Brokers in large markets typically do not need to create their own market research. Either they are part of sizeable companies that do the research for them, or they have reliable third-party providers.
However, brokers in smaller markets do need to create their own research in order to communicate to tenants, landlords and investors. By doing so, smaller real estate companies are able to track market trends, show the dynamics of different sub markets, and gain a better sense of the market overall. Additionally, creating proprietary research is a way for a realtor to distinguish itself from its peers.
The Zacher Company produces three distinct annual market surveys. The January survey focuses on the industrial market, the May survey focuses on the retail market, and the September survey focuses on the office space market. Each survey is accompanied by a commentary that reviews the past year’s activities and forecasts trends for the coming year.
The total size of the market for each property type is determined by auditing all of the buildings in the market for that property type. Then, the amount of vacant space, the vacancy rate and the absorption in the market are calculated by compiling data from multiple sources.
The general formula is:
Total inventory – at the beginning of the period, which is obtained from the previous year’s survey.
Minus: Vacant space – at the beginning of the period
Equals: Occupied space – at the beginning of the period
Plus: Space constructed during the period (typically one calendar year)
Minus: space demolished or reclassified during the period
Equals: Total inventory – at the end of the period
Minus: Vacant space – at the end of the period
Equals Occupied space – at the end of the period
Net absorption during the period is the occupied space at the end of the year minus occupied space at beginning of the year. The vacancy rate is also calculated and compared to previous reports.
Positive absorption is indicative of a strong market. This means that space became occupied during the year, either because vacant space was sold or leased, or because newly constructed space was occupied.
We have been conducting market surveys for several years. As the reports accumulate, their trends and significance to the market as a whole become more apparent.
Annual trends are very important. The market survey will show year to year changes in vacancy rates, trends among different quadrants, building classes ( specific to office ) and property types( specific to retail). The survey will also show market pricing and provide a range of sale and lease rates based on the same factors.
By itemizing a list of notable transactions, we are able to delineate trends that are specific to both markets and submarkets.
Providing market surveys is important to us. It garners positive feedback and publicity from several sources. It is also a way to establish the company as a recognized source of market knowledge. Clients and other brokerage firms refer to our studies throughout the year.
The Zacher Company welcomes feedback from industry colleagues with respect to providing market surveys.
About the Author:
Steve Zacher, SIOR
President, The Zacher Company
Fort Wayne, IN