Mid-Term Review Flashcards
Bid Rent Function
The maximum rent that a potential user would pay for a site or location due to transportation costs. The steeper the slope, the more sensitive to transportation costs.
Residual Land Theory
Land Value = Value of Goods/Services Produced - Cost of Production (including capital)
Net Present Value
Tells how much net value the investment is expected to create. Given in $
Kinked Supply Curve
Occurs when the price equals the marginal cost of adding new space (replacement costs) to the submarket
Space Market Segmentation
RE market tends to be local in nature and specialized by property usage
Equilibrium
When the quantity of space demanded equals the quantity supplied. AKA market rent
Asset Market
The exchange of ownership of real property. AKA property market
Space Market
The usage of real property. AKA rental market
Boom Cycle
Space markets see an extended rise in occupancy and rents
Compound Interest
Interest paid on the original principal and on accumulated interest
Compound Interest Equation
FV = PV + (1+i)^n
Negative Net Absorption
More commercial space was vacated than leased/absorbed. Rents in the scenario would fall
Positive Net Absorption
More commercial space was leased/absorbed than what was vacated. Leads to a decrease in supply causing rents to rise.
Net Absorption
The net change in the amount of occupied space in the market
Gross Absorption
Measures the total amount of space leased during the year
Months Supply (MS)
An indicator of how long it will take in months for all of the vacant space in the market to be absorbed
Months Supply Formula
MS = (Vacancy + Construction)/(Net absorption/12)
Centrifugal Forces
Decentralizing forces that limit growth and result in smaller more dispersed cities
If density and transportation costs remain constant, what is the effect of population growth on a city?
The city must expand
Highest & Best Use
The use that would produce the highest value for a property
HBU Tests (4)
- Is the use physically possible?
- Is the use legally permitted?
- Is the use financially feasible?
- Is the use maximally productive?
Central Place Theory Principles (2)
- If a territory is underserved, there is room for a new central site
- If a central site is already effectively located, it will be difficult to develop a new such site nearby
Edge City
A concentration of business, shopping and entertainment outside of a traditional downtown in what had previously been a residential or rural area
Economic Base Theory
The source of an area’s income. Growth depends on growth in the export sector.