Our office model evaluates long-term demand and supply conditions impacting a region's office market and includes a projection of regional office demand over future years. Office demand is calculated on the basis of increased employment in categories of economic activity typically associated with demand for office space. Employment gains (losses) are converted into increased (decreased) office space requirements utilizing space coefficients specific to several categories of office-related employment. A share of regional demand is assigned to the site area (and specific project) on the basis of location, competition, access, project scale, etc. Office supply is evaluated on the basis of office building permit activity throughout the region including the submarkets surrounding the subject site.
The quantified estimate of supply is then compared to the demand projection to determine expected changes in office vacancy rate, office absorption potential in the site area, anticipated tenant profile, etc. The model's ability to ascertain space requirements of local tenants serves as a valuable tool to assist developers in the design of new office buildings—floorplate sizes, etc.
Our office model relies on econometric methodologies updated and refined over the past 40 years and applied to office markets throughout the United States and Canada.
AGA Medical Office Model
AGA is able to determine demand potential for medical office space at site-specific locations via methodologies which include a determination of medical employment per capita for the surrounding MSA which is then multiplied by the average square footage required per medical employee to derive a total medical office square footage per capita coefficient. This local area coefficient is applied to current (future) estimates of site area population to generate an estimate of current (future) medical space demand, excluding demand related to acute care hospitals and other more specialized surgical centers. The investigation also determines which categories of medical-related demand (including dental-related demand) are increasing or decreasing in their overall representation of total demand.
Our estimate of site-specific medical demand is compared against the existing occupancy of medical-related office facilities in the site area (achieved through a detailed field audit conducted by AGA staff) to determine the current oversupply/undersupply of medical office facilities throughout the trade area. The medical office space per capita coefficient is also applied to projected population increases for the trade area to determine additional demand support over the next five years, comparing this demand support to the supply of future medical-related office facilities either under construction or planned for development within the trade area (based on information obtained from local planning department representatives) to determine future supply and demand relationships within the trade area. If medical office space is undersupplied across the trade area, the analysis will include a discussion of optimal product concepts, achievable pricing, anticipated end users, possible sponsorship opportunities, current design trends and targeted amenities, etc.
AGA can supplement the statistically-based analysis of office market potential with a detailed survey of site area office buildings. Survey data includes information pertaining to lease rates, tenant improvement practices, vacancy rates, absorption rates, tenant mix, building classification, building amenities, etc. We can also collect information regarding projects under construction and planned for future development.
The combination of our econometric model and local survey data assists our clients in understanding local development/investment opportunities and our recommended approach to capitalize on these opportunities.
Clients who utilize our services to assist them in the development or purchase of office properties include The Irvine Company, Chevron Land & Development, CT Realty Corp., LNR Property Corporation, BRE Properties, Boeing Realty Corporation, Shapell Industries, etc. Click here to receive more information regarding AGA's studies.