Rental Adjustment & Valuation of Real Estate in Overbuilt Markets: Fundamental vs. Reported Office Market Values in Sydney Australia / Patric H. Hendershott.

Format:

Book

Author/Creator:

Hendershott, Patric H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4775.

NBER working paper series no. w4775

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Rental Adjustment & Valuation of Real Estate in Overbuilt Markets

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Summary:

Real estate markets are periodically plagued by excess supply, rent concessions and few arms-length transactions. During such periods, valuation is problematic. The model presented here requires the forecasts of future vacancy rates, and equilibrium and actual rental rates. Vacancy rate forecasts of market participants are obtained, the equilibrium rental rate is specified as the cost of capital, and a rental adjustment equation is estimated in which real effective Sydney office market rents are related to gaps between both natural and actual vacancy rates and equilibrium and actual real effective rental rates. Value estimates (relative to replacement cost) for 1992, including that for above-market leases, are computed and the sensitivity to key assumptions is shown. Value/replacement-cost calculations are then made for the entire 1985-92 period and contrasted with comparable estimates implicit in data published by BOMA and JLW, two prominent Australian real estate sources. Lastly, the ratios of real effective rents to equilibrium rents and value to replacement cost are projected for the 1993-2006 period.

Notes:

Print version record

June 1994.