5 Steps for Competitive Market Analysis in CRE
Competitive market analysis (CMA) in commercial real estate (CRE) helps professionals make better investment decisions by understanding markets, competitors, and opportunities. Here's a quick breakdown of the five steps to conduct an effective CMA:
Define Your Target Market: Set clear geographic and regulatory boundaries, and study factors like transportation, zoning, and market drivers such as economic trends and population growth.
Research Your Competition: Identify direct, indirect, and alternative competitors. Gather data on rental rates, amenities, tenant profiles, and map their locations for better insights.
Collect and Analyze Market Data: Focus on key metrics like vacancy rates, rental trends, and sales data. Use multiple sources for accuracy and consider tools that centralize data management.
Evaluate Strengths and Weaknesses: Perform a SWOT analysis to assess your position and identify opportunities or risks. Compare property quality, pricing, and location to competitors.
Turn Insights into Action: Create actionable plans based on your findings. Use reports to communicate strategies to stakeholders and regularly monitor market changes.
Commercial Real Estate Market Analysis (Part 1): Step-by-Step LIVE Demonstration
Step 1: Define Your Target Market
The first step in any competitive market analysis is to define the boundaries of your target market. This step sets the stage for gathering the right data and ensures your analysis is focused on the information that will guide smarter investment decisions.
Set Market Boundaries
Start by identifying the geographic boundaries of your target market, as these determine the unique factors that influence property values, tenant demand, and investment returns.
Physical and natural boundaries often create distinct market segments. Features like rivers, mountains, and lakes shape how areas develop economically, influencing property values and tenant preferences. For example, properties on opposite sides of a river might experience differing demand due to variations in transportation access or development restrictions.
"Location itself is what makes real estate assets completely unique. Since no two structures can occupy the exact same location, each asset's value characteristics are one-of-a-kind." - Kimberly Goodwin, Ph.D.
Transportation infrastructure also plays a major role in defining submarkets. Highways, transit lines, and other transportation networks influence pricing and tenant profiles. Areas with limited access to transportation often become separate submarkets, even if they’re geographically close to better-connected areas. When setting boundaries, consider not only the existing infrastructure but also planned developments. For instance, a neighborhood that feels remote today could become highly desirable once a new transit line is operational. Reviewing city planning documents and proposed transportation projects can help you anticipate these shifts.
Regulatory boundaries further shape market conditions. Zoning laws, tax rates, and development incentives vary across cities, counties, and districts, creating distinct investment environments. These differences require a tailored analysis for each area.
Once you’ve clearly defined your market boundaries, the next step is to dig into the forces driving supply and demand within that market.
Study Market Drivers
After establishing geographic boundaries, it’s essential to identify the key drivers of supply and demand in your target market. These factors determine whether properties will appreciate, maintain occupancy, and deliver strong returns over time.
Economic indicators are a good starting point for understanding market strength. Metrics like GDP growth, employment rates, and job creation are directly tied to demand for commercial real estate. Areas with strong economies and robust job growth tend to attract businesses, driving demand for office, retail, and industrial spaces. Keep an eye on local unemployment rates, average wages, and the diversity of the economic base to assess stability.
Population and demographic trends also play a major role. Population growth typically increases demand for commercial spaces like retail stores and office buildings. But it’s not just about the numbers - details like age distribution, income levels, and education affect the types of businesses that will thrive. For example, younger, highly educated populations often drive demand for modern office spaces and trendy retail concepts. Meanwhile, areas with older residents might see higher demand for healthcare facilities and more traditional retail formats.
Infrastructure development can be a game-changer for commercial real estate. New transportation projects or policy incentives can make properties more attractive and signal future growth opportunities. By tracking planned infrastructure developments, you can identify areas poised for increased demand before property values reflect these changes.
Government policies and incentives also influence market dynamics. Programs like tax increment financing districts or opportunity zones can stimulate demand and drive development activity. Understanding these tools can help you pinpoint areas where government initiatives are likely to boost market growth.
