CRECI Market Analysis and Economics 3

Question 1

Which property sector is generally considered the most economically sensitive and tends to recover earliest in an economic expansion?

Accepted Answer

Hospitality

Answer

Hospitality (hotels) is highly economically sensitive because room rates and occupancy respond almost immediately to economic conditions, making it both the first to suffer in downturns and often the first to recover.

Question 2

The 'concentric zone model' of urban land use theory was developed by:

Accepted Answer

Ernest Burgess

Answer

Ernest Burgess developed the concentric zone model in 1925, depicting cities as a series of rings expanding outward from a central business district.

Question 3

In real estate economics, 'functional obsolescence' refers to:

Accepted Answer

Loss in value due to outdated design, features, or layout

Answer

Functional obsolescence is a loss in value caused by outdated design, inadequate features, or poor floor plans that reduce a building's utility relative to modern standards.

Question 4

A commercial real estate analyst is calculating the 'effective gross income' (EGI) for a property. Which formula is correct?

Accepted Answer

EGI = Potential Gross Income – Vacancy and Credit Losses + Other Income

Answer

Effective Gross Income equals Potential Gross Income minus vacancy and credit losses, plus any other income such as parking or laundry fees.

Question 5

What does a declining 'months of supply' figure in a commercial submarket typically signal?

Accepted Answer

Tightening market conditions that may support rent growth

Answer

Declining months of supply indicates that available inventory is being absorbed faster than new supply is added, signaling tightening conditions that can support rent increases.

(CRECI) Commercial Real Estate Certification Institute Practice Test

(CRECI) Commercial Real Estate Certification Institute Practice Test

CRECI Market Analysis and Economics 3