Analysis
Financial Analysis
Demand Drivers For Residential Single Family (Owner Occupied)
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)
Demand Drivers for Residential Multi Family (Apartments)
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)
Demand Drivers for Retail
Aggregate disposable income
Aggregate household wealth (do people have houses they can borrow against?)
Traffic volume
Basically can people buy stuff
Demand Drivers Office
Employment in office occupations (finance, insurance, legal)
Educational levels in the areas (will companies be here because of an educated workforce?)
Demand Drivers Industrial (Warehouses)
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?)
Demand Drivers for Hotel and Convention
Air Passenger Volume
Tourism Receipts or number of visitors
