Market Analysis

Have you ever wondered why someone decided to develop a particular property for a specific use?  Sometimes it just has to do with their developers expertise, or it may have been because they had developed another property in close proximity for a similar use (like a fast food restaurant)  the assumption was made by the developer that "if they can make it financially, we can too !"  Some developers work from a seat of the pants analysis, others from a general analysis at the regional level.  The best market analyses study the present and likely future supply and demand in a sub-market area for a specific property type, and they consider competition.     

A market analysis delves into the supply and demand questions that should be asked before a final decision is made about the development of a property.  If you want do develop a nursing home on a site, you may find after a market analysis is completed that the sub-market that you want to build in is saturated with nursing homes and that there is no demand for another.  Or possibly the selected site location is poor due to a lack of infrastructure, traffic or other factors.  Demand may be strong for the use selected in another sub-market within the same metropolitan area. 

Many real estate developments are often planned without the benefit of a market analysis.  A typical development scenario begins with an investor (or group of investors) finding a discounted parcel of vacant land that may or may not be well suited to their pre-conceived project.  The land often lacks on or more important features like; sufficient size, infrastructure development, corner orientation or zoning.  Its lack of features may be one of the reasons that it was offered at a bargain price to begin with.  The land is contracted, and a conceptual plan is developed (usually with the assistance of preliminary architectural drawings).  An income / expense analysis is then developed by the investors based on what are often unrealistic expectations.

When there are a number of unanswered questions in a conceptual plan, the bank or private investors often throw up a red flag.  The added risk of acquiring additional land, rezoning, completing infrastructure, projecting traffic counts and forecasting income without sufficient study is not well received.  The best market analyses reveal important information about; product type, supply, demand, competition, market-share, income and expenses and it would explain why factors like; location, economic conditions, quality of construction and costs vary from one development to the next.  

Each highest and best use analysis within an appraisal report asks and answers the supply and demand question "what is the most financially feasible use?"  Appraisers, however, are usually not prepared to provide the in-depth analysis that is necessary to  answer that question in a compelling way.  Appraisers simply lack the resources to study every sub-market and every property type.  Brokers, as noted on our Sources page, provide quarterly information in general categories (office, retail and industrial).  Specific, specialized market information on uses like; nursing homes, drug stores, auto service centers or taverns is simply not readily available.       

Contact us with your questions or concerns regarding market analysis or regarding your specific appraisal assignment in Nevada at 1-702-568-6699.  We can also be e-mailed at grigdon@cox.net.  

Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.