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Empirical studies of property appraiser behaviour and of location value in office rents
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
2007 (English)Licentiate thesis, comprehensive summary (Other scientific)
Abstract [en]

In the first paper the effect of accessibility upon rent is investigated for office properties located in Downtown Stockholm. Starting from the firm’s cost minimization problem, a translog hedonic model is derived. The results suggest the model has good predictive power in explaining the variation in the log of the rent. A negative rent gradient is obtained with a base approximately 90 meters from the postulated focal point. It appears as if Space Syntax adds important information to the understanding of the intraurban office rent pattern.

The second paper investigates assumed capitalisation rates in 3026 discounted cash flow valuations of office properties in Stockholm, Gothenburg and Malmö during the time period 1998-2004. The study investigates determinants of property-level variation in cap rates and how going in and exit cap rates relate to each other.

Exit cap rates exhibit substantial variation across properties. Part of this cross-sectional variation can be attributed to the location of the property, part of it is due to other characteristics of the property. Exit cap rates are differentiated between properties of the same type on the same market segment, which shows that valuers apply property level fine-tuning when setting exit cap rates. Properties with low market rent and high long-run vacancy assumption typically have high exit cap rates. Properties in peripheral parts of a city typically have higher exit cap rates than properties in central parts.

The implicitly assumed going-in cap rate (defined as assumed net operating income year one divided by estimated market value) follows a similar pattern as the exit cap rate but exhibits more temporary, property-specific variation. Going-in cap rates are strongly influenced by temporary deviations of vacancy rates and rents from assumed “normal” levels of vacancy and rent. The difference between going-in and exit cap rates is influenced by assumed short-run growth in net operating income in the way stipulated by theory: high assumed short-run growth is associated with going-in cap rates being lower than exit cap rates.

Place, publisher, year, edition, pages
Stockholm: KTH , 2007. , 5 p.
Series
Trita-BFE, ISSN 1104-4101 ; 7/79
Keyword [en]
Space Syntax, translog, hedonic model, office space, rent, Stockholm, property appraisal, capitalization rate, appraiser behaviour
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:kth:diva-4549ISBN: 978-91-975984-7-7 (print)OAI: oai:DiVA.org:kth-4549DiVA: diva2:12802
Presentation
2007-12-14, L52, KTH, Drottning Kristinas väg 30, Stockholm, 10:00
Opponent
Supervisors
Note
QC 20101115Available from: 2007-11-22 Created: 2007-11-22 Last updated: 2011-11-10Bibliographically approved
List of papers
1. Can Space Syntax Help Us in Understanding the Intraurban Office Rent Pattern?: Accessibility and Rents in Downtown Stockholm
Open this publication in new window or tab >>Can Space Syntax Help Us in Understanding the Intraurban Office Rent Pattern?: Accessibility and Rents in Downtown Stockholm
2008 (English)In: Journal of real estate finance and economics, ISSN 0895-5638, E-ISSN 1573-045X, Vol. 36, no 3, 289-305 p.Article in journal (Refereed) Published
Abstract [en]

The effect of accessibility upon rent is investigated for office properties located in Downtown Stockholm. Starting from the firm's cost minimization problem, a translog hedonic model is derived. The results suggest the model has good predictive power in explaining the variation in the log of the rent. A negative rent gradient is obtained with a base approximately 90 m from the postulated focal point. It appears as if Space Syntax adds important information to the understanding of the intraurban office rent pattern.

Keyword
space syntax, translog, hedonic model, office space, rent, Stockholm
National Category
Economics and Business
Identifiers
urn:nbn:se:kth:diva-7697 (URN)10.1007/s11146-007-9054-6 (DOI)000253632300003 ()2-s2.0-40149106795 (Scopus ID)
Note
Uppdaterad från manuskript till artikel(20101112) QC 20101112 Available from: 2007-11-22 Created: 2007-11-22 Last updated: 2011-10-10Bibliographically approved
2. A study of micro-level variation in appraisal-based capitalisation rates
Open this publication in new window or tab >>A study of micro-level variation in appraisal-based capitalisation rates
2009 (English)In: Journal of Property Research, ISSN 0959-9916, E-ISSN 1466-4453, Vol. 26, no 3, 235-263 p.Article in journal (Refereed) Published
Abstract [en]

This paper explores how appraisal-based going-in and exit capitalisation (cap) rates vary on the micro-level, i.e. how they differ from property to property. The studied database consists of 3022 discounted cash flow market valuations of office properties in Stockholm, Gothenburg and Malmö during 1998-2004. The purpose of the paper is to test the 'rationality' of Swedish office property valuations. By rationality is meant the extent to which appraisals, in particular appraisal cap rates, follow from economic theory. This is an important issue since commercial property markets rely heavily on valuations. Cap rates are regressed on characteristics of the property, other valuer assumptions regarding the property (i.e. the property's market rent) and variables that capture broad time series variation in cap rates. For the most part the studied appraisals follow the expected pattern. They do not exhibit major evidence of irrationality in the above mentioned sense though some of the findings point to the need for further research.

Keyword
Appraisal, Appraiser behaviour, Capitalisation rate, Micro-level variation, Office, database, property market, property rights, regression analysis, time series analysis, valuation, Goteborg, Malmo, Skane, Stockholm [Sweden], Sweden, Vastra Gotaland
National Category
Economics and Business
Identifiers
urn:nbn:se:kth:diva-26102 (URN)10.1080/09599911003669682 (DOI)2-s2.0-77954825614 (Scopus ID)
Note
Uppdaterad från manuskript till artikel QC 20101115Available from: 2010-11-15 Created: 2010-11-15 Last updated: 2017-12-12Bibliographically approved

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