Page 41 - Trump University Commercial Real Estate 101

Ho w to Read a Market

market is about to occur. They — and you — know this by doing your
research and looking for certain market forces taking place.
Oddly enough, local property owners are the most likely to be
blind to all the signs of recovery at fi rst. They ’ re the last to see it
because their vision is so clouded by the pain they ’ ve been through in
the last few years. They watched unemployment increase and saw the
glut of properties that choked the market. They felt constant pain as
revenues dropped, but their payments to lenders did not.
In the midst of all the swearing they did at the terrible market,
they swore they would not invest in the area again. After all, they see

no construction happening, and figure that the market is still dead.
These are fabulous sellers for you! They ’ re still hurting and look-
ing for someone to dump their properties on when you come along,
maybe interested in buying.
They breathe a giant sigh of relief when you slide that check across
the closing table. Their long nightmare is over.
The major oversupply is just starting to be absorbed, though, and
rent levels have not grown high enough to support the building of new
properties.
Because this city had an aggressive program to attract jobs, compa-
nies have committed to the area. Those plans transform from commit-
ments to actual, breathing people signing up for those new jobs.
As jobs come in, other jobs are created. For every one professional
job that comes into an area, another three to four service jobs are cre-
ated to support that professional. This is called the Multiplier Effect .
If a city expects to increase its labor force by 4,000 new nonagri-
cultural jobs, you can expect a total employment increase of 12,000 to
18,000. This ripple effect will positively affect each type of commer-
cial property, although — as I said before — apartments will see the ben-

efits before retail does.
As jobs come into an area, competition for labor begins to increase,
and so do salaries. There is now more disposable income that gets
reinvested into the community in the form of restaurant and shopping
revenues. The prosperity phase is beginning.

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