Real Estate Rental Growth Rates at Different Points in the Physical Market Cycle
AbstractReal estate markets go through both physical cycles (demand and supply) that affect rental growth rates and financial cycles (capital flows to real estate) that affect property Prices (Mueller, 1995). This study develops a rental growth rate hypothesis based on a market’s position in the physical (demand-supply) market cycle. Using data from fifty-four office and industrial markets in the United States over a thirty-year period, an aggregated national average rental growth rate was calculated for each point in the cycle. An ANOVA test for differences of means found that the national average rental growth rates at each point in the cycle were statistically different. The results show local demand and supply, which interact to affect occupancy, are major determinants in rental growth rates. This research should help investors move from using a single rental growth rate for multiple year forecasts, to using yearly cycle driven rental growth rate estimates in their discounted cash flow projections.
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Bibliographic InfoArticle provided by American Real Estate Society in its journal Journal of Real Estate Research.
Volume (Year): 18 (1999)
Issue (Month): 1 ()
Contact details of provider:
Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Find related papers by JEL classification:
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
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