Business confidence and industry trends provide additional insight into demand patterns. When businesses are optimistic, they’re more likely to expand, increasing the need for commercial space. Reviewing local business surveys, chamber of commerce reports, and industry-specific trends can reveal how these factors might impact your target market.
"When a market driver is present, there is likely to be positive market or industry trends showing. Values may go up and demand may increase." 3
Markets with strong drivers typically show declining vacancy rates, rising rents, and growing tenant demand. In contrast, markets without these drivers often struggle with high vacancy rates, stagnant rents, and limited interest from tenants, even if properties are priced competitively.
Step 2: Find and Research Your Competition
Now that you’ve defined your market, it’s time to dig into the competition. Understanding who you’re up against - and how they operate - gives you a clearer picture of the landscape and helps pinpoint what sets you apart. This means looking at not just the obvious rivals but also alternative options that potential tenants might consider.
Collect Competitor Information
Competitors come in three main types: direct, indirect, and alternative. Let’s break these down:
Direct competitors: These are properties that closely mirror yours in size, class, location, and tenant profile.
Indirect competitors: These offer alternative solutions to meet similar needs, like coworking spaces or more flexible setups.
Alternative competitors: These aren’t necessarily properties but other options tenants might turn to, such as remote work or short-term meeting spaces.
For example, if you’re marketing a Class A office building, your direct competitors would be other Class A spaces in the same submarket. Indirect competitors could include Class B buildings or coworking spaces, while alternative competitors might be remote work setups or business centers with no long-term commitments.
Start by researching direct competitors systematically. Online searches, business directories, and local advertising are great starting points to identify properties targeting the same tenant base. Commercial real estate databases like CoStar and LoopNet offer detailed insights into property data and market positioning.
What to track: Focus on rental rates, occupancy levels, amenities, tenant mix, and property features. Properties with long-term, creditworthy tenants often command higher rents and maintain better occupancy. Financial metrics like sale price, net operating income (NOI), and cap rates also provide a sense of competitiveness. Don’t forget to check transaction dates - market conditions can shift quickly.
To build a complete picture, use multiple data sources. Commercial aggregators like CoStar and LoopNet are reliable options. Public records, such as those from county assessors’ offices, can reveal ownership details, while brokerage websites like CBRE, JLL, and Colliers provide market reports and current data.
Finally, keep an eye on market trends. For instance, the rise of flexible workspaces has introduced new competition for traditional office properties, and e-commerce continues to reshape the retail property market.
Map the Competition
Once you’ve gathered all this data, put it on a map. Visualizing competitor locations can reveal trends and insights that spreadsheets alone can’t provide. It helps you see where competitors are positioned relative to your property, transportation links, and amenities, giving you a better grasp of the market dynamics.
Proximity matters. Properties in the same submarket often compete directly, while those in nearby areas might compete based on transportation access and tenant preferences. Mapping these relationships highlights the advantages - or disadvantages - of your location.
Transportation and accessibility become much clearer through mapping. Properties near transit hubs, for example, often enjoy a competitive edge. This insight can help you determine whether your property’s access is on par with competitors or if their locations justify higher rents.
Clustering analysis is another benefit of mapping. Some industries prefer to cluster together for networking or resource-sharing benefits, while others avoid direct competition. By understanding these patterns, you can better position your property to meet tenant needs.
Tools like CoreCast’s integrated mapping feature make this process easier by allowing you to view your property and the competitive landscape on a real-time map. You can track market changes, identify opportunities, and avoid the hassle of switching between multiple platforms.
Layering additional data onto your map - such as demographics, traffic patterns, or planned infrastructure - can provide even deeper insights. For example, a property that seems less competitive today might become more attractive once a new transit line or development project is completed.
Keep it updated. Regularly refresh your competitive map to reflect new market entries, ownership changes, or shifts in tenant demand. This helps you stay ahead of market trends and adjust your strategy as needed.
