MARKET

RESEARCH
UEBQ4553 PROPERTY DEVELOPMENT
Where have we
been?

We have learned:
◦ Investment
◦ Property investment
Where are we going?
Upon completion of this chapter, you will be able to:
◦ Explain what marketing research is
◦ Demonstrate the processes involved in property market research
◦ Conduct market research in property development
 Chapter Contents

Marketing Market Research Seven-step Market

Analysis Process
Marketing
Market research
Reasons for undertaking market
research:
◦ To ensure informed decisions are
made about individual developments
or investments.
◦ To assist in the formulation of long-
term development and/or investment
strategies.
◦ To analyse and predict the
performance of property investment
portfolios.
Seven-step market analysis process

Property Comparative
Market Forecast
productivity supply
delineation demand
analysis analysis

Forecast Equilibrium or
Financial
subject residual
modelling
capture analysis
 STEP 1
PROPERTY
PRODUCTIVITY
ANALYSIS
 A preliminary analysis of the
legal, physical and location
Property attributes of the proposed
productivity development that affects the
analysis productive capabilities and
potential uses of the property.
KLCITYPLAN2020
KL DCP Zoning Schedule
◦ City Centre Commercial (CCC) ◦ Established Housing Area (EHA)
◦ District Centre Commercial Zone (DCC) ◦ Public Housing (PH)
◦ Neighbourhood Centre Commercial Zone ◦ Industrial (IP)
(NCC)
◦ Technology Park (TP)
◦ Commercial (C)
◦ Public Institutional (P1)
◦ Mix Use Commercial (MXC)
◦ Private Institutional (P2)
◦ Mix Use Residential (MXR)
◦ Public Open Space (OS1)
◦ Mix Use Commercial Industry (MXCI)
◦ Private Open Space (OS2)
◦ Residential (R1)
◦ Forest Reserve (FR)
◦ Residential (R2)
◦ White Zone (WZ)
◦ Residential (R3)
Types of Land
Use Zones in
Kuala Lumpur
 ◦Land Use Zoning
Property ◦Density/ Plot Ratio
productivity ◦Title restrictions
analysis ◦Public planning for growth
Property productivity analysis

Development Intensity Planning

Control
◦ Attaining a sustainable built
environment for the city.
◦ Strengthen the land use zoning
control and use classes control,
◦ Ensure developments supports
infrastructure development as well
as protects the urban amenities.
 Development intensity will be control in two
forms:-
◦ Density control for residential
Property development (except for areas in the City
productivity Centre).
◦ Plot ratio control for residential
analysis development in City Centre area,
commercial, mixed-use and industrial
developments.
Property productivity analysis
Density Control
◦ Measure the amount of new housing schemes to be built on a
piece of land.
◦ Avoids sprawling of development to areas outside the
designated zones and concentrates development within areas
covered by public transportation and infrastructure.
◦ Generate a critical mass of people to support urban services
such as public transportation, local shops and schools.
◦ Provide a variety of housing types to meet the needs of local
residents and future communities.
Property
productivity analysis
Density Control
◦ The density shall be designated to
each plot of land/lot basis in these
zones other than the City Centre
area
◦ Residential 1
◦ Residential 2
◦ Residential 3
◦ Public Housing
• Density is used for residential land uses and controls the maximum
number of dwelling units on a lot.
• Density is calculated by determining the number of dwelling units
per acre (du/ac)
 Land use zoning Residential 3
5 15 5 15

