Advanced Search
MyIDEAS: Login to save this article or follow this journal

ACross-Sectional Analysis of CapRates by MSA

Contents:

Author Info

  • Doina Chichernea

    ()
    (University of Cincinnati)

  • Norm Miller

    ()
    (University of San Diego)

  • Jeff Fisher

    ()
    (Indiana University)

  • Bob White

    ()
    (Real Capital Analytics)

  • Michael Sklarz

    ()
    (Global Analytics New City)

Registered author(s):

    Abstract

    Much attention has been paid to capitalization rates or “cap rates?defined as the net operating income over transaction price, also known as a “going-in?current yield on commercial real estate when calculated at the time of purchase. We know that there are a number of global factors that drive capital markets and required rates of return that help to explain observed cap rates over time, but we know little about factors driving the geographical cross-sectional variation of these cap rates. Why are cap rates for similar sized and type property so much lower or higher in one metropolitan statistical area than another? Using data from Real Capital Analytics for multifamily properties we explore several models that combine the expected influences from housing demand growth, supply constraints, liquidity risk and the interaction of these. We document a very strong and robust relation between supply constraints and cap rates as well as evidence of capital flowing from larger markets to smaller markets in recent years. We also find weak but generally supportive evidence of influences from expected growth rates, liquidity and other risk factors.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol30n03/01.249_292.pdf
    File Function: Full text
    Download Restriction: no

    Bibliographic Info

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

    Volume (Year): 30 (2008)
    Issue (Month): 3 ()
    Pages: 249-292

    as in new window
    Handle: RePEc:jre:issued:v:30:n:3:2008:p:249-292

    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
    Email:
    Web page: http://www.aresnet.org/

    Order Information:
    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
    Email:
    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-99, November.
    2. Richard D. Evans, 1990. "A Transfer Function Analysis of Real Estate Capitalization Rates," Journal of Real Estate Research, American Real Estate Society, vol. 5(3), pages 371-380.
    3. Alberto Plazzi & Walter Torous & Rossen Valkanov, 2010. "Expected Returns and Expected Growth in Rents of Commercial Real Estate," Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3469-3519.
    4. Yoon Dokko & Robert H. Edelstein & Marshall Pomer & E. Scott Urdang, 1991. "Determinants of the Rate of Return for Nonresidential Real Estate: Inflation Expectations and Market Adjustment Lags," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(1), pages 52-69.
    5. Stephen Malpezzi & Gregory H. Chun & Richard K. Green, 1998. "New Place-to-Place Housing Price Indexes for U.S. Metropolitan Areas, and Their Determinants," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(2), pages 235-274.
    6. G. Donald Jud & Daniel T. Winkler, 1995. "The Capitalization Rate of Commercial Properties and Market Returns," Journal of Real Estate Research, American Real Estate Society, vol. 10(5), pages 509-518.
    7. Brent W. Ambrose & Hugh O. Nourse, 1993. "Factors Influencing Capitalization Rates," Journal of Real Estate Research, American Real Estate Society, vol. 8(2), pages 221-238.
    8. Lawrence Benveniste & Dennis R. Capozza & Paul J. Seguin, 2001. "The Value of Liquidity," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(4), pages 633-660.
    9. Stijn Van Nieuwerburgh & Pierre-Olivier Weill, 2006. "Why Has House Price Dispersion Gone Up?," NBER Working Papers 12538, National Bureau of Economic Research, Inc.
    10. Mayer, Christopher J. & Somerville, C. Tsuriel, 2000. "Residential Construction: Using the Urban Growth Model to Estimate Housing Supply," Journal of Urban Economics, Elsevier, vol. 48(1), pages 85-109, July.
    11. Kenneth M. Lusht & Jeffrey D. Fisher, 1984. "Anticipated Growth and the Specification of Debt in Real Estate Value Models," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(1), pages 1-11.
    12. Zahra Saderion & Barton Smith & Charles A. Smith, 1994. "An Integrated Approach to the Evaluation of Commercial Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 9(2), pages 151-168.
    13. Sivitanidou, Rena & Sivitanides, Petros, 1999. "Office Capitalization Rates: Real Estate and Capital Market Influences," The Journal of Real Estate Finance and Economics, Springer, vol. 18(3), pages 297-322, May.
    14. Jeffrey Fisher & Dean Gatzlaff & David Geltner & Donald Haurin, 2003. "Controlling for the Impact of Variable Liquidity in Commercial Real Estate Price Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(2), pages 269-303, 06.
    15. Stephen Malpezzi, 1994. "Housing Prices, Externalities, and Regulation in U.S. Metropolitan Areas," Wisconsin-Madison CULER working papers 94-08, University of Wisconsin Center for Urban Land Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Serguei Chervachidze & William Wheaton, 2013. "What Determined the Great Cap Rate Compression of 2000–2007, and the Dramatic Reversal During the 2008–2009 Financial Crisis?," The Journal of Real Estate Finance and Economics, Springer, vol. 46(2), pages 208-231, February.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:30:n:3:2008:p:249-292. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (JRER Graduate Assistant/Webmaster).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.