An Equilibrium Analysis of Real Estate Leases
AbstractThis article provides a unified equilibrium approach to valuing commercial real estate leases. Using a game-theoretic variant of real options analysis, the underlying real estate asset market is modeled as a continuous-time Nash equilibrium, where developers make construction decisions under demand uncertainty. Then, using the economic notion that leasing represents the purchase of the use of the asset over a specified time, I use a contingent-claims approach to value many of the most common leasing arrangements. The model provides equilibrium values for purchase options, forward leases, gross and net leases, cancellation options, ground leases, escalation clauses, lease concessions, and sale-leasebacks.
Download InfoIf 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.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 78 (2005)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JB/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Miki Seko & Kazuto Sumita & Jiro Yoshida, 2012.
"Downward-Sloping Term Structure of Lease Rates: A Puzzle,"
Keio/Kyoto Joint Global COE Discussion Paper Series
2011-042, Keio/Kyoto Joint Global COE Program.
- Seko, Miki & Sumita, Kazuto & Yoshida, Jiro, 2012. "Downward-sloping term structure of lease rates: a puzzle," MPRA Paper 37395, University Library of Munich, Germany.
- Jyh-Bang Jou & Tan (Charlene) Lee, 2009. "How Does a Development Moratorium Affect Development Timing Choices and Land Values?," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 301-315, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.