Lastly, mapping can uncover market gaps. Areas with little competition might be ripe for new developments, while highly competitive zones may call for aggressive pricing or unique value propositions to stand out. Plus, the visual format makes it easier to share these insights with stakeholders, simplifying complex data into clear, actionable visuals.
Step 3: Gather and Review Market Data
Now that your competition is mapped out, it’s time to dig into the numbers that shape market decisions. This step takes your analysis beyond surface-level observations and turns it into actionable, data-driven insights. The goal? To identify the metrics that truly influence the market and use them to inform your investment strategy.
Track Key Performance Indicators
Start by keeping an eye on rental rates. Look at asking and effective rates, escalations, and lease renewal terms. Analyzing how these rates have shifted over time across various property types and locations can help you identify trends.
Vacancy rates are another critical metric. Low vacancy rates often signal a tight market, which can push rents higher. On the flip side, high vacancy rates might indicate oversupply or a drop in demand. Pair this with absorption rates - how quickly available space is being leased - to get a clearer picture of market dynamics.
Time on market is also worth noting. Properties that lease quickly often reflect strong demand, while those lingering on the market may suggest pricing issues or weaker fundamentals.
Don’t forget recent sales data. Sale prices, cap rates, and price per square foot can reveal where the market is heading. Add in demographic data, like population growth, income levels, and employment stats, to understand the bigger picture.
Lastly, dive into financial metrics like operating costs, property taxes, and net operating income (NOI). These numbers can help you evaluate the profitability of competing properties.
Having access to current and accurate data allows professionals to act quickly and take advantage of emerging opportunities. By focusing on these metrics, you can create a well-rounded view of the market.
Combine Data Sources
Once you’ve identified the key metrics, gather them from a variety of sources to build a complete picture. Public records, MLS databases, and reports from trusted brokerage firms are great starting points. These resources provide insights into property ownership, transaction histories, and overall market trends.
Efficiency is key here. Streamlined data management can save time and reduce the hassle of cleaning up messy datasets. While some commercial databases offer detailed property data, they often come with a hefty price tag.
Platforms like CoreCast showcase how technology can simplify this process. CoreCast combines multiple tools into one system, allowing users to underwrite assets, track deal pipelines, view properties on integrated maps, and perform portfolio analyses - all in one place. This kind of all-in-one solution eliminates the need to juggle multiple platforms, making data management more seamless.
Modern tools are also increasingly powered by AI, which can analyze large datasets to identify patterns and uncover trends you might otherwise miss.
When choosing data sources or platforms, think about how well they integrate with your existing tools, like CRM or financial systems. A smooth workflow can make all the difference.
"Commercial real estate has changed rapidly, and we have seen CRE professionals increasingly embrace technology and analytics to stay competitive. However, we continue to hear that most still rely on narrow datasets, disparate systems, and cumbersome manual processes. We are striving to solve those challenges by expanding on the foundation of property data we have built to date."
Luis Amador, General Manager, CRE Solutions, Moody's Analytics
The key is finding the right balance between comprehensive data coverage and operational efficiency. With timely and relevant information at your fingertips, you’ll be better positioned to capitalize on opportunities and achieve success in the market.
Transform Real Estate Data into Confident Decisions
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Step 4: Analyze Strengths, Weaknesses, and Market Position
Now that you've gathered your data, it's time to turn it into actionable strategies. This step is all about understanding your position in the market and identifying the best way forward.
Complete a SWOT Analysis
Using the key performance metrics you've collected, shift your focus to evaluating both internal and external factors. A SWOT analysis is a great way to break this down, helping you pinpoint strengths, weaknesses, opportunities, and threats. This process is essential for shaping strategies that build on your advantages while addressing potential risks.
Start by identifying your strengths - the qualities that give you an edge. These could include prime locations, modern amenities, competitive lease rates, or strong tenant relationships. Think about what sets your properties apart and what tenants consistently appreciate.
Then, take a hard look at your weaknesses. High operating costs, outdated infrastructure, or limited parking might be areas holding you back. Recognizing these issues is the first step toward improving them.
