Reframing Neighborhood

The real estate appraisal industry, like most industries, is stuck in old thinking.

Perhaps the worst of this thinking is the term and concept of Neighborhood.

Most people correctly understand neighborhood as a collection of homes and perhaps businesses near their homes. Google images of neighborhood and you get what most people imagine a neighborhood to be.

But what constitutes a neighborhood of industrial, office or retail uses? It is not at all properties in close proximity, but it is instead competing properties. Put another way, what other properties would a buyer in the market consider?

Most national investors do not even care what state a property is in as long as it meets their yield requirements. So much for the cozy concept of neighborhood.

Therefore I propose that we do away with the concept of neighborhood and adopt the concept of market area, which is a much more flexible and realistic concept.

The market area for 100,000+ square foot industrial buildings could be a 50 mile stretch of the New Jersey Turnpike. The market area for a regional shopping center could be several counties in a state or the entire Pacific Northwest. The market area for an age-restricted ranch-style dwelling could include every Tamarack model in Regency at Damonte Ranch in Reno, Nevada.

So, what concept is outdated in your industry? How would you propose to change it?

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