Course Project Title: Field Research Project III
Objective: This project has been designed as a “capstone” to the course. As with the
other field research projects, this one bridges the gaps between valuation, marketability,
and location theory learned during the course, through the discussions, and from the
readings. Full application as practiced in the field is essential to the learning experience.
The prior projects have illustrated that no amount of study can address the multitude of
issues that are experienced in the field. Even a lifetime of fieldwork will not reveal all
possible difficulties. The experiences you will encounter in the performance of this study
should properly round out the course and prepare you for practical application in the field.
Guidelines: This marketability study is of a single land use on one parcel of real
property. The class will be divided into groups of 2 to 4 students for this project. Each
group will select a different aspect of the project to analyze — a vacant or under-improved
site, preferably in a large urban or suburban area. The group will estimate its logical
use(s) were it to be developed in the next one to five years. This estimate should be
based on its location and the patterns of development to which it is subject. Select a
dominant use and examine it through a marketability analysis. The report will conclude
with an estimated value range.
At the end of your marketability report include a ten-year estimate of income and
vacancies with your market rationale for both. Reflect your conclusions of the quality and
absorption estimated in the report.
The emphasis of this course and especially this project is on market analysis rather than
on regulatory limitations. Consider the property prior to the receipt of any zoning, health,
environmental or other approvals. Investigate the zoning and conclude reasonable land
use(s) for the property. Presume no deed restrictions or other impediments to
Professor Mr. Scott Rando- Project outline FINA 7397 -Spring 2018
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development. In other words, estimate the use of the property as simply as possible; do
not let the regulatory aspects detract you from the marketability analysis. Treat this study
as if you are advising a client about the marketability of one use on the site. If it is to be a
multi-use property, the effects that the other uses will have on the selected use are to be
considered.
A marketability study involves determining to what extent a specific land use or specific
combination of land uses on a particular piece of property can be marketed. The
marketability study analyzes the latent or present demand and the future demand for
each proposed use on the property including the existing and likely future supply of
closely competitive facilities. A marketability study includes (1) analyses of economic
quality in terms of sales prices or rent levels for each use together with their
corresponding physical quality levels, (2) estimates of the quantity of space in each use
that the market can absorb at the quality levels, and (3) the specific conditions, such as
amenities, finishes, and even financing that may be necessary to achieve or enhance the
absorption.
Some of the factors to consider in conducting this study are (in no particular order):
1. Your client is an investor with a track record of successful investments similar to
that proposed on your property.
2. While the site is real, the investment may, but need not, be hypothetical. If it is
hypothetical, you should estimate the size of the structure from a review of the
zoning/subdivision regulations or other restrictive uses. Plan a visit to the planning
commission. This is not to be an exercise in physical planning, but rather on economic
planning. Emphasis should not be on the physical size of the project, but on its
marketability. Your conclusion from the marketability study may be for any legal use.
3. The estimation of marketability is frequently a process of comparing quality and
quantity. First, estimate the quality of investments in both economic and physical terms.
Include those amenities you consider requisite to that quality level. Second, estimate the
quantity in terms of market absorption. You may have to adjust your estimates of quality
based on your findings of absorption. Third, estimate any special conditions that will
enhance the absorption; these may include amenities beyond those previously
considered as a requisite to the investment.
4. Identify the properties that are perceived to be competitive to your client’s
investment when it is ready to be marketed.
5. Analyze the absorption and quality level performances of the competition together
with their amenity packages. Compare them with the subject. Justify your conclusions.
6. Profile the typical buyers or renters of the space. Who will initially occupy the
space? Explain and support with market data.
7. Recommend price or rent levels and vacancies for the first 10 years of the
investment or until the project is fully leased based on market expectations.
8. A suggested format is:
a. Report Cover. Should identify the type of study being conducted, the address of the
property, and the names of the analysts.
Professor Mr. Scott Rando- Project outline FINA 7397 -Spring 2018
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b. Letter of Transmittal. Should include the executive summary material: a succinct
summary of major findings, conclusions and recommendations. Divide by sub-headings
into logical areas.
c. Executive Summary
d. Table of Contents. Should not include anything that precedes it (i.e. cover page,
letter of transmittal, table of contents, etc.). Should contain all primary and secondary
headings.
e. Nature of Assignment. Should paraphrase your proposal letter to your client (when
signed by the client this becomes your contract with him). Describe the assignment,
methodology, and major tasks (scope of services) undertaken. Mention any changes in
the assignment that may have occurred during the conduct of the assignment and which
change the parameters as defined in the proposal letter. Identify the property under
study, define the type of study being conducted, and list the major assumptions and
caveats. Legal descriptions, if included, should be placed in the appendix.
f. Economic Background and Patterns of Development.
