You want to develop an office project and come across the following market proje
ID: 2807336 • Letter: Y
Question
You want to develop an office project and come across the following market projection data for the years between 2010 and 2012. You plan to start this immediately if there is enough demand for it and will take 2 years to complete. Construct a basic demand model and tell me either how much excess supply or how much excess demand is projected to exist in the market in 2012.
Current Stock: 24,000,000
Construction Completions: 3,000,000
Construction Starts: 2,000,000
Gross Absorption: 27,000,000
Vacancies: 4,000,000
Net Absorption: 23,000,000
SQUARE FEET
A) 3,000,000 in excess supply
B) 3,000,000 in excess demand
C) 6,000,000 in excess supply
D) 6,000,000 in excess demand
Explanation / Answer
Ans is C: As 6,00,000 is in excess supply.
Current Stock + Construction Completion + Construction Starts - Net Absorption
= 24,000,000 + 3,000,000 + 2,000,000 - 23,000,000
=6,000,000