Sunk Costs and the Measurement of Commercial Property Depreciation

Walter Diewert and Kevin Fox

No 2014-28, Discussion Papers from School of Economics, The University of New South Wales

Abstract: This paper develops a new framework for measuring prices and quantities of commercial properties. In particular, it addresses problems associated with obtaining separate estimates for the land and structure components of a property. A key contribution is to address the problem of estimating structure depreciation taking into account the fixity of the structure. We find that structure depreciation is determined primarily by the cash flows that the property generates rather than physical deterioration of the building.

Keywords: Property price indexes; net operating income; discounted cash flow; System of National Accounts; Balance Sheets; land and structure prices; goodwill amortization; intangible assets (search for similar items in EconPapers)
JEL-codes: C2 C23 C43 D12 E31 R21 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014-06
New Economics Papers: this item is included in nep-acc, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Sunk costs and the measurement of commercial property depreciation (2016)
Journal Article: Sunk costs and the measurement of commercial property depreciation (2016)
Working Paper: Sunk Costs and the Measurement of Commercial Property Depreciation (2014)
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