An Integrated Approach to the Evaluation of Commercial Real Estate

Zahra Saderion, Barton Smith () and Charles A. Smith
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Zahra Saderion: Department of Economics College of Social Sciences University of Houston University Park Houston, Texas 77204-5882, http://www.uh.edu/academics/sos/econ/
Barton Smith: Department of Economics College of Social Sciences University of Houston University Park Houston, 77204-5882, http://www.uh.edu/academics/sos/econ/
Charles A. Smith: College of Business University of Houston-Downtown Houston, Texas 77204, http://www.dt.uh.edu/academic/colleges/business.htm

Journal of Real Estate Research, 1994, vol. 9, issue 2, pages 151-168

Abstract: Hedonic estimation techniques have been applied to real estate markets for more than twenty years, but the literature is dominated by analyses of the single-family residential market. This paper focuses upon hedonic analysis as applied to commercial real estate when information is known about complex characteristics and net operating income. The model presented incorporates traditional hedonic specifications and rate of return analysis. The empirical illustration focuses upon the apartment market in Houston, Texas, during 1980s. It is found that the apartment complex price function displays the same type of nonlinearities often found in the single-family market and that apartment market cap rates vary substantially over time and across project types. This suggests that analysts of commercial real estate should be wary of applying simple price per square foot rules or common cap rates across all property types and across all locations.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1994
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