Empirical studies of property appraiser behaviour and of location value in office rents
2007 (English)Licentiate thesis, comprehensive summary (Other scientific)
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.
Trita-BFE, ISSN 1104-4101 ; 7/79
Space Syntax, translog, hedonic model, office space, rent, Stockholm, property appraisal, capitalization rate, appraiser behaviour
Economics and Business
IdentifiersURN: urn:nbn:se:kth:diva-4549ISBN: 978-91-975984-7-7OAI: oai:DiVA.org:kth-4549DiVA: diva2:12802
2007-12-14, L52, KTH, Drottning Kristinas väg 30, Stockholm, 10:00
Berg, Lennart, Docent
QC 201011152007-11-222007-11-222011-11-10Bibliographically approved
List of papers