Development Evaluation – U d Understanding the Market t di th M k t 2014 Virginia Planning Conference g g July 21, 2014 Melina Duggal, Senior Principal
SESSION PROGRAM DESCRIPTION The purpose of the session is to help planners evaluate development submissions from a market perspective. The f session will help planners identify the types of data necessary to understand the market, what to look for in necessary to understand the market what to look for in development applications, and analyze the data and proposal to determine if it is realistic and market-feasible proposal to determine if it is realistic and market feasible. We will look at real applications and go through how to evaluate them from a market perspective. p p 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 2
PRESENTATION OVERVIEW – AGENDA • Introduction to Market Analysis • Economic and Demographic Analysis • Subject Site Analysis • Competitive Supply Analysis • Demand Analysis • Development Recommendations • Outside the Conventional Market Analysis y • Examples 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 3
WHAT IS A MARKET ANALYSIS? • Examination of subject property/area in context of broader market trends • Analysis of supply and demand factors • Market-driven recommendations and programming 6,000 120% 5,000 100% 4,000 80% 3,000 60% 2,000 40% 1,000 20% 0 0% Single-Family Permits Multifamily Permits % Single-Family Permits 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 4
WHEN DO YOU NEED MARKET ANALYSIS? • Verify existing products/program • Achievable pricing and absorption • Due diligence • Third-party project financing • Land planning and revitalization • Highest and best use • Long-term site planning g p g • Reposition existing developments 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 5
TRADITIONAL MARKET ANALYSIS APPROACH Rigorous Market Analysis Initial Concept Plans Initial Concept Plans Economic & Economic & Supply Supply Precedent Precedent Envisioning Demographic And Analysis Synthesis Analysis; & Site Analysis Demand (Case Studies) & Analysis Market Trends Analysis or Trends Market-Driven Investment Strategy 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 6
FORMULATING THE HYPOTHESIS • What land uses should the market study focus on? • What market assumptions need to be tested? • What site challenges need to be overcome? 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 7
8 Economic and Demographic Analysis 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014
BIG PICTURE QUESTIONS TO CONSIDER • Where are we located on the economic cycle? Nationally and locally? ? • Is current growth supported by solid fundamentals? • How are demographics shifting nationally and locally? • Where is growth occurring? What are its drivers? 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 9
WHERE ARE WE LOCATED ON THE ECONOMIC CYCLE? NATIONALLY AND LOCALLY? CYCLE? NATIONALLY AND LOCALLY? IND FUTURE OFFICE LAND LAND CYCLE CYCLE APT AAC STAGE [+12 FOR- RETAIL SALE MONTHS] HOTEL 2ND RESORT RETAIL HOTEL AAC CURRENT IND CYCLE LAND STAGE FOR- 2ND SALE APT RESORT OFFICE 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 10
ECONOMIC TRENDS • Employment growth • Location of employment cores • Major employers • Major industries • Industries that are growing/declining • Economic development initiatives 276,110 223,600 , 196,500 992,770 165,600 684,100 519,700 Government Trans/Utilities 143,800 366,000 188,420 119,600 120,700 277,525 Services Services Manufacturing Manufacturing 175,000 205 800 205,800 346,490 374,200 286,900 305,500 F.I.R.E. Construction/Mining 252,800 217,275 127,740 127,400 165,300 148,400 134,200 Trade 142,075 210,190 154,700 Moody’s 121,700 www.economy.com 84,100 90,500 US Gov’t www.bls.gov 1985 1990 1995 2000 2005 2014 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 11
MANY DIFFERENT VERSIONS OF THE FUTURE Forecasted Household Growth Washington-Alexandria-Arlington, D.C.-VA-MD, MSA g g , , 1980-2040 "Housing the Region's Future Workforce" 45,000 Report 40 000 40,000 COG 35,000 Historical 30,000 25,000 20,000 Moody's ESRI 15 000 15,000 10,000 5,000 0 A Annual Household Growth l H h ld G th 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 12
DEMOGRAPHIC TRENDS • Household and population growth • Income distribution • Household age by income • Household size and types • Ownership and renter propensity 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 13
