“Market analysis investigates the relationship between the demand for and the competitive supply of real estate in a defined market.” ¹ It is a key consideration in completing a highest and best use analysis.
The conclusions drawn from the highest and best use analysis provide an estimate of the economic demand for a particular use such as a hotel or motel. The estimate of the economic demand for the possible alternative uses is supported by the market analysis. The economic data supporting the market analysis is itself used in the development of the three approaches to value.
The Appraisal of Real Estate: Second Canadian Edition, 2002, Chapter 11 Market Analysis at pages 11.15 and 11.23-25 suggests the following six steps in performing a market analysis:
- Property Productivity Analysis
- Market Delineation
- Forecast Demand
- Competitive Supply Analysis
- Equilibrium or Residual Analysis
- Forecast Subject Capture
The details in each step are set out in the Appendix A - Market Analysis.
It is essential that a proper market analysis be undertaken to conclude the highest and best use of a hotel/motel property whether vacant or improved. To do otherwise can lead to an improper determination and a mistaken result.
¹ The Appraisal of Real Estate, Second Canadian Edition, page 11.1)
| 
