Data & Tools for Understanding Our State & Our Local Economies
September 29th, 2009
University of Nevada, Reno
Simulation Scenario #2 - COMMERCIAL REAL ESTATE SCENARIO
Situation & Setting
You are a summer intern for a commercial real estate investment firm, and have to evaluate, analyze, and compare two major metropolitan markets in a very short amount of time.
The key players in your firm have determined over the course of a handshake and expense-account steak dinner to look into whether the Reno (Washoe County, Nevada) or Sacramento (Sacramento County, California) markets appear more viable (on the demand side) for a commercial real estate building. They are interested in buildings that will house firms in the information business. Because in-depth real estate market analysis is expensive, they have asked you for a very brief presentation (they have very short attention spans when not at a steakhouse or bar) that they will use to determine which of these markets to analyze at greater depth. It is 2pm, and they have asked you to return this report by happy hour at their favorite haunt, which begins at 4pm. Unfortunately, they do not want you to be at the bar with them, so you must present the material by 3:45 pm.
The REAP website will allow you to meet this deadline. As a team, see how below!
Your Assignment
While you have the site open and at your fingertips, go through the following questions and use the site to find out the following information. To provide a first-blush comparison of Reno and Sacramento for the above scenario, we will utilize the REAP website to find employment data for both regions, including employment in the key industry that will drive demand for that type of real estate. This scenario shows that there are many different ways to acquire the same data on the REAP site. One of your tasks as a group is to use each, and select those that you feel are most relevant to this scenario.
OVERALL EMPLOYMENT: This section will analyze the overall employment structure of the two economies, with pleasing graphical output for your presentation.
Compare the tables for each county, especially Figure 4. At first blush, which economy would you be more comfortable with investing in, at a broad level? Discuss and decide among your group which figures best represent the overall employment trends in each county for your presentation. Include these in your presentation.
LOCATION QUOTIENTS and GROWTH RATES: A location quotient is a simple and frequently used index that measures concentration of employment in the key sectors. Any index above "1" indicates a higher-than-expected concentration of employment in that industry for the size of an economy. Because the principle focus of this exercise is the information industry, pay particular attention to the quotients in that industry. Growth rates are very important for real estate analysis, so consider the change in each market over time, and discuss/debate these factors as a group as you prepare your presentation.
On the left menu, click on "Industry Structure and Performance", "Counties By Industry", and "Employment"
Click "Information" in the menu to the right, then follow the same steps (a-c) for Sacramento in a new browser window
For growth rates of the information industry for each county, go to Table 2. Either copy the data for this industry or recreate it in another display for the PowerPoint presentation
Note the difference in employment location quotients between the counties. Use your creativity to decide which data, figures, and/or tables to use for your analysis
BRAINSTORM: (time permitting) There is a wealth of data at your fingertips on the REAP site. Browse the modules, and consider whether any of them offer additional information that could embolden your presentation. Consider using LSGL analysis for another graphical take on the data.
CONSTRUCT YOUR PRESENTATION: Be sure to include the following in your presentation:
Overall employment trends for each market
Location quotient analysis for information for each market
Comparison of growth rates for the key industry (information) used in this analysis
Any additional details you have gleaned from the REAP site that will inform your conclusions
A slide giving your official recommendations and the caveats that you should attach to this kind of "quick-and-dirty" analysis
REMEMBER: These real-estate types are visual learners: do not bore them with extensive tables. Graphics and figures are key. Be pithy---they have serious business to conduct once happy hour begins!
