Capture rate

Capture rate
See also
Capacity factor Commercial rate Gross Income Multiplier Total capital Income budget Potential market Net yield Economic Value Added - EVA Public funds

Capture rate is the part of age, size, and revenue qualified renter steading in the primary market area that the belongings must capture to fill the units. What is more the Capture Rate is figured by dividing the all number of units at the property by the total number of size, age and income classified renter households in the primary market sphere.

Definition

This indicator is most often described as a rate related to sales, which compares the congruous projects. Moreover, it can also be related to the leasing. What is essential it is being point out, that some restrictions might be applied in calculations by funding agencies to the households. The constraints refer to the variables like income level, age and other comparable factors .

One thousand of real estates are being offered in the specific area. One part of the project, equal to 250 estates, is offered by one Stakeholder. Sales level in this area in January is 100 estates and a half of this quantity is sold out specifically by this Stakeholder. In this case, the capture rate of this Stakeholder is equal to 50%.

Examples

There is a lot of different explanation of capture rate, lexicographical term can be found below :

• As Business Dictionary says Capture rate is an environmental management, the percentage of secondary material recovered from household, commercial, and industrial waste.
• Capture rate might be explained as an average number of square feet leased per month, quarter or a year.

What is more

To broaden the reference range, the US Department of Housing and Urban development provides the other example: “a capture rate of 5 percent would indicate that 5 percent of the potential, eligible renters in that market would need to become tenants” .

This inclines to clarification, that the percentage of property renter, that search for a real estate meeting the certain criteria (e.g. price, house type, location), needs to be caught by the offered property to make the process successful.

Capture rate's theoretician

Jack Friedman describes capture rate among the terms of economy as “ the portion of total sales in the market that are sold by one entity or one project”. To assess the level of capture rate as favorable, the value shall remain equal or lower than 5%. In the range of 5 and 10%, there are reasonable chance to succeed. Economically, when ratio differs between 10 and 45%, projects shall be avoided. However, taking into account special factors, the success of the project is possible. Cases with the value above 45% are in general recommended to be abandoned .

Advantages of Capture rate

Capture rate is an important metric for understanding the effectiveness of a property's leasing efforts. It allows owners and managers to measure their success in the primary market area and assess the potential for growth. The following are the advantages of using Capture Rate:

• It provides a comprehensive view of the leasing performance in a particular market. It allows owners and managers to track the success of their leasing efforts and identify areas that need improvement.
• It helps to identify potential new tenants and determine which demographic segments need to be targeted for increased occupancy.
• It enables an assessment of the competitive landscape, allowing owners and managers to understand the relative strengths and weaknesses of their competition.
• It can be used to identify potential opportunities for growth in the primary market area and to adjust leasing strategies accordingly.
• It helps to anticipate future rental trends, allowing owners and managers to plan their leasing strategies accordingly.

Limitations of Capture rate

The Capture Rate is a useful tool for understanding the effectiveness of a property's marketing and leasing efforts, however it has a number of limitations. These limitations include:

• Lack of accuracy - The Capture Rate can be affected by inaccurate data from surveys or other sources, resulting in an inaccurate figure.
• Problematic assumptions - The Capture Rate assumes that the rental property is attractive to all eligible renters, and that all eligible renters are equally likely to rent from the property, which is not always the case.
• Timeliness - The Capture Rate is only an accurate measure of leasing activity at the time of the survey, and does not take into account changes in the market or changes in the property that could affect the rental market.
• Limited to primary market - The Capture Rate only reflects the rental activity in the primary market area, and does not take into account renters from outside the area who may be interested in the property.

Other approaches related to Capture rate

Capture Rate is a metric that measures the effectiveness of an apartment building or property in capturing the target renter base in its primary market area. Other approaches that can be used to gauge a property's performance in this regard include:

• Market Penetration: This is a measure of how many of the qualified renter households in the primary market area are renting units at the property. It is calculated by dividing the total number of units at the property by the total number of size, age, and income-qualified renter households in the primary market area.
• Rental Rate: This measures the actual rental rates being charged for the units in the property. It is calculated by dividing the total rental income of the property by the total number of units at the property.
• Occupancy Rate: This measures the rate of occupancy at the property. It is calculated by dividing the total number of occupied units at the property by the total number of units at the property.
• Retention Rate: This measures the rate at which tenants remain at the property over time. It is calculated by dividing the number of tenants who renew their leases at the property by the total number of tenants at the property.

In summary, Capture Rate is just one of several metrics that can be used to measure a property's performance in capturing the target renter base in its primary market area. Other approaches such as market penetration, rental rate, occupancy rate, and retention rate also provide valuable insight into a property's performance.

References

• Capture rate, (2019) Business Dictionary
• Friedman J. P., (2012) Dictionary of Business and Economics Terms, Barron's Educational Series, s. 27
• National Council of Affordable Housing Market Analysis members, (2007), Market Study terminology, s. 2
• US Departments of Housing and urban development, (2013), Home and the Low-Income Housing Tax Credit Guidebook, s. 9

Author: Anna Droczak