A Local Property Yield Rate Using An Economic Indicator for Future Growth

Donald Epley

Journal of Real Estate Literature, 2013, vol. 21, issue 1, 107-123

Abstract: This paper develops the relationship between local economic growth and the overall property discount rate. A measure of local growth is calculated based on the value the local workforce contributes to the local economy through wages and salaries. Future levels of growth are projected using exponential smoothing in a best-fitting regression equation that is updated quarterly. The growth projection is used with an estimate of the overall capitalization rate for office buildings to derive the overall yield rate that can be updated quarterly. The result provides a procedure to derive projected yield rates that is conceptually correct, relies on available data, and can be updated quarterly.

Date: 2013
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DOI: 10.1080/10835547.2013.12090348

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