Real Estate Analysis: A Toolkit for Property Analysts presents economic and financial models, applications and insights, packaged as a toolkit for analysts and other participants in commercial and residential real estate markets.
Participants in property markets – analysts, brokers, commentators as well as investors and tenants – move seamlessly across a range of physical and financial markets. They employ models that illuminate market activity: the tools of supply and demand to explain rental trends and to forecast vacancy rates and construction cycles; forecasts of macro-economists foreshadow shoppers’ spending behaviour in shopping malls and the growth in demand for office space; capital market arithmetic to apply discount and capitalisation rates. Currently these topics are often scattered through textbooks. This book brings these tools together and situates them in a real estate market context.
Topics addressed include:
- The interaction of markets – capital, space and physical assets
- Debt, the cost of capital and investment hurdle rates
- Real options – valuing lease contracts and land
- Risk – what counts, what doesn’t (systemic and non-systemic risk)
- Discounted rates and capitalisation rates – interpreting spreads to sovereign bond yields
- Externalities – why do markets “fail”; what are the “solutions”?
- Property rights – different rules, different outcomes
- Exploitation for natural resources (exhaustible, renewable) – how does discounted cash flow analysis (DCF) fit in?
- Cost-benefit analysis – the analytics of compensation payments
- Forecasting – purpose and process
The foundations and the scaffolding that underpin and support real estate market analysis are the focus of this book. Its purpose is to complement, sometimes augment, the subject matter of real estate training programs. The prospective audience includes curious professionals and researchers, seeking perspectives that extend standard class-room fare.
Foreword: A little learning
1 Space, time and assets: The three markets that drive real estate
2 Debt, equity and the cost of capital: Can debt add value and enhance investment returns?
3 The real estate quadrant model: Finding value in the capital stack
4 Inside the engine room – getting the metrics right: Discounted cash flow analysis
5 Decisions, decisions … trick or treat?: Real options and the price of choice
6 Change the rules, change the game: How property rights regulate outcomes
7 When property rights fail –compensation and rent-seeking: Getting to “fair value”
8 When property rights fail –externalities: Good fences make good neighbours
9 Natural resources –old problems, changing rules: Confronting “the surly bonds of earth”
10 Investment portfolios: where does real estate fit in?: Putting it all together
11 Inside the crystal ball – A user’s guide: What is forecasting for?
Index
Biography
David Rees is an independent consultant. With a background in finance, real estate and investment strategy he has held positions as
- Regional Director of Research at JLL, an international real estate broker and manager
- Head of Research at Mirvac, a diversified publicly listed REIT
- Head of Research at Commonwealth Bank, Australia’s largest commercial bank
He is based in Sydney, Australia.
