An Integrated Approach to the Evaluation of Commercial Real Estate
Hedonic estimation techniques have been applied to real estate markets for more than twenty years, but the literature is dominated by analyses of the single-family residential market. This paper focuses upon hedonic analysis as applied to commercial real estate when information is known about complex characteristics and net operating income. The model presented incorporates traditional hedonic specifications and rate of return analysis. The empirical illustration focuses upon the apartment market in Houston, Texas, during 1980s. It is found that the apartment complex price function displays the same type of nonlinearities often found in the single-family market and that apartment market cap rates vary substantially over time and across project types. This suggests that analysts of commercial real estate should be wary of applying simple price per square foot rules or common cap rates across all property types and across all locations.
Volume (Year): 9 (1994)
Issue (Month): 2 ()
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- 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.
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- Denton Marks, 1983. "The Effect of Rent Control on the Price of Rental Housing: An Hedonic Approach," Land Economics, University of Wisconsin Press, vol. 59(4), pages 81-94.
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- Charles A. Smith & Mark J. Kroll, 1989. "Utility Theory and Rent Optimization: Utilizing Cluster Analysis to Segment Rental Markets," Journal of Real Estate Research, American Real Estate Society, vol. 4(1), pages 61-71.
- G. Stacy Sirmans & C.F. Sirmans & John D. Benjamin, 1990. "Rental Concessions and Property Values," Journal of Real Estate Research, American Real Estate Society, vol. 5(1), pages 141-152.
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