Agenda - 08-19-2010 - 1 - Laserfiche WebLink

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C SMATE'GY 5 Section 7: Opportunity / Surplus Gap Analysis 7.1 Introduction An opportunity / surplus gap analysis is generally a calculation of either net unsatisfied demand (opportunity) and/or net un- leased supply (surplus). This type of analysis is typically used in retail studies — not office studies — because retail demand is usually locally driven and the stores that capture said demand are also in an easily defined market area (often a zip code, census tract or Metropolitan Statistical Area (MSA). Therefore the surplus / gap can be quantified through sales tax receipts, business licenses, retail space inventories, etc. By comparison, demand for office space (particularly in a market like the Research Triangle) can, and does, come from local, regional, national and even international sources. Therefore, while existing demand can be quantified in the simplest terms as leased space and the rates it commands, potential demand is impossible to quantify. We know it is there in large amounts — again especially given the market characteristics of the Research Triangle — but how large? In this section an attempt has been made to conduct a surplus / gap analysis for the Town of Chapel Hill office market as an illustrative tool that may shed some light on the supply /demand dynamics that have been presented discussed so far. 7.2 Opportunity As stated elsewhere in the report, there is an opportunity in capturing demand from within the Research Triangle, the Mid - Atlantic region, other regions of the U.S., and from within the international marketplace. Other opportunities to grow the office market from within by tapping into the creative class, cultivating and mining the links to the University and the entrepreneurial and business development climate it purposely fosters, and working through the other opportunities for increasing and capturing demand as summarized in the previous section can all have their effect. The closest we can come to quantifying potential demand comes from backing in to the projection by using the example shown in Section 5 relating to the capture of a relatively small additional share of the Research Triangle market, of which Chapel Hill currently only has about 4% - 5 %. Increasing Chapel Hill's fair share to 6% - 7% could mean an additional 1 million square feet of office space (estimated). Even if its share remains the same (4% - 5 %) it will be of a growing market and serve to match the expected additional growth in supply as discussed in Section 5. All indicators suggest that there is sufficient demand in the marketplace to support this — over time — if various efforts, trends, and motivations combine to answer it. al