This part is the “guts” of the study. It should lay a framework of facts and analysis within
which the property (and development) can be studied. This section should discuss the
larger areas first and then the smaller (region, area, county or city, neighborhood or
district). Each area should be identified within a dynamic framework: what are the
patterns of development that affect each level? It is important to remember that the
patterns encompass physical, economic, governmental, and sociological issues.
An analysis of all areas is not required for every study. The analyst must first determine
what is the largest area impacted by the development of the subject property. The
subsequent area will be smaller geographically. The last area to be studied will be the
market. The market for the property or its proposed use should be discussed within its
setting at the appropriate level.
The market setting is the geographic area or collection of geographic areas that appeals
to virtually the same market forces (in economic terms: areas between which the market
forces are indifferent). Whereas the terms “neighborhood” and “district” refer to
contiguous areas, the market for many properties as represented by competitive facilities
is frequently scattered throughout an urban area. This type of analysis is important; rarely
are these competitors found within the same contiguous area.
It is most important for the analyst to know and describe the immediate area of influence
of the property under study. This area is usually the immediate environs of the property.
The analyst should be able to identify this area of influence in such terms as various
driving or walking times; primary, secondary, and tertiary trade areas; natural and manmade
barriers; or similar identifiable criteria. This immediate area of influence and the
competitive areas comprising the market setting should be compared to the patterns of
development; areas in the direction of growth of a community tend to fare better than
those peripheral to that direction. This analysis requires that the area of influence and the
market setting be placed in the broader context of the city or metropolitan area before it
becomes more specific. The analyst must also adapt the methodology to changes in the
market.
Professor Mr. Scott Rando- Project outline FINA 7397 -Spring 2018
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The economic background and patterns of development sections should include trends
affecting the type of land use being studied. Think about this in terms of “market
position:”
i. location — spatial aspects.
ii. timing — where the building is in the window of supply and demand curves at the
times it will be both marketed and finished (when the certificate of occupancy is issued).
Pre- leasing or pre-selling is becoming essential and research on this area is important.
iii. time — absorption period.
iv. marketing — the level of absorption is crucial and must reflect the market being
targeted (model units, media use, and brochures).
v. price — pre-leasing or pre-selling, phasing of development, and discounts must
reflect the targeted market segment.
vi. product quality — form versus substance. The illusion of richness is necessary
today. The market also has a greater understanding of how a building works: HVAC,
electrical, etc.
f. Description of the Property and Proposed Development. Now that an economic
framework has been laid, it is time to discuss the subject development in detail.
The site and improvements should be discussed separately. Any unique location aspects
should be included in the beginning of the site discussion in which the location of the site
in the immediate area of influence is identified.
g. Competitive Developments or Facilities. The section on economic background and
patterns of development should contain a market overview with historic and forecast
data, more detail is required on the specific competition –existing, planned, and
proposed. This inventory should include rental rates or prices, vacancy and absorption
rates, current marketing practices, amenities, etc. and conclude with an analysis of the
advantages and disadvantages of each relative to the subject.
h. Market Potentialities of the Proposed Investment. This demand analysis of the
subject should attempt to place the subject in the framework established in the economic
background and competitive development sections. Sources of potential patronage
(demand) need to be identified and, to the extent possible, quantified in a dynamic sense.
i. Conclusion of Marketability. This is a reconciliation of prior data; no new information
should appear here, only analysis. Past absorption patterns should be reviewed together
with rental rates or sales prices. Each of these should be forecast for the subject
property. Here is the place to include recommendations appropriate to the project which
affect the overall marketability, such as unit mix and size, rate structures, phasing,
parking, other amenities, etc. Comments on sensitivity of critical market variables should
be included.
j. Qualifications of the analysts.
k. Appendix.
Professor Mr. Scott Rando- Project outline FINA 7397 -Spring 2018
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9. Exhibits should include maps identifying the subject, competitive developments,
and a delineation of the market area; photographs of the subject property, its block front,
and the front of the block facing it; and schedules of competition (size, rent/price,
vacancies, amenities, etc.
Grading Rubric:
Category Points % Description
First Draft or
First Deliverable 1.0 4
1) Identify the investment
2) Brief description of the market
3) Identification of each team member, their
respective role, and summary project plan.
Documentation and
Formatting 2.0 8
Each component included with the correct
information as described
Organization and
Cohesiveness 3.75 15 Well organized, clear, logical presentation of
content
Editing 2.0 8 Free of grammar and spelling errors
Content 12.5 50 Quality content with appropriate references
Presentation 3.75 15 Clear, well organized, professional, appropriate
team professionalism
Total 25 100 A quality paper/presentation will meet or exceed
all of the above requiremen
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