10 10 20
Land area (Lot 123) 27.5 acre

Assigned Density 80 units per acre

Max. Persons/Max 27.5 x 80 = 2,200 units

Allowable number of
units for land 2,200 units x 4
person/unit = 8,800
persons
Property productivity analysis
◦ Density is calculated in gross. All the surrendered land such as open space, road
reserves as well as infrastructures and utilities areas will also be included in the
density calculation for a plot of land identified for development.
◦ Example:
Based on the acreage and density that has been assigned for Lot 123, the maximum
allowable density is 8800 persons which is equivalent to a maximum allowable of
2200 units.
◦ When Lot 123 has been approved for sub division and in order to obtain the
Development Order (DO), the number of units must be based on the gross (not
exceeding 8800 persons/2,200 units) inclusive of the open space, roads as well as
infrastructures and utilities
Property
productivity analysis
Plot ratio control
◦ Relationship between the gross area
of a site, and the total floor area of
a building.
◦ The total floor area allowed to be
built on the said site based on the
maximum permissible plot ratio for
the said land/site.
 Plot ratio control
◦ Achieve sustainable development intensity
that would prevent adverse effects of over
development;
Property ◦ Achieve the desired functions and character
productivity of commercial zones;
analysis ◦ Achieve a critical mass that can support the
urban services such as Public Transportation,
urban amenities etc;
◦ Achieve the overall urban design objectives
Land area 4.0 acres/ 16,187 m2 / 174,240 sf
Plot ratio 1:4
Total floor area requirement (FAR) 64,748 m2 / 696,960 sf
 Plinth area
◦ The portion of a plot of land that is
covered by a building or structure having a
solid roof - includes balconies or other
projections from the building but does not
Property include eaves up to a maximum of 600mm
productivity in width.
◦ Plinth area controls allows more spaces
analysis for public realms and green areas and
helps reduce the large blocks of
development that will create barriers to
pedestrian as well as a wall-like street
frontage
It is measured as a proportion of
building area over land area.
Property productivity analysis
Plinth area
 Land area 4.59 acres/ 18,580 m2 / 200,000 sf
Plot ratio 1:4
Plinth ratio 60%

Total floor area requirement 200,000 sf x 4 = 800,000 sf

Footprint
Size of property unit
Circulation/common area
Number units per floor
Number of floor
Total units
200,000 sf x 60% = 120,000 sf
1000 sf
50%
(120,000 sf x 50%) / 1000 sf = 60 units
800,000 sf /120,000 sf = 6.6 storeys
6.6 storeys x 60 units = 400 units
Or
800,000 sf x 50% /1000 sf = 400 units
 STEP 2
MARKET
DELINEATION
Market delineation
◦ It is the market analysis process which defining the
market and users that used to understand the
market area in which the demand of the proposed
development will be suitable to develop.
- Consider the potential types of property
development
- Identify the market for the defined use.
Market delineation
◦ Defining the property market for
the subject property clearly
enhances the understanding of how
externalities affect the proposed
development.
◦ Break down a specific property
market into consumer submarkets
or market segments, and then
disaggregates the proposed
development from other types of
properties.
 The market area of potential buyers
can be defined in terms of:
◦ Time-distance relationships

Market ◦ Linkages to major employers and

amenities
delineation ◦ Social or political boundaries
◦ Manmade or natural boundaries
Market delineation
Market segmentation process
◦ Market area – geographically or by location
◦ Available substitute properties
◦ Property features - occupancy, customer base (tenant profile), quality of
construction, and design and amenities
◦ Complementary properties (support facilities)
◦ Proposed property development
 STEP 3
FORECAST
DEMAND
Forecast demand
◦ Focusing on identifying the potential users of a proposed property
development, i.e. the buyers, tenants or customers it will attract.
◦ For each particular type of property, demand analysis focuses on the end
product or service that the property provides.
Property buying – Post MCO
 ◦ Ages, gender, preferences and behavioural
patterns of households
◦ Growth rates in population and population
projection
Forecast demand ◦ Rate of household formation – income and
age groups in the existing population;
migration
 ◦ Income projections and employment
levels– real income is not stable and
may either decrease or increase
Forecast ◦ The availability of property for
development and the adequacy of the
demand infrastructure in the subject area –
determine how much of the growth
projected will go into a particular area
 Residential

Forecast Office
demand

Retail
 Residential development
◦ Population of the market area – size
and number of households, rate of
increase or decrease in household
formation, composition and age
Forecast distribution.
demand ◦ Income.
◦ Employment types and unemployment
rate.
◦ Percentage of owners and renters.
2018
 Residential development
◦ Financial considerations such as
savings levels and lending requirements
(e.g. interest rates on mortgages, loan-
Forecast to-value ratios).
◦ Factors affecting the physical appeal of
demand the neighbourhood, e.g. geography and
geology (climate, topography, drainage,
bedrock and natural or man-made
barriers).
 Residential development
◦ Local tax structure and administration,
assessed values, taxes and special
assessments.
◦ Availability of support facilities and
Forecast community services (cultural
demand institutions, educational facilities,
health and medical facilities, fire and
police protection).
◦ Land-use patterns and directions of
city growth and development.
 Office development
◦ Employers who use office space; current
and estimated future staffing needs.
◦ Average square metre areas of office
Forecast space required by an office worker. Note
that requirements vary according to the
demand category of work, the rank of the office
worker and the location of the office in
the suburbs or the centre business
district.
 Office development
◦ Vacancy rate for the specific class of office
building.

