EconPapers    
Economics at your fingertips  
 

Redevelopment Option Value for Commercial Real Estate

Simon B chler, Alex van de Minne, Olivier Sch ni

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft - CRED

Abstract: We analyze the impact of the redevelopment potential on commercial real estate transaction prices. First, using a probit model, we compute the fitted redevelopment potential. This potential is primarily determined by the difference in net operating income (NOI) per square foot of land (sql) to the potential highest and best use (HBU) of the property. This difference reflects the economic obsolescence of a property. Second, we run a 2SLS model with the fitted redevelopment potential as an instrument for the redevelopment dummy. We find that having a 100 percent redevelopment potential increases the property's price by nine to 17 percent.

Keywords: Probability of redevelopment; Real Estate Pricing; Competing Risk (search for similar items in EconPapers)
JEL-codes: C01 R32 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.vwiit.ch/cred/CREDResearchPaper26.pdf (application/pdf)

Related works:
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:rdv:wpaper:credresearchpaper26

Access Statistics for this paper

More papers in Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft - CRED Contact information at EDIRC.
Bibliographic data for series maintained by Franz Koelliker ().

 
Page updated 2025-04-01
Handle: RePEc:rdv:wpaper:credresearchpaper26