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tive – Disaggregated by size, quality, and age – Projected future development ? Planning departments ? Media research ? Local market interviews 17 18 Market Analysis ? Demand – Historical absorption – Market research of key indicators ? New business startups ? Population growth ? Other economic trends ? Other demographic trends – Projected growth in demand Demand (sq ft) Time 18 19 Market Analysis ? Reconciliation of supply and demand – Rental rates – Percentage rents – Occupancy levels – Commissions – Buildout – Growth rates ? Rental ? Expense – Capitalization rates – Renewal assumption 19 20 Market Analysis ? Space may be vacant prior to releasing ? New rent is set ? New tenant improvements, missions ? Base years, sales, other levels are set Renewal assumptions What happens at the end of a lease? 20 21 The Due Diligence Process Sales Contact Executed Tenant Review Market Analysis Pro Forma Analysis Remendation to Buyer Financial Operational Review Physical Asset and Environmental Review 21 22 Physical Asset and Environmental Review ? Engineering report – Deferred maintenance – Required capital improvements ? Architects or space planners – Efficiency of existing space: opportunities or constraints for value enhancement ? Environmental – Phase 1, 2 and 3 ? Title search 22 23 The Due Diligence Process Sales Contract Executed Financial Operational Review Tenant Review Market Analysis Remendation to Buyer Physical Asset and Environmental Review Pro Forma Analysis ? Converting analysis to cash flow 23