Office Market Values During the Past Decade: How Distorted Have Appraisals Been?
AbstractThis paper develops evidence that, in a declining market, appraisal values may lag notably behind analytical measures of the discounted present value of commercial property cash flows. For the period 1982-92, alternative measures of the economic value of constant-quality office buildings are constructed using two benchmark projections designed to bracket expected future vacancy rates and real rents. Until 1992, the time path for both benchmark series lie consistently below that developed from the appraisal-based Russell/NCREIF office market index. This divergence implies that the rate of price appreciation reported by the Russell/NCREIF index is distorted: being slow to register price declines when markets first weaken and then having to overstate the rate of decline once the market begins to bottom out. The distortion may reflect incentives for investment managers and appraisers to smooth potentially temporary price volatility, as well as systematic differences in the character and condition of the properties that tend to trade at different stages of the real estate cycle.
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 InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4128.
Date of creation: Jul 1992
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
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.:
- Ross, Stephen A & Zisler, Randall C, 1991. "Risk and Return in Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 175-90, June.
- William C. Wheaton & Raymond G. Torto, 1988. "Vacancy Rates and the Future of Office Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 430-436.
- Ramon P. DeGennaro & James B. Thomson, 1992.
"Capital forbearance and thrifts: an ex post examination of regulatory gambling,"
9209, Federal Reserve Bank of Cleveland.
- Ramon P. DeGennaro & James B. Thomson & Robert A. Eisenbeis & ary, 1993. "Capital forbearance and thrifts: an ex post examination of regulatory gambling," Proceedings 421, Federal Reserve Bank of Chicago.
- Edward J. Kane & Min-Teh Yu, 1994. "How Much Did Capital Forbearance Add to the Cost of the S&L Insurance Mess," NBER Working Papers 4701, National Bureau of Economic Research, Inc.
- David M. Geltner, 1993. "Estimating Market Values from Appraised Values without Assuming an Efficient Market," Journal of Real Estate Research, American Real Estate Society, vol. 8(3), pages 325-346.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.