Abstract

http://ssrn.com/abstract=2205058
 
 

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Commercial Real Estate Rental Index: A Dynamic Panel Data Model Estimation


Xudong An


San Diego State University - Department of Finance

Yongheng Deng


National University of Singapore, Business School and the School of Design and Environment; National University of Singapore (NUS) - Institute of Real Estate Studies

Jeffrey D. Fisher


Indiana University

Maggie Hu


University of New South Wales (UNSW) - School of Banking and Finance

November 1, 2012


Abstract:     
Based on the quarterly actual rental income of over 9,000 NCREIF commercial properties during 2001Q2-2010Q2, we construct a commercial real estate rental index using a dynamic panel data model. The rental index we construct captures the market-wide fluctuations in rental income, and our model estimates show that market-wide rent growth is mean-reverting and older properties tend to have consistently lower rent growth. We also provide a new measure of rental income risk, which is the volatility of the rental index we estimate from our model. In addition, our model provides additional tools for rent growth prediction. In contrast to the existing literature, we find a strong negative relation between cap rate and our rent growth estimate, consistent with theoretical predictions. Moreover, our rent growth estimate, together with mortgage interest rate and availability of financing, explains 85% of the cap rate variations during our study period.

Number of Pages in PDF File: 42

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Date posted: January 23, 2013  

Suggested Citation

An, Xudong and Deng, Yongheng and Fisher, Jeffrey D. and Hu, Maggie, Commercial Real Estate Rental Index: A Dynamic Panel Data Model Estimation (November 1, 2012). Available at SSRN: http://ssrn.com/abstract=2205058 or http://dx.doi.org/10.2139/ssrn.2205058

Contact Information

Xudong An (Contact Author)
San Diego State University - Department of Finance ( email )
5500 Campanile Drive
San Diego, CA 92182-8236
United States
619-594-3027 (Phone)
619-594-3272 (Fax)
Yongheng Deng
National University of Singapore, Business School and the School of Design and Environment ( email )
4 Architecture Drive
Singapore 117566
Singapore
(65) 6516 8291 (Phone)
(65) 6774 1003 (Fax)
HOME PAGE: http://www.ires.nus.edu.sg
National University of Singapore (NUS) - Institute of Real Estate Studies ( email )
Singapore
Jeffrey D. Fisher
Indiana University ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-7972 (Phone)
812-855-5875 (Fax)
Maggie Rong Hu
University of New South Wales (UNSW) - School of Banking and Finance ( email )
University of New South Wales
Sydney, NSW 2052
Australia
61-2-93855623 (Phone)
61-2-93856347 (Fax)
HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/Maggie-Hu.aspx

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