Market analysis is essential when making a decision on buying, selling, or leasing a property or land. It can also inform how you market and advertise the location. Using data and technological solutions, analysis can be completed efficiently and offer insights you may have otherwise missed.
Key takeaways
- A real estate market analysis provides further information that is crucial when deciding on an investment.
- Commercial real estate analysis considers various factors such as price, location, potential growth value, lease length, competitor locations, and more.
- Using a data provider or platform is essential to inform your analysis. Look for a provider that offers high-quality and accurate data.
Book a call with our team to see how our data can inform your commercial real estate market analysis.
What is a market analysis in real estate?
A comparative market analysis (CMA) in real estate estimates a property’s monetary value to help investors make informed choices and competitive offers on a commercial real estate property.
A real estate market analysis can include factors such as the property’s location, nearby tenants, condition, current rent and charges, style, nearby attractions, local demographics, and other factors.
What is the goal of a market analysis in real estate investment?
In commercial real estate, market analysis aims to gather and analyze information to reduce the risk of purchasing or renting a property.
For investors, market analysis is a necessity to identify opportunities, evaluate risk factors, and increase return on investment (ROI).
What does a real estate market analyst do?
A real estate market analyst completes financial evaluations to inform decision-making and aid the leasing, selling, purchasing, and advertising of a property. An analyst’s role is to monitor the market, create models, and predict outcomes based on data and market trends.
A market analyst offers advice to companies and investors to answer questions they may have including:
- Is investing in this property now optimal for my portfolio or is waiting in this economic climate preferable?
- Which locations are the best for my business?
- What are the vacancy rates of these properties? Is there anything I should be aware of?
- Is this location suitable for my business to expand?
- Is this property at good market value or is there a similar, more competitive opportunity I’m missing?
- Is this location or land best developed as a commercial opportunity such as a shopping mall, business park, leisure center, hotel, or housing complex?
- What locations are decreasing or increasing in value?
How to complete a real estate market analysis
One of the most crucial tools you can have is an efficient real estate market analysis. This process can be an absolute saving grace when it comes to taking smart, informed investments steps. We’ll break this process down for you, highlighting each step of the path to successful analysis.
1. Evaluate the area
To set a competitive price or ensure the property you’re interested in is a good deal, the analysis should consider the area’s quality.
Consider the nearby amenities, attractions, retail stores, curb appeal, nearby schools and colleges, and so on. For example, if you’re considering purchasing a gym then a nearby juice bar in the area makes the opportunity more appealing.
2. Collect property details
A real estate agent typically completes an analysis of the property. They may review the current property listing, make an in-person visit, take note of the size and style, and collect information on any previous sales of the location, property age, and other key details.
3. Compare properties
Known as “comps”, these properties for comparison are ones that have been sold or leased recently within the area of the property you’re interested in.
In commercial real estate, comps can help investors and analysts decide if the guide price is worth it. Comps are also used for house purchases. Comps typically include properties that are of similar square footage, construction type, and lot size.
More recent comps are better as market prices go up and down quite often depending on the area you’re considering.
4. Benchmark and set expectations
So, the property has a good market value and is in a good location. But is it the right property for your business – will it perform? Benchmarking is completed during the site selection process.
A benchmark aims to set expectations on performance by evaluating the performance of competitors and the market. When evaluating commercial real estate, a benchmark is a necessary step to reduce risk and analyze ROI potential.
To set a benchmark, use a data platform or provider. You have two options:
- Request data for the area or properties you’re interested in. A data provider can sell this to you for your team to analyze in-house and produce a benchmarking report.
- Use a data platform. The platform analyzes the data for you, generating reports to inform your decision-making.
Real estate market analysis examples
A market analysis is usually provided as a report or presentation. The analysis could include details such as location, price, and vacancy rate.
When comparing properties, the data can be displayed in graphs or as a table.
| Property A | Property B | Property C | |
| Location | Austin, Texas | Austin, Texas | New York |
| Monthly leasing cost | $3,000 | Purchase only | $4,000 |
| Condition | New | Older | New |
| Minimum lease contract length | 6 months | N/A | Pop-up shop only |
Benefits of real estate market analysis
There are many reasons to do a real estate market analysis. The key benefit is that the analysis reduces the risk of investing, leasing, or purchasing a property. Having evaluated the opportunities, investors and buyers alike can make informed choices using the data and reports.