Opportunities are external factors you can take advantage of. For instance, the rise of e-commerce may boost demand for logistics centers, or emerging neighborhoods with increasing property values could open doors for expansion. New transportation infrastructure could also create growth opportunities.
Lastly, consider threats that could affect your bottom line. These might include economic downturns, increased competition, shifting tenant preferences, or rising operational expenses.
Here’s an example of what a SWOT analysis might look like for different property types:
To make your SWOT analysis even more effective, conduct detailed market research to anticipate trends and consult with industry professionals. Keep an eye on rental price trends and vacancy rates to uncover new ways to increase income.
Once you've completed your SWOT framework, use it to refine your overall market strategy.
Determine Your Market Position
Next, evaluate your market position by comparing key criteria like property quality, pricing, location, and tenant services. Use a simple ranking system - say, a scale of 1–10 - to see where you're excelling and where you need to improve.
"You always want to stay on top of what your competitors are doing and where you stand. It's something to make part of your organizational discipline, like keeping good books."
– Mallika Kazim, Senior Business Advisor, BDC Advisory Services
This ranking exercise helps you identify your competitive edge. For example, your advantage might come from having premium properties with top-notch amenities, which could position you as the luxury choice in your market. Or, if your strength lies in competitive pricing and solid fundamentals, you might focus on being the go-to value option.
Leverage the data and mapping insights you've already gathered to shape your strategy. Tools like CoreCast's integrated mapping can help you visualize your market position in real time, making it easier to spot opportunities and track changes over time.
While it's important to stay aware of your competitors, don't let their actions dictate your entire strategy. Instead, focus on playing to your strengths.
"Challenge your assumptions because the data changes all the time. Don't wait until a competitor launches a new product before changing your strategy, otherwise you might end up in a reactive position to market changes. You want to be proactive - and it's easier to be proactive if you do this exercise regularly."
– Mallika Kazim, Senior Business Advisor, BDC Advisory Services
Market positioning isn’t a one-and-done task. Stay updated on local economic trends, new developments, and changes in property management practices. These factors can influence property values and desirability, so regular reviews will help keep your strategy relevant.
Step 5: Create Reports and Action Plans
Now that your SWOT analysis is done and your market position is clear, it’s time to turn all that information into actionable plans. This step transforms your research into strategies that stakeholders can act on, bridging the gap between analysis and execution.
Turn Data into Action Steps
The goal here is to take your findings and translate them into specific, prioritized action steps. Look for patterns in your data that highlight opportunities or risks.
Focus on insights that can guide decisions rather than broad observations. For instance, if your analysis shows that Class A office buildings in your target area have a 15% lower vacancy rate compared to Class B properties, your next step might be to prioritize upgrading properties to Class A standards within the next 18 months.
When crafting recommendations, keep three factors in mind: risk profiles, financial projections, and market positioning. Each suggestion should align with your investment goals and make sense in the current market. For example, if there’s a rising demand for industrial properties near transportation hubs, you might allocate 20% of your portfolio to logistics centers over the next two years.
Organize your action steps by priority and timeline. High-impact, low-risk opportunities should come first, followed by longer-term strategies that require more resources or time. This prioritization helps stakeholders understand what needs immediate attention and what can wait.
Tie together insights from your analysis to highlight strategic opportunities. For example, if population growth in suburban areas aligns with limited supply identified in your competitor analysis, your action plan might focus on expanding your suburban portfolio before the competition catches up. These connections ensure your strategy moves seamlessly from analysis to execution.
Report to Stakeholders and Monitor Results
Once your action plan is ready, the next step is to communicate it effectively. Well-crafted reports empower stakeholders to make informed decisions about their real estate investments. Present your findings clearly so the key takeaways are immediately obvious.
Begin with concise recommendations that suggest actionable strategies for leveraging market opportunities or addressing risks. Use summaries and visuals like charts or graphs to make your insights easy to understand.
