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A Conceptual Framework for Commercial Property Price Indexes

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Listed author(s):
  • Diewert, Erwin
  • Shimizu, Chihiro

Abstract

The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country and related price indexes for the land and structure components of a commercial property are required in the Income Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the System of National accounts. The paper suggests a variant of the capitalization of the Net Operating Income approach to the construction of property price indexes and uses the one hoss shay or light bulb model of depreciation as a model of depreciation for the structure component of a commercial property.

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File URL: http://www.economics.ubc.ca/faculty-and-staff/w-erwin-diewert/
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Paper provided by Vancouver School of Economics in its series Economics working papers with number erwin_diewert-2013-44.

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Length: 25 pages
Date of creation: 09 Oct 2013
Date of revision: 09 Oct 2013
Handle: RePEc:ubc:bricol:erwin_diewert-2013-44
Contact details of provider: Web page: http://www.economics.ubc.ca/

Keywords: Commercial property price indexes; Net Operating Income; discounted cash flow; System of National Accounts; Balance Sheets; methods of depreciation; l;

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Find related papers by JEL classification:
  • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
  • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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  1. Diewert, W. Erwin & Nakamura, Alice O. & Nakamura, Leonard I., 2009. "The housing bubble and a new approach to accounting for housing in a CPI," Journal of Housing Economics, Elsevier, vol. 18(3), pages 156-171, September.
  2. Neil Crosby & Steven Devaney & Vicki Law, 2012. "Rental depreciation and capital expenditure in the UK commercial real estate market, 1993--2009," Journal of Property Research, Taylor & Francis Journals, vol. 29(3), pages 227-246, March.
  3. Fisher, Jeffrey D & Geltner, David M & Webb, R Brian, 1994. "Value Indices of Commercial Real Estate: A Comparison of Index Construction Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 9(2), pages 137-164, September.
  4. Timothy J. Dixon & Neil Crosby & Victoria K. Law, 1999. "A critical review of methodologies for measuring rental depreciation applied to UK commercial real estate," Journal of Property Research, Taylor & Francis Journals, vol. 16(2), pages 153-180, January.
  5. Schreyer, Paul, 2009. "User costs and bubbles in land markets," Journal of Housing Economics, Elsevier, vol. 18(3), pages 267-272, September.
  6. W. Erwin Diewert, 2005. "Issues in the Measurement of Capital Services, Depreciation, Asset Price Changes, and Interest Rates," NBER Chapters,in: Measuring Capital in the New Economy, pages 479-556 National Bureau of Economic Research, Inc.
  7. Sheharyar Bokhari & David Geltner, 2012. "Estimating Real Estate Price Movements for High Frequency Tradable Indexes in a Scarce Data Environment," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 522-543, August.
  8. Diewert, W E, 1992. "The Measurement of Productivity," Bulletin of Economic Research, Wiley Blackwell, vol. 44(3), pages 163-198, July.
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Cited by:

  1. Chihiro Shimizu & W. Erwin Diewert & Kiyohiko G. Nishimura & Tsutomu Watanabe, 2015. "Estimating quality adjusted commercial property price indexes using Japanese REIT data," Journal of Property Research, Taylor & Francis Journals, vol. 32(3), pages 217-239, September.
  2. Fare, Rolf & Grosskopf, Shawna & Shang, Chenjun & Sickles, Robin, 2015. "Pricing Characteristics: An Application of Shepard's Dual Lemma," Working Papers 15-013, Rice University, Department of Economics.
  3. W. Erwin Diewert & Kevin J. Fox, 2016. "Sunk costs and the measurement of commercial property depreciation," Canadian Journal of Economics, Canadian Economics Association, vol. 49(4), pages 1340-1366, November.
  4. Mick Silver, 2016. "How to Better Measure Hedonic Residential Property Price Indexes," IMF Working Papers 16/213, International Monetary Fund.

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