ECONOMIC AND DEMOGRAPHIC SOURCES • Claritas: www.claritas.com • ESRI: www.esri.com • American Fact Finder: www.factfinder2.census.gov • Local COG, TPO • BLS: www.bls.gov • Moodys: www.economy.com 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 14
WHAT TO WATCH FOR IN ECO-DEMO • Who is doing the projections—are they reasonable? • Does the product type match the current and future projections for the area? o Age o Income 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 15
16 Subject Site Analysis 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014
SUBJECT SITE CHARACTERISTICS • Size, topography, layout, and constraints • Surrounding land uses • Proximity to employment and services • Area prestige/reputation • Access, visibility, and frontage • Planned infrastructure Result: Determination of i improvements t appropriateness of the site for the i t f th it f th potential use or uses in the context of the universe of alternatives 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 17
SWOT ANALYSIS Strengths: Site/area characteristics that promote development Weaknesses: Site/area characteristics that present challenges Opportunities: Preliminary market opportunities based upon site Preliminary market opportunities based upon site analysis Threats: Competitive threat assessment 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 18
WHAT TO WATCH FOR IN SUBJECT SITE ANALYSIS ANALYSIS • Typically qualitative • Does the hypothesis match what you believe about the site and/or area? 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 19
20 Competitive Supply Analysis 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014
WHAT ARE WE RESEARCHING? Current and future supply conditions: • Performance of existing, relevant projects l t j t o Price trends o Historical sales/absorption rates • Future development pipeline 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 21
WHAT ARE WE TRYING TO ANSWER? Understand appropriate positioning and orientation: • How is the market segmented? Wh t What are the dominant consumer th d i t preferences? • Location, quality, product trade-offs L ti lit d t t d ff in the marketplace • What are the subject site’s What are the subject site’s competitive advantages and disadvantages in this marketplace? disadvantages in this marketplace? 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 22
COLLECTING DATA – SECONDARY • Residential: Home sales, permits, absorption, rent • Commercial: Vacancy, rents, absorption Residential Building Permits in Prince William County 2000-2013 6,000 120% 5,000 , 100% 4,000 80% 3,000 60% 2,000 40% 1,000 20% 0 0 0% 0% Single-Family Permits Multifamily Permits % Single-Family Permits 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 23
COMPETITIVE MARKET AREA (CMA) ( ) Competitive Market Area (CMA): Geographical area within which the subject site will directly compete for f consumers/tenants • Geographical proximity G hi l i it 3 • Quality 2 • Market orientation 1 4 MAP KEY Ice House Ice House 1 3 Reflections Lofts • 1,229 SF • 1,033 SF • $244 / SF • $217 / SF Stone Sonoran 2 4 Curves Palms • 1,000 SF • 817 SF • $222 / SF $222 / SF • $124 / SF $124 / SF 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 24
EXAMPLE: PRICING ADJUSTMENT MATRIX RCLCO Unit Mix and Pricing Recommendation Compared to Market Comparables p p October 2013 RCLCO RECOMMENDATION Metro 303 West 130 Avg. Avg. Avg. g g g Avg. Avg. Avg. Subj. Site g g g j Avg. Avg. Avg. Subj. Site g g g j Product Rent SF $/SF Rent SF $/SF Discount Rent SF $/SF Discount Studio 1,475 475 $3.11 1,925 623 $3.09 $450 Small One Bedroom Bedroom 1,825 1,825 613 613 $2.98 $2.98 2,328 2,328 853 853 $2.73 $2.73 $502 $502 2,343 2,343 844 $2.65 844 $2.65 $517 $517 Larger One Bedroom 1,950 675 $2.89 2,565 987 $2.60 $615 2,620 982 $2.56 $670 One Bedroom + Den Den 2,038 2 038 800 800 $2 55 $2.55 2,650 1,121 $2.37 2 650 1 121 $2 37 $612 $612 2,793 1,129 $2.36 2 793 1 129 $2 36 $755 $755 Smaller Two Bedroom 2,250 925 $2.43 3,025 1,276 $2.37 $775 3,153 1,279 $2.37 $902 Larger Two 2,450 1,038 $2.36 2 450 1 038 $2 36 3,375 1,454 $2.32 3 375 1 454 $2 32 $925 $925 3 418 1 345 $2 43 3,418 1,345 $2.43 $967 $967 Bedroom Bedroom 2014 VIRGINIA PLANNING CONFERENCE | July 21, 2014 25
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