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Commercial Real Estate, Information Production and Market Activity

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  • David Downs
  • Z. Güner

Abstract

This paper addresses several issues related to the production of information across commercial real estate markets. The purpose is to determine the extent to which factors of production might complement or substitute for one another. A simple model is presented to illustrate the potential trade-offs between appraisal- and transactions-based information production. A series of empirical tests are performed on a panel data set constructed for 51 markets covering 9 years, 2001 through 2009. The number of commercial appraisers (i.e., certified general appraisers) and the number of commercial property transactions are used as proxies for information production. Overall, the results support the substitution hypothesis. Additional analyses examine a broader definition of appraisal-based information production, as well as the influence of market transparency on the main findings of this paper. Findings based on these additional analyses indicate that the trade-off between appraisal- and transactions-based information production is more pronounced in transparent markets. We conclude that appraisal-based information as a factor of production is, potentially, most critical in markets or conditions where the information environment is incomplete (i.e., transactions are scarce or the information regarding transactions is not public). Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • David Downs & Z. Güner, 2013. "Commercial Real Estate, Information Production and Market Activity," The Journal of Real Estate Finance and Economics, Springer, vol. 46(2), pages 282-298, February.
    • Handle: RePEc:kap:jrefec:v:46:y:2013:i:2:p:282-298
    DOI: 10.1007/s11146-011-9348-6
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    References listed on IDEAS

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    1. David H. Downs & Z. Nuray Güner, 1999. "Is the Information Deficiency in Real Estate Evident in Public Market Trading?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(3), pages 517-541, September.
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    3. Jeff Fisher & David Geltner & Henry Pollakowski, 2007. "A Quarterly Transactions-based Index of Institutional Real Estate Investment Performance and Movements in Supply and Demand," The Journal of Real Estate Finance and Economics, Springer, vol. 34(1), pages 5-33, January.
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    7. Patric H. Hendershott & Edward J. Kane, 1995. "U.S. Office Market Values During the Past Decade: How Distorted Have Appraisals Been?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(2), pages 101-116, June.
    8. R. Brian Webb & Mike Miles & David Guilkey, 1992. "Transactions‐Driven Commercial Real Estate Returns: The Panacea to Asset Allocation Models?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 325-357, June.
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    More about this item

    Keywords

    Information; Markets; Real Estate; Valuation; G10; G14; R33;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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