PROJECT CAPTURE RATEObviously, the market or submarket demand that is used as basis for estimating this rate is the market or submarket within which the real estate project under consideration is competing. For example, if the project is an apartment building, its capture rate will refer to the percentage of total apartment demand in the city within which it is located, that the project is expected to attract. The starting point for estimating such a capture rate can be the so called project’s Fair Market Share (FMS). This is estimated as: FMS = Project available supply/Market available supply The project available supply refers to the number of units (if it is residential development) or total square meters (if it is commercial development) of the project that will compete with the available market supply at the time of completion. Market available supply, refers to the competing supply, measured in units (residential) or square meters (non-residential), that is expected to be available in the local market when the project under consideration will be completed and enter the market.
Project supply = 120 As indicated before, the FMS gives the starting point for estimating a reasonable capture rate for the project. Once the FMS is estimated, then the analyst needs to evaluate the competitive position of the project, based on its characteristics and the strength of its location vis a vis other competing projects and locations within the city. For example, if the project under consideration is evaluated as above average, and therefore more attractive than the average competing project, then a Competitive Position Index (CPI) of above 1 can be assigned. A CPI of 1.05% for the apartment building in our example, would indicate that the project is by 5% more attractive than the average competing project in the local market. The capture rate for the project can then be estimated as: Project Capture Rate = CPI x FMS = 1.05 x 0.10 = 0.105 =10.5%
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