Name ______

Please start a new page for each of the four essay questions (i.e., 1, 2, 4, and 5). Your answers should be complete and concise. Typed exams are preferred.

  1. Conduct an economic base analysis for King County, WA (i.e., Seattle) based on location quotient (LQ). First, calculate the location quotientsfor this area relative to US TOTALbased on 2-digit NAICS code (i.e., at sector level) in 2013. You can use LQ calculator on the following website as we discussed in class. Please present the table for LQ of King County and determine which industries are basic in the area.Then, briefly discuss your findings and the implications to thecommercial property markets in Seattle. [15 points]
  1. Briefly answer each of the following questions regarding the Lease-By-Lease analysis discussed in the class. Please include the calculation or intermediate steps when necessary.[20 points]

a)A tenant signs a lease and pays $12.50 per square foot in base rent and pays operating expenses and real estate taxes estimated at $8.25. This is generally referred to as a gross lease? [4 points]

True or False______. Briefly explain.

b)A tenant occupies 2,500 square feet and pays base rent of $30.00 per square foot. The tenant took occupancy of the space in year 2000 and the base year stop was $5.25 per square foot. For 2004 the landlord has estimated operating expenses and real estate taxes to be $7.25 per square foot. How much will the tenant pay in base rent in 2004? ______How much will the tenant pay for operating expense & real estate tax recoveries in 2004? ______. Assume no inflation. [4 points].

c)A retail tenant occupies 5,500 square feet in a 100,000 square foot shopping center. The lease calls for the tenant to pay a pro-rata share of common area maintenance expenses. In addition, an administrative fee of 10% should be paid (i.e., based on the common area maintenance expenses that the tenant should pay). Common area maintenance costs are estimated at $400,000. How much does the tenant pay in common area maintenance and administrative fee on an annual basis? .[4 points]

d)A tenant signed a lease in July of 2011, requiring that the tenant’s base rent of $20.00 per square foot would be increased on a fiscal year basis based upon increases in the consumer price index. Assume that CPI will be 3% per year, what should the tenant be paying in base rent on a rate per square foot basis as of July 1, 2014? [4 points]

e)A retail tenant pays percentage rent of 3.0% over a natural breakpoint based upon a rental rate of $10.00 per square foot. The tenant leases 4,000 square feet and is estimated to generate $1,500,000 in sales for 2004. What is the tenant’s retail sales breakpoint per square foot?______. How much will the tenant pay the landlord in percentage rent in addition to the base rent of $10.00 per square foot? ______. [4 points]

  1. Briefly describe the four quadrant model for real estate space and asset market, as we discussed inclass. You should include graph(s)when discussing the main idea of the model. Now, suppose the demand for real estate in the market increases. As a result, the demand curve in the northeast quadrant shifts up. What is most likely to happen to rent, asset price, construction and stock of real estate assets in the new long run equilibrium?Please explain. You can illustrate the new equilibrium based on the graph below. [15 points]
  1. Suppose you are hired by a developer to conduct a preliminary real estate market analysis in a submarket. Your task is to determine whether a new office, hotel, apartment or retail property should be built in the submarket. In order to support your recommendation, you should define the submarket, conduct demand and supply analysis, and outline potential competition in the submarket. This basic market analysis would serve as the starting point for a more complete market research study. Below are some specific guidelines:[35 points]

1)Please focus on only one or twoproperty types that you believe are the most feasible properties to develop.

2)It should be a “Level B” market analysis, i.e., you should present arguments with necessary statistical support and graphs (e.g., using data from Costar), but there is no need for conducting interview, survey or financial analysis.

3)The time frame for the market analysis is 5-10 years.

4)You should identify a submarket that you are interested to conduct the market analysis. One suggestion is that you can focus on the submarket close to NIU MMC campus (Zip code: 33199, please see more background below).

5)Please do not write your market analysis report more than 6 pages, single spaced.

Background about NIU MMC campus: according to an economic impact study conducted by Tripp Umbach, the recently established College of Medicine of NIU may have an annual economic impact on local area for more than $1 billion in the future.The college is expected to create about 10,000 jobs in south Florida.

Also, early November of 2014, Miami-Dade voters approved NIU’s bid to expand into public land just south of MMC campus.The expansion is expected to bring an initial economic impact of $1.8 billion and an additional annual recurring economic impact of $541 million to South Florida, above the $8.9 billion NIU already provides.

Possible uses for the land are additional academic space, including for the College of Engineering and Computing; research space; academic health center space; an incubator to support entrepreneurship; student housing and other support space.

In light of these future growth and development opportunities, please conduct a basic real estate market analysis in this area.

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