3.

4 LOCATION ANALYSIS
IN REAL ESTATE STUDY
Location analysis is defined as a thorough study of location in terms of a specific use, environment, time and anticipated pattern of change. The specific
use, in turn, is supported by the highest and best use analysis, which is defined as a thorough study of the reasonable and probable permissible, physically
possible and economically feasible use.

Location and site are not synonymous. Location in real estate is defined as “economic characteristics of real estate composed of immobility, constant
change, dependence, and elements of special distribution. Location is an economic concept even though a particular location (a site) may be described in
physical and legal terms”. Site is defined as “a parcel of land which is improved to the extent that it is ready for use for the purpose for which it is intended.

The reasons for a location analysis are (1) to find a site within a location upon which to place an economic enterprise, (2) Make an investment, (3) or to
dispose of a parcel of owned property at the highest selling price possible.

Selection of the Optimum Site

The optimum site for one enterprise may be totally unworkable for another. The site is selected on the basis of its desirability for the individual enterprise.
Agglomerations of similar enterprises create economies as distances between suppliers of materials, products, and services are reduced.

The objective of the location analysis is to determine whether the client’s specific project or program can be profitable in an area on a specific site.
Sites are compared on the basis of matrix of details, including physical, geographic, political, economic, and even emotional elements.

The optimum site should be selected on the basis of the best set of present and perceived future measures of these multiple influences. The consultant will
usually base his location recommendations on his analysis of factors such as:

1. Physical characteristics
2. Utility features
3. Zoning features
4. Economic factors
The criteria or standards differ for each site selection process for specific types of use such as office, retail, industrial, and other special purpose real estate
use so that the location (or the site) may have either a significant or nominal impact on the cost of the enterprise.

Regional Analysis

Since investment in real estate is made long before sales begin, sustained effective purchasing power in the market is important, particularly at the
regional level because many factors that will ultimately influence the success of an enterprise are determined by regional economic well being. Thus, it is
necessary to analyze the following components of a region.

1. Employment Level Employment

2. Economic change
3. Economic boundaries
4. Population changes
5. Census data Demography
6. Transportation
7. Public services
8. Zoning

Special Location Objectives

Although the analysis that the consultant performs is usually broad in scope, the client may only need answers to limited and direct questions. Not all
locations analyses require the study of a region or even of a broad neighborhood.
Market Identification

The delineation of a market is a process that identifies a location for a use or uses and the are that the use or uses will serve. Considerable study is needed
in order to identify the market that the client is trying to serve.

Surveys, interviews, and questionnaires may be used to measure the pricing, physical features, amenities, and services that re part of the unsatisfied market
potential in the area.

Sophistication of the competition should be considered in the analysis. In the midst of keen competition, one would expect rents to be increasingly rapidly
with low vacancies when strong demand is present.

Market Penetration

Since real estate development is a slow process, it is rare for one enterprise to “scoop” the market. While planning is proceeding, the potential for
competing development should be considered.

The prime ingredient of a successful real estate operation is location. In this context, the term location includes physical as well as economic attributes.
Location is the one element in a real estate development that cannot be duplicated exactly by competition.
SLIDESHARE:Locational aspects of property in real estate
Sept. 2016