Price Dynamics in Public and Private Commercial Real Estate Markets

Ying Fan () and Abdullah Yavas ()
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Ying Fan: The Hong Kong Polytechnic University
Abdullah Yavas: University of Wisconsin-Madison

The Journal of Real Estate Finance and Economics, 2023, vol. 67, issue 1, No 6, 150-190

Abstract: Abstract In this paper, we examine price dynamics, cycles and lead-lag relationships between private and public commercial real estate markets. We utilize wavelet technology to capture both the frequency and the time variations of a time series. We find that the long-run trend of prices in public commercial real estate markets is steeper than that of private commercial real estate markets. In addition, both short-term and long-term cycles are longer in the public market than the private market. We also find that the private market led the public market up until the recession of early 1990s and the public market has led the private market since then. Finally, we offer the first evidence of contagion between the two markets. We find that there is an increase in excess (high frequency) contagion between the two markets during periods of crisis, but not beyond the crises periods. An understanding of co-movements of real estate prices across these two markets is of crucial importance policy makers and for maximizing portfolio diversification benefits and managing risk.

Keywords: Commercial real estate prices; Wavelet decomposition; Wavelet coherency; Contagion effect (search for similar items in EconPapers)
JEL-codes: C22 C53 E30 G11 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11146-020-09773-6

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