Discovering Demand

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Demand.
What is it?
How is it created?
What causes it?
How to capture it?

This course answers these questions and reviews the first three of nine Demand Triggers. Also, provides guidelines on how to create a Demand Matrix to determine which site has the highest Demand Potential in any given market.

Published in: Business, Economy & Finance
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Discovering Demand

  1. 1. Discovering RealEstate Demand For your next project
  2. 2. Discovering Real Estate Demand• D. Scott Smith, CCIM Professor of Real Estate• Fair Housing, Steering, Blockbusting It’s a NO NO!• No magic bullet theory
  3. 3. Discovering Real Estate Demand“What you need to do to make money, is to focus on where is the demand” http://video.cnbc.com/gallery/?video=3000072098 2:17
  4. 4. Discovering Real Estate Demand“RETHINK” Real Estate( first know the established model )
  5. 5. Discovering Real Estate Demand Traditional Demand Model• Economic Sectors Basic + Non Basic Employment• Economic Base Multiplier Total Employment / Basic Employment
  6. 6. Discovering Real Estate Demand Traditional Demand Model• Location Quotient Total Industry Local / Total Local Employ _________________________ Nation Industry Total / National Total Employ• Standard Industrial Classification System• Shift Share Projections
  7. 7. Discovering Real Estate Demand• AbsorptionThe rate at which supply is reduced over a given time period Answers the “how” of demand
  8. 8. Discovering Real Estate Demand• Demand Matrix• Demand Triggers Answers the “why” of Demand
  9. 9. Discovering Demand D2 = Hassle Free Emotion ReusableD2={ H x E x R } Best overall {BxAxL } Affordability {DxI xP } “Herbal Dip” Location Demographics Indicators Psychographics
  10. 10. Discovering Real Estate Demand Demand Matrix• Demographics Who will buy it?• Psychographics Will they like it?• Economic Indicators Will they be able to afford it?
  11. 11. Discovering Real Estate DemandDemand Trigger #1 - Demographics
  12. 12. Discovering Real Estate Demand Demographics •Age •Sex •Income •Location •Interests
  13. 13. Discovering Real Estate Demand• Study of characteristics in an identified market• Hard facts and external realities• Census and point of sale driven
  14. 14. Discovering Demand
  15. 15. Discovering Demand
  16. 16. Discovering Real Estate Demand• What are the Demographics of the Room?
  17. 17. Discovering Real Estate DemandDemographics report can be found atwww.putrealestatetowork.com•According to the room’sdemographics, what type of real estatewould have the most demand?•How about in five years?
  18. 18. Discovering Real Estate DemandDemand Trigger # 2 - Psychographs
  19. 19. Discovering Real Estate Demand•If Demographics are the hard facts,Psychographs are the sensory component•Categorization about how you feel aboutsomething•The key to understanding what motivatesa customer
  20. 20. Discovering Real Estate Demand How is information gathered?
  21. 21. Discovering Real Estate Demand• Survey method• Social Interactions• Data Mining Companies• Search Engines
  22. 22. Discovering Real Estate Demand• Values, Attitudes, Lifestyles SystemVALShttp://www.strategicbusinessinsights.com/vals/free/2010-06-VALSbrochure.pdf•Eight basic market segmentations
  23. 23. Discovering Real Estate DemandInnovator•Highest incomes, high self-esteem•Expression of taste•Consumer choices are "finer things”•Image importance
  24. 24. Discovering Real Estate DemandThinkers•High-resource group and idealistic•Mature, well-educated•World views, open to change•Practical consumers and rationaldecision makers
  25. 25. Discovering Real Estate DemandBelievers•Conservative and predictable consumers•Favor American products and brands•Focused on family, community, and religion•Modest incomes
