What A Submarket Is And Where It Ends

Market data is reported by submarket, and the boundaries appear authoritative. They are drawn by the organisation publishing the data, using judgement rather than any objective rule.

What a boundary is supposed to represent

A submarket is meant to enclose properties that genuinely compete for the same tenants, so that conditions inside it are reasonably uniform.

The test is substitutability. If a tenant considering one building would seriously consider another, the two belong in the same set.

Where that condition fails, the aggregate describes a mixture of different conditions and represents none of them accurately.

Why the lines get drawn wrongly

Boundaries often follow administrative geography, which was drawn for reasons unrelated to how tenants search for space.

Physical barriers matter more than lines on a map. A motorway, a river or a rail corridor can separate two areas that a boundary treats as one.

Transport access can do the opposite, joining areas that are geographically distant but functionally connected by a direct route.

Boundaries also persist after the conditions that justified them have changed, because revising them breaks the historical series a data provider is selling.

Averaging across dissimilar stock

Even within a well-drawn boundary, property quality varies. Newer buildings and older ones compete for different tenants at different rents.

An average across both describes neither, and a submarket where new supply has arrived can show rising average rents while older buildings weaken.

This is why quality tiers are reported separately where the data supports it, and why an unsegmented average should be treated with caution.

Building your own set

For a specific property, the relevant comparison is the buildings a prospective tenant would actually consider, which rarely matches a published boundary.

Assembling that set requires local knowledge: which buildings compete, what the barriers are, and where tenants come from.

Leasing agents working the area hold this information, and their view of the competitive set is more accurate than any boundary drawn from a distance.

Asking prospective tenants what else they considered is the most direct method available, and it frequently produces a set that crosses published boundaries.

Using published data anyway

None of this makes submarket data useless. It is consistent over time, which makes it valuable for identifying direction even where the level is imprecise.

Trends are more reliable than absolute figures, because whatever bias the boundary introduces is broadly constant across periods.

The practical approach is to use published data for direction and a custom competitive set for anything that determines a price.