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Commercial Real Estate Return Cycles: Do Capital Flows Matter?

Author

Listed:
  • David Ling
  • Jeffrey Fisher
  • A. Naranjo
  • Jeffrey Fisher
  • Andy Naranjo

Abstract

This paper examines the short- and long-run dynamics among institutional capital flows and returns in private real estate markets. The main tool of analysis we employ is a vector autoregressive (VAR) regression model in which both institutional capital flows and returns are specified as endogenous variables in a two equation simultaneous system and in which we also control for various financial and economic variables. When aggregating across U.S. CBSAs and property types, we find some evidence that both lagged NCREIF returns and lagged NCREIF flows significantly influence current returns. However, these aggregate results mask significant cross-sectional variation across different metropolitan areas and property types. In particular, we provide evidence that our aggregate results are driven by a limited number of large CBSAs. We find no evidence that returns are predictive of future NPI capital flows. We also document that institutional capital are not generally predictive of relative future capital flows.

Suggested Citation

  • David Ling & Jeffrey Fisher & A. Naranjo & Jeffrey Fisher & Andy Naranjo, 2007. "Commercial Real Estate Return Cycles: Do Capital Flows Matter?," ERES eres2007_215, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2007_215
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2007-215
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    Cited by:

    1. Jim Clayton & David Ling & Andy Naranjo, 2009. "Commercial Real Estate Valuation: Fundamentals Versus Investor Sentiment," The Journal of Real Estate Finance and Economics, Springer, vol. 38(1), pages 5-37, January.
    2. David Ling & Gianluca Marcato & Pat McAllister, 2009. "Dynamics of Asset Prices and Transaction Activity in Illiquid Markets: the Case of Private Commercial Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 359-383, October.
    3. Doina Chichernea & Norm Miller & Jeff Fisher & Bob White & Michael Sklarz, 2008. "ACross-Sectional Analysis of CapRates by MSA," Journal of Real Estate Research, American Real Estate Society, vol. 30(3), pages 249-292.
    4. Serguei Chervachidze & William Wheaton, 2013. "What Determined the Great Cap Rate Compression of 2000–2007, and the Dramatic Reversal During the 2008–2009 Financial Crisis?," The Journal of Real Estate Finance and Economics, Springer, vol. 46(2), pages 208-231, February.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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