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Factors Governing Real Estate Market Retail and Industrial and Commercial
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Factors Governing Real Estate Market Retail and Industrial and Commercial


Factors Governing Real Estate Market Retail and Industrial and Commercial

Factors Governing Real Estate Market Retail and Industrial and Commercial

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  • For example if an REIT has a larger percentage of its investments in hotels, they would typically be more affected by an economic downturn than an REIT that had invested in office buildings. Hotels are a form of property that is very sensitive to economic activity due to the type of lease structure inherent in the business. Renting a hotel room can be thought of as a form of short-term lease that can be easily avoided by hotel customers should the economy be doing poorly. On the other hand, office tenants generally have longer-term leases that can't be changed in the middle of an economic downturn. Thus, although you should be aware of the part of the cycle the economy is in, you should also be cognizant of the real estate property's sensitivity to the economic cycle.


  • 1. Factors Governing Real Estate Market Retail and Industrial and Commercial Submitted By Piter Biswas SPA Bhopal
  • 3. 2. Interest Rates Interest rates also have a major impact on the real estate markets. Changes in interest rates can greatly influence a person's ability to purchase a residential property. That is because as the interest rates fall, the cost to obtain a mortgage to buy a home decreases, which creates a higher demand for real estate, which pushes prices up. Conversely, as interest rates rise, the cost to obtain a mortgage increases, thus lowering demand and prices of real estate. 1. Demographics Demographics are the data that describes the composition of a population, such as age, race, gender, income, migration patterns and population growth. These statistics are an often overlooked but significant factor that affects how real estate is priced and what types of properties are in demand. Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades.
  • 4. 4. Government Policies/Subsidies Legislation is also another factor that can have a sizable impact on property demand and prices. Tax credits, deductions and subsidies are some of the ways the government can temporarily boost demand for real estate for as long as they are in place. Being aware of current government incentives can help us determine changes in supply and demand and identify potentially false trends. 3. The Economy Another key factor that affects the value of real estate is the overall health of the economy. This is generally measured by economic indicators such as the GDP, employment data, manufacturing activity, the prices of goods, etc. When the economy is sluggish, so is real estate. However, the cyclicality of the economy can have varying effects on different types of real estate.
  • 5. Retail Factors Affecting the Rental Prices: Location remains as the most important factor for leasing the areas in high streets and the city center. Other factors, such as intensity of consumer traffic, surrounding business area, architectural design of the retail real estate may also be among factors affecting the decision making for quality retailers.
  • 6. Industrial buildings Location In all forms of real estate, location is critical. If you find a fantastic property, but it's located 50 miles from the nearest city, you're going to have a hard time finding employees to work there. Consider the convenience of the location as well as surrounding buildings; are there restaurants, shops and other buildings nearby? If so, this will increase the marketability of the building. Price Anyone looking to buy or sell an industrial property should contact a Realtor who specializes in commercial properties to get some comparables. What is the price per square foot are similar buildings in the same area? If a building is overpriced, obviously that will decrease its marketability. A competitively priced property, on the other hand, should draw some interest.
  • 7. Amenities Does the building have elevators? Is it ADA-accessible for wheelchairs? Does it use any green technology? Does it have features such as a kitchen, new windows and new smoke detectors? All of these items will influence the marketability of the building. The Tour Finally, anyone looking to purchase an industrial building is likely going to want a tour. What first impression does the building leave? Was it left in disrepair by a previous owner? Is it spotless and well-organized? While an industrial building doesn‘t have to be as perfect as a house when it's shown to potential buyers, it should be in good condition to boost its marketability.
  • 8. Factors Affecting Value In Commercial Real Estate 1. Location: Location most always is one of, if not the main, factor to value. 2. Highest and best use: The current use is not always the best use. 3. Cyclical demand: Retail, office, industrial, residential; depends on the economy. 4. Marketing time: How motivated are you to quickly sell or lease? 5. Market driven value: Buyer/Tenant’s best offer vs. Seller/Landlord’s bottom-line.
  • 9. 6. Site vs. Improvements: Improvements: add to or subtract from the market value 7. Lease value: What is the property’s net lease value? 8. Financing: Affects value; cash, bank, or owner; down payment; interest rate. 9. Vehicle impact: driving times; ingress/egress; traffic counts; traffic lights. 10. Demographics: Population; income, age, educational levels; family stats, etc. 11. Competition: From other properties or from other name brands in the market.
  • 10. 14. Creative sales/leasing methods: Auctions; trades/exchanges; sale/leaseback; etc. 15. Multipliers and “rules of thumb”: What do you use to judge value? 16. Income (appraisal) approach to value: Net income divided by return desired. 12. Taxation issues: Effect taxes for the seller/landlord and/or buyer/tenant. 13. Zoning: What is the current permissible use or what can it be changed to?
  • 11. 20. Adaptive Re-Use: A building that can be affordably adapted to many uses other than its current one, has more value than a "single purpose use" building. 17. Market (appraisal) approach to value: Comparison to similar sold properties. 18. Cost (appraisal) approach to value: Cost of site + cost to build – depreciation. 19. Net lease value: Determined by competition in the market and demand factors
  • 12. THANK YOU