Demand for real estate is called a derived demand because it follows from:
Correct Answer
B) The demand for the activities the space houses
Why this is correct: Demand for real estate space is 'derived' from the demand for the economic activity or service that occurs within that space. For example, demand for office space derives from demand for business services; demand for retail space derives from consumer demand for goods. Why the other choices are wrong: 'The cost of constructing new buildings' is a supply factor, not the source of demand. 'The number of licensed brokers in a market' is a market facilitation factor, not the underlying economic driver. 'Historical price appreciation in the area' may influence investor sentiment, but it is not the fundamental source of demand for space. Exam tip: Think: 'Nobody rents an empty box.' They rent it to house an activity (living, working, storing, selling).
Why This Is the Correct Answer
Why this is correct: Demand for real estate space is 'derived' from the demand for the economic activity or service that occurs within that space. For example, demand for office space derives from demand for business services; demand for retail space derives from consumer demand for goods. Why the other choices are wrong: 'The cost of constructing new buildings' is a supply factor, not the source of demand. 'The number of licensed brokers in a market' is a market facilitation factor, not the underlying economic driver. 'Historical price appreciation in the area' may influence investor sentiment, but it is not the fundamental source of demand for space. Exam tip: Think: 'Nobody rents an empty box.' They rent it to house an activity (living, working, storing, selling).
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A market-conditions adjustment should be applied to a comparable:
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In the neighborhood life cycle, what characterizes the decline stage?
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Why does an appraiser analyze the market area before analyzing the subject property?
In which phase of the real estate cycle do rising vacancies first meet a still-growing construction pipeline?
Which measure most directly signals demand strength in a housing market?
The principle of consistent use prohibits:
Frictional vacancy in a rental market refers to:
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