  26. 26. Discovering Real EstateAchievers Demand•Motivated by achievement and work-oriented•satisfaction from jobs and families•Politically conservative•Respect authority and status quo•Favor established products and servicesthat show off their success to their peers.
  27. 27. Discovering Real Estate DemandStrivers•Low-resource group,•Motivated by achievements•Values very similar to achievers•Have fewer economic and social, andresources.•Style is extremely important•Strive to emulate people they admire
  28. 28. Discovering Real Estate DemandExperiencers•Median age of 25.•Energy, physical exercise, social activities•Avid consumers, spending on clothing, fast-foods, music, etc.•Emphasis on new products and services
  29. 29. Discovering Real Estate DemandMakers•Practical people who value self-sufficiency.•Focused on the familiar-family, work, andphysical recreation•Have little interest in the broader world.•Appreciate practical and functionalproducts
  30. 30. Discovering Real Estate DemandSurvivors•lowest incomes.•few resources•median age of 61•tend to be brand-loyal consumers
  31. 31. Discovering Real Estate Demand•Use the VALS survey method to determinethe Psychographic of the rooms leadingdemographics.•Would the Demand analysis change fromDemographic to Psychographical analysis?
  32. 32. Discovering Real Estate Demand Demand Trigger # 3 Economic Indicators
  33. 33. Discovering Real Estate DemandWhy Economic Indicators?•Used as a forecast for local and nationaleconomies.•Demonstrate when an economy expandsand contracts.
  34. 34. Discovering Real Estate DemandIndicators for Spending, Manufacturing,Housing, Inflation, Productivity, andEmployment
  35. 35. Discovering Real Estate DemandDifferent Indicators will beused for:• Office, Retail, Housing, Industrial• Buyer vs. Tenant• Business and Personal Financing
  36. 36. Discovering Real Estate DemandSeveral “BIGGIE” Indicators• EmploymentReleased on 1st Friday each monthMeasures job growth• Consumer Confidencelast Tuesday of the monthMeasures how consumers feel about economy, etc.
  37. 37. Discovering Real Estate DemandSeveral “BIGGIE” Indicators• Gross Domestic ProductQuarterly w/ revisionsMeasures how fast or slow and economy is growing• Consumer Price IndexMonthly followingMeasures inflation in retail goods and services
  38. 38. Discovering Real Estate DemandEconomic Indicators as it relates toReal Estate•Housing StartsMonthlyMeasures new homes and permits for future homes.•Existing Home SalesMonthlyMeasures monthly sales of prev. home sales
  39. 39. Discovering Real Estate Demand•New Home SalesMonthlyMeasures Sales of New Homes•Weekly Mortgage ApplicationsMonthlyMeasures number of applications to purchase/refihomes
  40. 40. Discovering Real Estate Demand Trickle Down Economics•Each local economy has similar data toeach area.•Determines Local, National, andInternational Economic conditions andwhere they are heading with reasonableaccuracy.
  41. 41. Discovering Real Estate DemandEconomic Indicators can be found athttp://www.census.gov/cgi-bin/briefroom/BriefRmA complete calendar can be foundhere:http://www.census.gov/epcd/econ/www/indicator_calendar_date.htm
  42. 42. Discovering Real Estate DemandEconomics and Statistics Administration http://www.esa.doc.gov/Bureau of Labor and Statisticshttp://www.bls.gov/bls/newsrels.htm
  43. 43. Discovering Real Estate Demand Demand Matrix Results Conclusion
  44. 44. Discovering Real Estate DemandPutting it together
  45. 45. Discovering Real Estate DemandPutting it together
  46. 46. Discovering Real Estate DemandPutting it together
  47. 47. Discovering Real Estate•Age 35-50 Demand•Male•Income-•Location- Texas ( major MSA)•Psychograph- Achievers / Thinkers•Industry- Higher Education•Works in a Office•Housing Type Where is there a gap and demand?
  48. 48. Discovering Real Estate Demand•Give each Trigger a value from 1-10 and findthe average for each locationLocation #1 H- 7 D- 4 E- 6 I- 8 R- 5 P- 5 B- 9 A- 7 L- 7 = 6.44
  49. 49. Discovering Real Estate Demand For your next project Thank you!

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