Other benefits of completing an analysis include:
- Compare and decide between properties
- Identify ideal areas and locations for investment
- Find challenges and risk factors of a property
Key factors to consider
There are several important factors to consider when performing a precise and efficient real estate market analysis. These factors help you assess the potential of a property and make informed decisions.
Familiarity with market trends
Understanding the current trends in the US real estate market is imperative. This includes not only national trends but also specifics of the area where you’re investing.
Look at aspects such as the pace of real estate sales, the average length of time properties stay on the market, and price ranges.
Choice of comparables
Identifying comparable properties or ‘comps’ is key to estimating the value of the property you’re interested in. Pay attention to properties sold recently, as these represent the most accurate market value.
Proximity matters too; try to select properties within the same neighborhood or general area. Also, consider the unique characteristics of each property, such as age, size, number of rooms, and amenities.
Knowledge of the target market
Assessing the characteristics and preferences of your target market is important.
By conducting research and surveys, you can gather valuable data about what your potential buyers or renters are looking for. A real estate agent who knows the local market well can help with this.
You can also use a data provider to analyze local demographics. This can tell you about the age range, income, values, and education level of consumers in the area.
Customer visitation analysis
This refers to analyzing the frequency of visits by potential clients to real estate listings. Observing this behavior can give you insights into the attractiveness and potential of a property.
A property that garners a lot of attention could indicate high demand, while a property that receives little interest might be overpriced or lack desirable features.
For commercial real estate properties, this is done by analyzing foot traffic data.
Understanding economic factors
The real estate market does not operate in a vacuum. It’s critical to keep an eye on wider economic indicators.
For instance, low-interest rates usually encourage more people to invest in real estate. Similarly, local job market growth or decline can affect housing demand.
5 Market analysis real estate tips
Moving forward, here are some useful tips for sharpening your skills in real estate market analysis. These tactics will not only improve the speed and accuracy of the assessment but also aid in making more well-informed decisions.
1. Develop a keen understanding of the local market
This is probably one of the most important tips. You need to familiarize yourself with the local market, since the data and trends of another area might not be necessarily applicable to yours. Recognize the specific characteristics, preferences, socioeconomic factors, and buying behaviors in your chosen area. This understanding gives you a strong starting point for your analysis and helps to identify promising investment opportunities.
2. Constantly update your data pool
A critical aspect of accurate market analysis is the use of current, up-to-date information. The real estate market is dynamic and changes frequently. New properties are listed, others are sold, and market trends constantly evolve. Regularly updating your data ensures that your analysis reflects the current state of the market, leading to more accurate conclusions.
3. Factor in real estate cycles
As previously mentioned, the real estate market experiences periodic cycles – times of boom and recession. Understanding these cycles can help you predict potential changes in the market consequently aiding you in making strategic real estate investment decisions.
4. Use technology to your advantage
In today’s world, technology is our great ally. A number of real estate market analysis tools are available, which can simplify and speed up the process for you. These tools help compile data, analyze market trends, and generate comparative market analysis reports quickly.
5. Consult with real estate experts and professionals
The last and one of the most beneficial tips is to consult with experts in the field. Other than merely relying on data and technology, the wisdom of experienced real estate professionals is invaluable for a thorough market analysis. They can offer insightful advice, as well as guide you through the nuances of the local market.
Leveraging technology for quick real estate market analysis
Using data and technology for real estate market analysis is essential to identify new opportunities, evaluate performance, and find properties your competitors have missed.
The AI in Real Estate Market Size Analysis Growth Report to 2033 found that AI would grow to over $731 billion in 2028 – a compound annual growth rate of 34%. Not using these tools means your investment decisions and analysis could miss crucial information, choose higher risk investments than intended, and fall behind your competitors.
Essential tools for market analysis include:
- Foot traffic analysis tool
- Benchmarking reports
- AI-powered predictive insights
- Demographic data
- Market trend reports
By using these tools and data, CRE investment choices become clearer. Book a call with our team to see how our data can help.
