Office Market Values During the Past Decade: How Distorted Have Appraisals Been?

Patric Hendershott and Edward Kane

No 4128, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops evidence that, in a declining market, appraisal values may lag notably behind analytical measures of the discounted present value of commercial property cash flows. For the period 1982-92, alternative measures of the economic value of constant-quality office buildings are constructed using two benchmark projections designed to bracket expected future vacancy rates and real rents. Until 1992, the time path for both benchmark series lie consistently below that developed from the appraisal-based Russell/NCREIF office market index. This divergence implies that the rate of price appreciation reported by the Russell/NCREIF index is distorted: being slow to register price declines when markets first weaken and then having to overstate the rate of decline once the market begins to bottom out. The distortion may reflect incentives for investment managers and appraisers to smooth potentially temporary price volatility, as well as systematic differences in the character and condition of the properties that tend to trade at different stages of the real estate cycle.

Date: 1992-07
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Journal of Real Estate Economics, vol. 23, (Summer 1995), pp. 101-116.

Downloads: (external link)
http://www.nber.org/papers/w4128.pdf (application/pdf)

Related works:
Journal Article: U.S. Office Market Values During the Past Decade: How Distorted Have Appraisals Been? (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4128

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4128

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().