Tools like CoreCast simplify this process with features like portfolio insights and branded reporting. These allow you to create polished, professional reports that reflect your expertise while delivering detailed market intelligence. CoreCast also lets you automate report delivery, ensuring stakeholders stay updated on market shifts and portfolio performance.
Include an executive summary that highlights the key findings, followed by detailed sections with supporting data. Visual aids such as maps and charts can make market trends and competitive positioning easier to digest.
Set up systems to monitor market changes over time. Markets evolve quickly - what’s true today could shift by next quarter. CoreCast’s real-time tracking tools help you stay on top of these changes, so you can adjust strategies as needed.
Establish regular review cycles to reassess your position and refine your action plan. For fast-moving markets, monthly reviews might be necessary, while quarterly updates could suffice for more stable ones. This proactive approach keeps you ahead of the curve.
Track performance metrics that align with your goals. For example, if your focus is on boosting occupancy rates, monitor metrics like lease-up speed, tenant retention, and rental trends. If diversification is your aim, keep an eye on acquisition progress and market share by property type.
Ultimately, effective reporting isn’t just about presenting data - it’s about driving action. Each report should clearly outline what stakeholders need to know, what decisions they should make, and what results they can expect. This approach turns your market analysis into a practical tool for achieving real estate success.
Conclusion
Breaking down competitive market analysis in commercial real estate (CRE) into five straightforward steps - defining your target market, researching competitors, collecting market data, analyzing your position, and creating actionable reports - makes the process manageable and effective.
However, the work doesn’t stop there. Market dynamics are constantly shifting, and staying ahead means keeping a close eye on those changes. Regular monitoring ensures you’re not caught off guard by evolving conditions.
This is where tools like CoreCast come in. By combining data collection, pipeline tracking, competitive mapping, and branded reporting into a single platform, CoreCast simplifies the process, saving both time and reducing the chances of mistakes.
The true payoff, though, lies in putting your analysis to work. A well-executed competitive analysis isn’t just about gathering data - it’s about using that information to make informed decisions that strengthen your position in the market.
In a fast-paced CRE landscape, ongoing analysis isn’t just helpful - it’s essential. By focusing on actionable insights rather than just data, you can drive smarter investments and achieve better returns.
FAQs
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To set clear geographic and regulatory boundaries for your market analysis, start by diving into local zoning laws and land-use regulations. These guidelines dictate how properties can be used and what types of developments are allowed, giving you a roadmap to uncover viable opportunities.
Beyond regulations, take a close look at geographic factors. Think about proximity to essential infrastructure, natural features, or other elements that could influence demand or limit growth.
Don’t overlook local government policies and tax incentives, either. These can significantly impact the profitability of your investments. At the same time, stay alert to regulatory risks, such as new laws or shifting compliance requirements, which could create obstacles down the line. By weighing these considerations, you can carve out boundaries that balance market potential with regulatory requirements.
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To collect reliable market data in commercial real estate, begin by examining local economic trends, demographic changes, and property sales comparisons. These foundational insights help paint a clearer picture of the market landscape.
Incorporate tools like market surveys and SWOT analyses to pinpoint strengths, weaknesses, opportunities, and threats specific to your target area. Advanced technology, such as predictive analytics and real estate intelligence platforms, can make data collection and analysis more efficient and precise.
Additionally, working with seasoned brokers or appraisers and tapping into membership databases for property comparisons can provide deeper insights. For the best results, combine multiple data sources and cross-check the findings to ensure they’re as accurate as possible.
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SWOT Analysis in Commercial Real Estate
A SWOT analysis is a practical way to sharpen your competitive edge in the commercial real estate (CRE) market. By breaking down your Strengths, Weaknesses, Opportunities, and Threats, you can chart a strategic path forward with greater clarity.
Leverage your strengths to capitalize on market opportunities, tackle weaknesses to minimize vulnerabilities, and prepare for external threats to outpace competitors. This structured method helps fine-tune investment strategies, improve property positioning, and make informed, data-backed decisions that align with your business objectives.