Real Estate Principles for the New Economy

Article excerpt

Real Estate Principles for the New Economy. Norman G. Miller and David M. Geltner, 2005, 504 pages, South-Western (Thompson Learning).

Anyone who has ever taught an introductory real estate class has struggled with its circularity and with the massive amount of content that could (should?) be taught. Where to start the course is always a puzzle. Should the students know something about law before they learn about brokerage? Should they learn discounted cash flow analysis before they learn market analysis? Is it better to teach appraisal before finance, or the other way around? And, does property management fit in the course at all? Or housing policy?

The newly released Miller and Geltner sequel to their graduate text, Commercial Real Estate Analysis and Investment approaches these two problems creatively. Real Estate Principles for the New Economy, released in 2004 with a 2005 copyright, has been slimmed down substantially from its parent by providing less coverage of institutional investment (one-third of the Geltner-Miller book) and by including ten additional chapters, approximately 400 additional pages of material, on a CD-ROM inserted in the back of the book. This new book retains some of the financial economic flavor of the first text but includes housing market analysis and residential finance, topics omitted in the prior book. Overall the emphasis of the book is on market analysis and financial analysis; it is designed to be the textbook for the first real estate course taken by third- or fourth-year undergraduate students who have some economics background. It could also be the basic text for an introductory MBA course.

The hard copy portion of the book is divided into five parts as follows:

1. Introduction to Real Estate Markets

2. Focusing on Property Markets by Type

3. Legal and Regulatory Environments

4. Real Estate Financial and Investment Analysis

5. Real Estate Brokerage, Eeasing, Development and Trends

A discussion of each part follows.

Part 1 "Introduction to Real Estate Markets" uses career path discussions to explain how broadly one can view the real estate industry and how many specializations there are for professionals. It highlights the free website www.real-jobs.com where students can post resumes. An optional supplement from the CD-ROM contains interviews with professionals such as the head of real estate for Proctor & Gamble. The two chapters that follow review the economics of real estate markets, how cities grow and how values are influenced by growth, transport systems and regulation.

Part 2 "Focusing on Property Markets by Type" covers three property types: housing, office and industrial. The largest chapter, on housing, covers single family affordability, buy versus rent decisions and the dynamics of the rental market, showing how demand and supply interact over time to influence vacancy rates, rents, values and changes in supply. An appendix to the housing chapter covers fair housing issues as well as welfare economics of subsidies and rent control. Excel files on the CDROM also provide illustrations of the conversion from rent to a supportable home value and its sensitivity to interest rates. The office and industrial chapters review the demand and supply traits of these markets with some notes on recent trends. Other property types including retail, lodging and convention centers, recreational property, parking lots, airports and mixed use are on the CD-ROM.

Part 3 "Legal and Regulatory Environment" includes the traditional legal material: ownership interests, contracts, transferring ownership, the legal aspect of leases, land use controls and property taxation. What is unique in this section is the inclusion of an entire chapter devoted to negotiation, ethics and risk management based on contracting strategies. An appendix for Part 3 includes an abbreviated and simplified interpretation of the NAR codes of conduct. …