Post date: Jan 27, 2016 11:18:57 PM
Phase 1 of the College Station economic development plan is a thorough and informative document for our land use planning. A developer will use resources such as this (or go to the primary data from the U.S. census) to identify potential markets. The architect will advise and respond to that market identification to design something that should be profitable.
As Professor Booth explained, the property income and the capitalization rate determine the value of the property. Reading a little between the lines, you might realize that both the income and the cap rate are related to the desirability of the property and how well it fits a market niche that is under-served. Basically, if you figure out a market that has a good number of customers but no one else has identified it and you do a good job designing and building a property, then you will be able to achieve a high occupancy rate and charge high rents. Your income will be high. Because it should be an expanding market, it will be desirable for investors and the cap rate will be low. The combination of these means that the property will be very valuable and you will make a lot of money.
If instead,your property has a low occupancy rate, perhaps due to a saturated market or a low quality product, then your income will be low. At the same time, the lenders and investors will look at your property and assess that the market is saturated and the potential for expansion is low, and they will set the cap rate high. The property will be low value.
Considering the very large number of student residence projects built recently in College Station, what do you think the occupancy rate, project income, and cap rate should be for a student residence project?
Do you think the mixed use development envisioned by Midway has greater potential than another student residence project?
I would love to see some comments and discussion below.