Commercial Buildings Capital Consumption and the United States National Accounts

50 Pages Posted: 16 Jun 2016

See all articles by Sheharyar Bokhari

Sheharyar Bokhari

Massachusetts Institute of Technology (MIT)

David Geltner

Massachusetts Institute of Technology (MIT); MIT Center for Real Estate

Date Written: June 15, 2016

Abstract

Commercial buildings are a major asset class, over 30% of the value of the stock of all produced assets according to the BEA. Yet, US commercial buildings depreciation has not been comprehensively studied since the highly influential work of Hulten and Wykoff almost 40 years ago. This paper’s major contributions include: (i) More flexible and precise estimation of the net depreciation value/age profile, allowing much finer characterization of the building life cycle; (ii) Explicit quantification of the land value component of commercial property value, enabling net depreciation to be quantified as a fraction of remaining structure value; (iii) Inclusion of capital improvement expenditures, allowing estimates of “gross depreciation” (total capital consumption); and (iv) Application and implications of the paper’s findings to and for the national accounts.

Keywords: Commercial Buildings, Capital Consumption, Depreciation, Land Value

JEL Classification: E01, R33, H25

Suggested Citation

Bokhari, Sheharyar and Geltner, David, Commercial Buildings Capital Consumption and the United States National Accounts (June 15, 2016). Available at SSRN: https://ssrn.com/abstract=2796382 or http://dx.doi.org/10.2139/ssrn.2796382

Sheharyar Bokhari

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

David Geltner (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

MIT Center for Real Estate ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

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