Week 4 - Market research

Question 1

How do developers use market research

Answer 1

to identify potential buyers

determine marketing strategies

identify key design characteristics

foccast adequate demand

anticipate leasing sales

make adjustments to prices

estimate profits

Question 2

market research involves

Answer 2

macroeconomic market study
markability study
investment analysis
feasibility analysis

Question 3

difference between primary and secondary source research documents

Answer 3

primary = document or physical object which was written or created during the time under study

secondary = Source interprets and analyses a primary source, thus more steps removed from the event

Question 4

types of market research

Answer 4

strategic analysis - used by developers to review a current strategy or evaluate moving in a new direction. keeps developers informed of emerging and future trends in tenant, development an investment markets

Site specific analysis - used by developers to review the upcoming market conditions for potential risks and opportunities

Forecasting - used by developers to manager risk by making predictions of future market conditions in areas such as rent, yield returns and capital

Portfolio analysis - used by developers to review the comparative risk and return performance of
property as a whole agasint other investment types
an individual property type against other land users

Question 5

macroeconomics market sutdy

Answer 5

provide a broad picture of supply and demand for a specific property type or specific area

Question 6

Markability study

Answer 6

analyses how a particular property will be absorbed, sold or leased based on market conditions

Question 7

investment analysis

Answer 7

Determines how a specific property meets the risk and return criteria of an investor

Question 8

Feasibility study

Answer 8

determines whether a project or development will fulfil the objective of the investor

Question 9

What are the ‘market research process’

Answer 9

1. product definition
2. market delineation
3. demand analysis
4. supply analysis
5. supply and demand interaction
6. capture analysis
7. finance modelling

Question 10

explain step 1 product definition

Answer 10

analysis of the legal, physical and locational attributes of the subject dwelling

The better you know the subject of your research, the better your decision making will be.
Get to know your … product’s key features, the area/location, zones, local linkages (transport), potential uses (or limitations) , distinguishing features of the site, etc.

Question 11

explain step 2 market delineation

Answer 11

determine the characteristics of likely buyers/users
who they are?
determine likely catchment area
geo boundaries

Consider: income levels, purchasing power, age, families, level of finishes (quality), technology, cost/value ratio, etc.

Question 12

Explain step 3 remain analysis

Answer 12

analyse and forcsast anticipated market demand for the site/property given the suitable potential uses

(consider important residential demand factors
e.g.
income
population
geo
financial market
local amenities)

What is the (level of) desire or need for your development?
Consider potential changes over the time-span of the development. (Think mining-boom housing.)
Is a new road or railway planned?
How is local employment?
How long are properties on the market for(Days on the market)?

Question 13

Explain supply analysis step 4

Answer 13

Analyses and forecast existing and anticipated supply of the specific site/property type under construction

Look at existing, recently completed, in progress and approved (proposed competition)

Supply = how much stock is on the market. It’s stock inventory.–> Particularly of “comparable stock”.
Quantity and quality need to be comprehensively considered together.
Developable land availability
Cost of construction
Conversion to alternative uses
Construction loan availability
Change of zoning ordinances (or other regulations)

Question 14

explain supply and demand interaction

Answer 14

investigate the interaction of supply and demand to determine when the site / property type under construction will be sought after

Question 15

explain capture analysis step 6

Answer 15

compare the subject property to comparable competitors to determine the likely capture of market share

Give due consideration to market conditions, demand and competitive supply

This follows on from steps 2 and 5, so may not be needed for all developments.This concept is for larger developers/developments.(Eg: multi-story apartments, and may involve a costing element also.)
Capture rate and absorption period (Risk Management)

Capture analysis can be done by undertaking a)Inferred methods and b)fundamental capture methods.

Question 16

Capture analysis can be done by undertaking a)Inferred methods and b)fundamental capture methods.

Answer 16

Inferred methods
Comparison of subject to general market indicators
Comparable property data
Secondary date surveys
Historical performance
Local Economic analysis

Fundamental capture method
Estimate subject capture potential of fundamental demand forecast by such methods as
Share of market
Adjust by quantifiable rating techniques
Historical capture 

Inferred analysis, which is sometimes called trend analysis, is descriptive and emphasises historical data rather than future projections.

Fundamental analysis is a more detailed study of market conditions focusing on