Estimating The Economic Impact Of Commercial Real Estate
Transcript of Estimating The Economic Impact Of Commercial Real Estate
Estimating the Economic Impact of Commercial Real
EstateOVERVIEW
Economic Impact• How is it measured?
• What is included?
How is economic impact measured?
• Total Output - value produced by the final demand dollars cycling through the economy.
• Total Earnings - the amount of total output paid in compensation.
• Total Employment -the number of jobs created or sustained.
What is included?• Direct Impact
• Indirect Impact
• Induced Impact – Effects of households.
Three Rivers Model• What inputs are needed?
• How does it work?
What inputs are needed?• RIMS II Multipliers
• Building Size
• Cost per square foot
• Building occupancy (total or per square foot)
How does it work?• Step 1: Define Region and Order
RIMS II Data
• Step 2: Calculate Final Demand
• Step 3: Apply Multipliers
Step 1: Define Region and Order RIMS II Data
• Define geographic scope– County up to Country
level
• Select data series– Annual– Benchmark
• Choose data type– Type I– Type II
http://www.bea.gov/regional/rims/
Step 2: Calculate Final Demand
Construction Phase
Building SizeX Cost per sf Final Demand
Business Operations Phase
Direct Employment Multiplier÷ Total Employment
Multiplier Calculated MultiplierX $1,000,000 Final Demand per
Employee X # of Employees Final Demand
Step 3: Apply MultipliersStep 1 Step 2 Step 3
Total EmploymentMultiplier/1Million
Total EarningsMultiplier
Total OutputMultiplier
Final Demand
Case Study – ConstructionFinal Demand: 100,000 sf x $150 per sf =
$15 MillionStep 1 Step 2 Step 3
19.3875/1,000,000
0.7593
2.3339
$15,000,000
Case Study – Business Operations
Final Demand: 2.1554/17.6334 x $1,000,000 x 400 = $48 Million
Step 1 Step 2 Step 3
17.6334/1,000,000
0.7903
2.0506
$48,893,600
Advanced Application• Multipliers can be disaggregated
• Total value added can be observed
• Properties can be allocated for different uses
• Sales and employment taxes can be estimated
• Apply it to several projects simultaneously
• Building operations can be considered
Conclusion• Quantifying the economic impact of
commercial real estate development is often ambiguous.
• The Three Rivers Model is a fairly simple way of measuring gross economic impacts.
• It is based in RIMS II data that is highly regarded, easily obtained, and inexpensively purchased.
Publication
Web Address: http://www.ciremagazine.com/article.php?article_id=1330
Contact InformationRyan StokesConsultantConstellation Real Estate
Services4221 Sherrod StreetPittsburgh, PA 15201
Phone: 412-512-1864E-mail: