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On Setting Apartment Rental Rates: A Regression-Based Approach

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Abstract

This study presents a regression-based analysis of apartment rents for a cross-section of properties located in an "edge city" submarket. It attempts to provide a solution for owners and managers of apartments to the thorny problem of setting a property's rental rate. The approach used in this analysis differs from previous studies in at least three important respects: (1) vacancy is treated as part of the dependent variable, (2) the property-specific rental rate generated by the regression analysis is compared to the property's actual effective rent, and (3) each property in the submarket is ranked by the difference between its actual effective rent and its characteristic-adjusted effective rent. This is then followed by several observations concerning the advantages and disadvantages of such an analysis in a practical setting.

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  • Joseph L. Pagliari, Jr. & James R. Webb, 1996. "On Setting Apartment Rental Rates: A Regression-Based Approach," Journal of Real Estate Research, American Real Estate Society, vol. 12(1), pages 37-62.
    • Handle: RePEc:jre:issued:v:12:n:1:1996:p:37-62
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    1. Stuart A. Gabriel & Frank E. Nothaft, 1988. "Rental Housing Markets and the Natural Vacancy Rate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 419-429, December.
    2. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    3. Colin Read, 1988. "Advertising and Natural Vacancies in Rental Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 354-363, December.
    4. G. Stacy Sirmans & John D. Benjamin, 1991. "Determinants of Market Rent," Journal of Real Estate Research, American Real Estate Society, vol. 6(3), pages 357-380.
    5. Rosen, Kenneth T & Smith, Lawrence B, 1983. "The Price-Adjustment Process for Rental Housing and the Natural Vacancy Rate," American Economic Review, American Economic Association, vol. 73(4), pages 779-786, September.
    6. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
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    Cited by:

    1. Jian Wang & Murtaza Das & Stephen Tappert, 2021. "Applying reinforcement learning to estimating apartment reference rents," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(3), pages 330-343, June.
    2. Jian Wang & Murtaza Das & Amar Duggasani, 2016. "Predicting and measuring customer lifetime values for apartment tenants," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 2(2), pages 103-120, October.
    3. Rose Lai & Ko Wang & Jing Yang, 2007. "Stickiness of Rental Rates and Developers’ Option Exercise Strategies," The Journal of Real Estate Finance and Economics, Springer, vol. 34(1), pages 159-188, January.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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