Writer: Cathy Keen
Source: Grant Thrall
GAINESVILLE, Fla. --- A new geographic market analysis technique that forecasts demand for office space can replace huge white elephants with black ink for taxpayers, says a University of Florida researcher.
Overbuilding of office space in many American cities in the 1970s and ‘80s led to vacant buildings, urban decay and enormous losses for taxpayers and investors. But that can become a thing of the past with a new geographic technology that has unprecedented levels of accuracy in long-range forecasts, said Grant Thrall, a UF geographer who developed the procedure.
A large office building can cost hundreds of millions of dollars and take years to complete, Thrall said. "If the market changes after construction begins, when the office building is completed it may not be able to be rented," he said. "The investors and the city alike end up with a multimillion dollar white elephant. A large vacant office building, even if it's new, can contribute to urban decay because an oversupply of office space diminishes property value and discourages investment.
"The market analysis that we have innovated can forecast which neighborhoods have potential for future office market growth, and which do not," Thrall said. "Applying the technology can result in sustained and more vibrant commercial centers, with improving employment opportunities. The opposite -- that of vacant commercial centers, declining property values and declining tax revenues -- can be avoided."
Before shopping malls, restaurant chains and other establishments begin construction, businesses consult a geographer to advise them where to build, Thrall said. Locating in the right spot can increase their revenues by more than 25 percent, he said.
Glenn R. Mueller, managing director of real estate research at Legg Mason Inc. and a faculty member of The Berman Real Estate Institute at Johns Hopkins University, called Thrall's technique "one of the major real estate analysis tools of the next century.
"Real estate has gone through its own information revolution in the 1990s," Mueller said "Everyone thought that with more data available we would easily be able to make better decisions. The problem is that understanding and analysis of the data is the real key for decision makers."
The computer software Thrall uses for the procedure is like a spreadsheet except the information is mapped. It can be thought of as a "spatial spreadsheet" with a map being a computerized spatial database, he said.
Because of desktop computer hardware, availability of commercial geographic data and geographic information systems software, an analysis that required years to complete in the 1970s, now may require only a few minutes, he said.
With some changes, the method also works for housing, said Thrall, who used it in St. Lucie County to calculate how many homes could be built and sold by neighborhood.
The new procedure avoids the mistakes of focusing on broad national or countywide economic trends. Instead, it hones in on the neighborhood, projecting future office space by considering available space and proposed development nearby, as well as employment projections by job category, he said.
The procedure was developed using information for the Tampa area as a case study. Thrall and UF graduate student Paul Amos, now director of geographic information systems projects for the Wharton School of Business at the University of Pennsylvania, were able to break down the forecast for different neighborhoods or submarkets of the city and county.
Except for the Westshore area -- with its waterfront views and proximity to the city's airport -- much of the Tampa area is likely overbuilt and won't need additional office space in the next 10 years, given current job growth and population projections, Thrall said.
"Some folks in Tampa and surrounding Hillsborough County may not like our forecasts and would rather not know this technology exists," he said. "They view market analysis as unnecessary and a block to what they want to achieve." -30-
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