Market Segmentation

• Characteristics of the Real Estate Market

  • Durable
  • Lumpy and Large Economic Unit
  • Costly Information
  • High Transaction Costs
  • Unique Location and Heterogeneous Nature
  • Regulated use by Government
  • Taxation arrangements – owner occupiers and investors
  • Segmented
• Segmentation


  A market is "segmented" if it breaks up into sub-markets, or market segments
• The real estate market is characterised by its numerous sub-markets
• Segmentation of the real estate market


  • Usage
  • Geography
• Sub-markets


  Generally characterised by substitutable properties
• Sub-markets


  • Premium office property in Perth CBD
  • Retail premises in Subiaco
  • Large format goods warehouse on Albany Highway
• A user would be equally happy to occupy identical properties anywhere within the sub-market
• The same good may have a different equilibrium price in different sub-markets
• Usage segmentation of sub-markets

  • Retail - shopping centres, high street shops, suburban shops, bulky goods warehouses etc.
  • Offices - large HQ offices, financial services, one person operations
  • Industrial - workshops, factories, manufacturing plants
  • Leisure - hotels, restaurants, bars/clubs, golf courses, gyms etc
• Geographic segmentation of sub-marketsMetropolitan areas

  • REIWA 5 sub-regions, 25 Sub-Markets