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Clustering Methods for Real Estate Portfolios

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Author Info

  • William N. Goetzmann

    ()
    (Yale University, School of Management)

  • Susan M. Wachter

    ()
    (Real Estate Department)

Abstract

A clustering algorithm is applied to effective rents for twenty-one U.S. office markets, and to twenty-two metropolitan markets using vacancy data. It provides support for the conjecture that there exists a few major families of cities: including an oil and gas group and an industrial Northeast group. Unlike other clustering studies, we find strong evidence of bicoastal city associations among cities such as Boston and Los Angeles. We present a bootstrapping methodology for investigating the robustness of the clustering algorithm, and develop a means for testing the significance of city associations. While the analysis is limited to aggregate rent and vacancy data, the results provide a guideline for the further application of cluster analysis to other types of real estate and economic information.

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm59.

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Date of creation: 03 Jul 1998
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Handle: RePEc:ysm:somwrk:ysm59

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Web page: http://icf.som.yale.edu/
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Cited by:
  1. Janet K. Tandy & Leon Shilton, 1999. "Risk Assessment Steeplechase: Hurdles to Becoming a Target Market," Journal of Real Estate Research, American Real Estate Society, vol. 17(2), pages 127-150.
  2. Theodore M. Crone, 2003. "An alternative definition of economic regions in the U.S. based on similarities in state business cycles," Working Papers 03-23, Federal Reserve Bank of Philadelphia.
  3. Brett Day & Ian Bateman & Iain Lake, 2007. "Beyond implicit prices: recovering theoretically consistent and transferable values for noise avoidance from a hedonic property price model," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 211-232, May.
  4. Piet Eichholtz & Hans Op t Veld & Mark Schweitzer, . "Outperformance: Does Managerial Specialization Pay?," Center for Financial Institutions Working Papers 97-31, Wharton School Center for Financial Institutions, University of Pennsylvania.
  5. Darren Hayunga & R. Pace, 2010. "Spatial Statistics Applied to Commercial Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 41(2), pages 103-125, August.
  6. Peter Byrne, 2005. "A Geography of the UK Commercial Property Market," Real Estate & Planning Working Papers rep-wp2005-17, Henley Business School, Reading University.
  7. William N. Goetzmann & Stephen J. Brown, 1998. "Mutual Fund Styles," Yale School of Management Working Papers ysm40, Yale School of Management.
  8. Theodore M. Crone, 1999. "Using state indexes to define economic regions in the U.S," Working Papers 99-19, Federal Reserve Bank of Philadelphia.
  9. Philip McCann & Stephen Lee, 2005. "The Implications for Regional Investment of Diversification Strategies in Commercial Real Estate Portfolios," ERSA conference papers ersa05p473, European Regional Science Association.
  10. William Goetzmann & Matthew Spiegel & Susan Wachter, 1999. "Do Cities and Suburbs Cluster?," Yale School of Management Working Papers ysm115, Yale School of Management, revised 01 May 1999.
  11. Mark Gallagher & Asieh Mansour, 2000. "An Analysis of Hotel Real Estate Market Dynamics," Journal of Real Estate Research, American Real Estate Society, vol. 19(2), pages 133-164.
  12. Theodore M. Crone, 2004. "A redefinition of economic regions in the U.S," Working Papers 04-12, Federal Reserve Bank of Philadelphia.

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