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Investor Rationality: An Analysis of NCREIF Commercial Property Data

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  • Patric H. Hendershott

    ()
    (Centre for Property Research, University of Aberdeen Business School, Edward Wright Building, ABERDEEN AB24 3QY)

  • Bryan D. MacGregor

    ()
    (Centre for Property Research, University of Aberdeen Business School, Edward Wright Building, ABERDEEN AB24 3QY)

Abstract

The concept of a peak in value or a "100% location" is so well established in real estate that there is no reference to the term in recent real estate principles and appraisal texts. However, the land value section in appraisals of a regional shopping center did not apply the concept when adjusting comparables for location, which resulted in a substantial underestimation of site value. A regression model that included a distance variable to control for location produced a value estimate that was more than double the values in the appraisals. The empirical results illustrate that the subject site represented a distinct peak in land value as well as reemphasizing the importance of making careful location adjustments in situations where there is a distinct peak in land value.

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Bibliographic Info

Article provided by American Real Estate Society in its journal journal of Real Estate Research.

Volume (Year): 27 (2005)
Issue (Month): 4 ()
Pages: 445-475

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Handle: RePEc:jre:issued:v:27:n:4:2005:p:445-475

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Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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  1. Robert E. Hall, 2001. "Struggling to Understand the Stock Market," American Economic Review, American Economic Association, vol. 91(2), pages 1-11, May.
  2. Hendershott, Patric H., 1996. "Rental Adjustment and Valuation in Overbuilt Markets: Evidence from the Sydney Office Market," Journal of Urban Economics, Elsevier, vol. 39(1), pages 51-67, January.
  3. John M. Quigley, 1999. "Real Estate Prices and Economic Cycles," International Real Estate Review, Asian Real Estate Society, vol. 2(1), pages 1-20.
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Cited by:
  1. Martin Hoesli & Colin Lizieri & Bryan MacGregor, . "The Inflation Hedging Characteristics of US and UK Investments: A Multifactor Error Correction Approach," Swiss Finance Institute Research Paper Series 06-04, Swiss Finance Institute.
  2. Patric Hendershott & Maarten Jennen & Bryan MacGregor, 2013. "Modeling Space Market Dynamics: An Illustration Using Panel Data for US Retail," The Journal of Real Estate Finance and Economics, Springer, vol. 47(4), pages 659-687, November.
  3. Jim Clayton & David Ling & Andy Naranjo, 2009. "Commercial Real Estate Valuation: Fundamentals Versus Investor Sentiment," The Journal of Real Estate Finance and Economics, Springer, vol. 38(1), pages 5-37, January.

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