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10 Basic Steps to Conduct a Real Estate Market Analysis

Houston, TX, 05/11/2023 – Conducting a thorough market analysis in commercial real estate is essential for understanding the demand and potential growth of a commercial property. Factors such as population growth, economic indicators, local infrastructure development, and market trends can all influence rental rates and occupancy levels, directly impacting cash flow potential. Ali Choudhri, CEO of Jetall Capital, and one of Houston’s largest private commercial real estate owners has shared a basic list below on what steps a novice investor might take on developing their own market analysis.

  1. Define your investment objectives: Clearly outline your investment goals, such as desired return on investment, holding period, and risk tolerance. Understanding your objectives will help guide your analysis and decision-making process.
  2. Gather property information: Obtain detailed information about the commercial property you’re considering, including its location, size, zoning regulations, building condition, and any unique features or amenities. This information will form the basis of your analysis.
  3. Identify comparable properties: Look for recently sold or leased properties in the same area that are similar in terms of property type, size, condition, and location. These comparable properties, also known as “comps,” will serve as benchmarks for assessing the market value of the property you’re analyzing.
  4. Evaluate market conditions: Research and analyze the current real estate market conditions in the area where the property is located. Look into factors such as supply and demand, vacancy rates, rental rates, absorption rates, and trends in property prices. This information will provide insights into the overall health and potential of the market.
  5. Analyze comparable property sales and leases: Examine the recent sales and lease transactions of the comparable properties you identified. Consider factors such as sale prices, rental rates, terms of the lease agreements, and any unique circumstances that may have influenced the transactions. This analysis will help you gauge the market value and rental potential of the property you’re analyzing.
  6. Assess property-specific factors: Evaluate any unique features or attributes of the property that may affect its value or desirability. These factors can include location advantages, proximity to transportation, amenities, development potential, or any upcoming infrastructure projects that may impact the property’s value.
  7. Consult local real estate professionals: Engage with local real estate agents, brokers, or appraisers who have expertise in the specific commercial property sector and the local market. They can provide valuable insights, guidance, and access to additional data or resources that will enhance your analysis.
  8. Consider market trends and forecasts: Review market forecasts and economic indicators that can influence the real estate market, such as interest rates, employment rates, population growth, and industry trends. Understanding the direction and potential future changes in the market can help you make more informed investment decisions.
  9. Document your findings: Document all the information and data you have gathered throughout your analysis. This will help you organize your thoughts, compare different properties, and allow you to refer to your findings when making investment decisions.
  10. Make an informed decision: Based on your market analysis, evaluation of comparable properties, and consideration of property-specific factors, assess whether the commercial property aligns with your investment objectives. Consider the potential risks, returns, and your ability to manage the property effectively. If the analysis indicates a favorable investment opportunity, proceed with further due diligence and consult with professionals as needed.

“Remember, real estate market analysis is an ongoing process, and market conditions can change over time. Continuously monitor the market and update your analysis as needed to stay informed, and adapt your investment strategies accordingly.” – Ali Choudhri, CEO at Jetall Capital