Real Estate Demand

However, there are several concepts of demand for real estate:

• Effective demand represents the demand for property that that is supported by purchasing power

• Ex-ante demand refers to the intended demand for property by consumers before they actually interact with available supply and price levels

• Ex-post or realized demand represents that quantity of property that was actually transacted either through sales contracts in the sales market or through lease contracts in the rental market.

• Aggregate real estate demand refers to the total demand for property in the owner occupied market or the rental market in a given property market.

Demand for any type of real estate has at least three components: 1) type of occupancy, that is, owner-occupied or rental 2) property characteristics and quality and 2) locational characteristics. Thus, for analytical purposes, real estate demand can be segmented at least across these three dimensions starting from the owner-occupied market versus the rental market. It is also segmented by property type (such as residential, office, retail, industrial, hotel, etc.) and even across qualities within the same property type (such as luxury housing or class A office space) and by locality and often by sub-market within each locality.

The drivers of real estate demand differ by property type. For example, the drivers of demand for office space are different from the drivers of demand for retail space or the drivers of demand for industrial space.

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