Illuminating the Real Estate Landscape Expert & Dedicated Minds Research and Forecasting Philosophy Real Estate Markets Housing The median price of single family housing is calculated from inflation, demand (household formation), and supply (permits). Permits, in turn, are calculated using a link to economic activity in the region. Affordability is calculated based on the median home price, income growth, and interest rates. Affordability is a factor in tenure choice. In particular, apartment demand is affected by single family housing affordability. We project apartment demand for each MSA through modeling household formation and tenure choice. Supply is linked to economic activity in the region and is projected by linking permits to household growth, interest rates, tax considerations and past values of the vacancy rate. The current vacancy rate results from the interaction of supply and demand. Rent growth is calculated as a function of the vacancy rate, and its spread from the "equilibrium" vacancy rate. Office Office demand (net absorption) is linked to office employment, which we calculate from the employment subsectors. We typically know office supply for the next year or two based on the hard construction pipeline. Further out, we use a "soft pipeline" for office supply, as well as making informed judgments about future building based on fundamental economic and real estate conditions. The vacancy rate is calculated from applying net absorption and new construction the past stock and occupied stock. Rent growth is a function of the spread between the vacancy rate and the "equilibrium" vacancy rate. Rent growth is modeled to respond in a non-linear fashion to dis-equilibrium conditions. Industrial Industrial demand (net absorption) is a function of output, as well as employment in the manufacturing and trade sectors. Output is calculated by applying a productivity factor to employment. The supply is known for about the first year, based on the hard pipeline. Thereafter, we use the soft pipeline and judgment to estimate supply in the out-years. The vacancy rate is the result of the interaction of supply and demand, and rent growth is a function of the vacancy rate. Retail Retail net absorption is modeled using trade employment growth, personal income growth, and residential permits, lagged. Supply is based on what we know about the hard pipeline for the next year, and estimates for years further out. The vacancy rate is the result of interacting supply and demand, and rent growth is a function of the vacancy rate and the "equilibrium" vacancy rate.