Commercial Real Estate Analysis & Investments
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Learn to analyze commercial real estate from an investment perspective with COMMERICAL REAL ESTATE ANALYSIS AND INVESTMENTS and its accompanying CD-ROM! Presenting the essential concepts, principles, and tools for the analysis of commercial real estate, this real estate text provides you with the tools you need to understand real estate investments in today's dynamic economy. Studying is made easy with the CD-ROM that provides expanded coverage as well as spreadsheet examples of methodologies, data used in exhibits, lecture slide notes, and answers to study questions.
reform act removed virtually all of the special tax incentives from which real estate had beneﬁted. Also, by the late 1980s, the inﬂation rate was down sharply, and inﬂation appeared to be under control, undercutting the ‘‘inﬂation fear’’ source of real estate investment demand. And by the late 1980s, the extent of overbuilding in the space market was obvious, as was the ﬁnancial crisis in the overextended savings and loan industry, which had loaned vast sums in commercial mortgages backed by
cost of capital is 11% per year, reﬂecting the greater risk associated with not knowing for certain what the 162 PART III BASIC FINANCIAL ECONOMIC CONCEPTS AND TOOLS future market rent will be. The initial lease is expected to be signed (and ﬁrst rent received) one year from now, with an annual rent of $10/SF. What is the value of this property per SF? In the ﬁrst step of solving this problem, we compute the present value of the ﬁrst lease when it is signed, as a level annuity in advance. We
95–119, 1995. Gyourko, J., and D. Keim. ‘‘What Does the Stock Market Tell Us About Real Estate Returns?’’ Real Estate Economics 20(3): 457–486, 1992. Korpacz Real Estate Investor Survey (various issues), The Korpacz Company, Frederick, MD. Miles, M., and N. Tolleson. ‘‘A Revised Look at How Real Estate Compares with Other Major Components of the Domestic Investment Universe.’’ Real Estate Finance 14(1), spring 1997 (Institutional Investor Inc., publisher). Mueller, Glenn. ‘‘Understanding Real
before commencing development, or that the equilibrium rent in the city will be higher as a result of the growth expectations. The effect of expected future growth in the rent of a given ﬁxed use (that is, the same structure on the same site) would be fully reﬂected in the current market value of the built property. Therefore, there is no reason to wait for the growth in rent before building the structure. The developer receives the present value of the expected growth in the value of the
improvements, and this cost detracts from the returns that would otherwise be implied by the change in property price depicted in the index. Chapter 5 Inside the City II: A Closer Look 95 From the perspective of real estate investors, neighborhood succession theory holds an important implication. Succession theory suggests two things about the course of location (or usage) rents and values over time, and both of these are illustrated in our Herengracht example. First, location rents and