Forecast ◦ Pressure to upgrade placed on higher

grade buildings or decreased demand for
demand lower grade buildings.
◦ Land-use patterns and directions of city
growth and development.
 Office development
◦ Accessibility (transportation facilities and
highway systems) and cost of
transportation.
Forecast ◦ Factors that affect the appeal of the office
demand building (quality of construction,
management and tenancy) and the
availability of support facilities (shops,
restaurants and recreational centres).
 Retail development
◦ Population of catchment area(s) – size and
numbers of households, rate of increase or
decrease in household formation,
composition and age distribution of
households.
Forecast demand ◦ Household income.
◦ Percentage of household income spent on
retail purchases and percentage of disposable
income (effective purchasing power) spent
on various retail categories.
 Retail development
◦ Rate of sales retention in the catchment
area.

Forecast demand ◦ Required volume of sales for a retail facility

to operate profitability and existing sales
volume per square metre.
◦ Retail vacancy rate in the market.
 Retail development
◦ Percentage of retail purchases captured from
outside the catchment area.
◦ Land-use patterns and directions of city
growth and development.
Forecast demand ◦ Accessibility (transportation facilities and
highway systems) and cost of transportation.
◦ Factors that affect the appeal of the retail
centre (image, quality of goods and tenant
reputation).
1. Tenants, attractions,
excitement
2. Find a niche
3. Embrace e-
commerce
4. Keeping green
 STEP 4
SUPPLY ANALYSIS
Supply analysis
Data may be gathered in various way:
◦ field inspection, e.g. vacant sites
◦ review of building permits (issued and acted upon), cadastral maps, town plans
and surveys of competitive sites
◦ interviews with developers and government planners
◦ review of newspaper articles and media coverage
Supply analysis
Important factors in the analysis of the supply of competing properties:
◦ Quantity and quality of available competition (standing stock)
◦ Volume of new construction (competitive and complementary) – property
developments in planning and under construction.
◦ Properties currently on the market ‘for sale’ (existing and newly built).
◦ Availability and price of vacant land.
◦ Costs of construction and development.
Source: https://napic.jpph.gov.my/portal
Link:
Supply analysis
Important factors in the analysis of the supply of competing properties:
◦ Owner occupancy versus tenant occupancy.
◦ Causes and number of vacancies.
◦ Conversions to alternative uses.
◦ Special economic conditions and circumstances.
◦ Availability of construction loans and financing,
◦ Impact of building codes and bylaws, zoning, town planning controls and other
regulations on construction volume and cost
LINK:
https://klmycity2040.d
bkl.gov.my/pppkl/
 STEP 5
EQUILIBRIUM OR
RESIDUAL
ANALYSIS
Equilibrium or residual
analysis

◦ The inventory of supply and

estimate of demand are
compared, to determine whether
marginal or residual demand
exists, or whether such demand
can be forecast in the future.
Equilibrium or residual
analysis

There are two possible types of

oversupply:
◦ when the available units exceed
potential tenants
◦ when the available space is
priced beyond the purchasing
power of potential tenants.
2020
2022
 STEP 6
FORECAST
SUBJECT CAPTURE
Forecast subject capture
Comparing the productive attributes of the
proposed development to competing property
developments, then an estimation can be made of
the market share the subject is likely to
capture considering market conditions, demand,
and competitive supply.
Forecast subject capture
Market Share
◦ Proposed residential units: 200 units
◦ Total numbers of property supplied in Kajang = 4,000 units

Market share = 200/4,000 x 100% = 5%

It means, the proposed development has a 5% share of the entire property

market in Kajang.
Forecast subject
capture

Any special advantage on

the subject properties and helps in
forecasting the subject’s probable
market share under existing
conditions.
 ◦ Selling Price/ Rental
◦ Location
◦ Design (concept)
◦ Size
How to ◦ Amenities/ Facilities/ Features
(Project & Unit)
increase
◦ Parking
market share? ◦ Density/ Occupancy
◦ Quality
◦ Incentive/ Scheme
◦ Neighborhood characteristics
 STEP 7
FINANCIAL
MODELLING
Financial modelling

Consider and model alternative

development configurations with
the emphasis placed on financial
feasibility analysis.
 Desired profit margin

Anticipated sale price

Financial Pricing alternatives

modelling
Optimistic market forecasts

Pessimistic market forecasts

Financial
Modeling
Further reading:
Wilkinson S and Reed R. (2015).
Chapter 8 Market Research.
Property Development (5th
Edition). Hampshire: Routledge.
Key takeaways
◦ Market research helps the
property developer to understand
the market better before
kickstarting any development
projects.
◦ Conducting thorough market
research has the potential to
make a successful property
development.