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Essays on lease and property valuation
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.
2010 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The first two papers in this dissertation discuss a fairly recently developed research field, Space Syntax, and how the findings in this field may be used to understand spatial economic patterns such as geographic distribution of market rents. Both papers use standard econometric methods to investigate the relationship between rents and the so called integration value developed within Space Syntax. The integration value may be understood as a measure of the accessibility of a certain location in a street network. The measure is constructed using tools from graph theory and uses the shape of the street network as its only input. The papers estimate hedonic models of office and retail leases from central Stockholm to test whether the integration value can help explain rents. A statistically significant effect of integration value on both office and retail rent is found. It appears as if Space Syntax adds important information to the understanding of intraurban rent patterns.

Illiquidity is a main feature of most property markets and market participants are therefore directed to property appraisals to obtain information about market values. The reliability of property appraisals is therefore an important research topic. The third paper studies the “rationality” of valuations by testing if capitalisation (cap) rates from individual discounted cash-flow (DCF) valuations are consistent with economic theory. Standard econometrics is used to study the variation in cap rates. For the most part the results support the hypothesis that appraisers are “rational” in the above mentioned sense.

Illiquidity of direct property also poses a problem when constructing property price indices.  Lack of price observations and heterogeneity among the few observations available is likely to introduce noise in price indices based on transactions. Valuations are therefore often used instead to construct indices. These indices however suffer from a bias due to so called “appraisal smoothing”. In the fourth paper it is shown that, given certain assumptions, one may filter out noise in a transaction-based price index by regressing it on a valuation-based index (contemporaneous and lagged one period). The procedure may in some circumstances improve pure valuation- or transaction-based indices.

Place, publisher, year, edition, pages
Stockholm: KTH , 2010. , 13 p.
Series
TRITA-FOB, 2010:4
Keyword [en]
rent, space syntax, valuation, index, real estate, accessibility, capitalisation rate
National Category
Economics
Identifiers
URN: urn:nbn:se:kth:diva-26801ISBN: 978-91-978692-1-8 (print)OAI: oai:DiVA.org:kth-26801DiVA: diva2:373455
Public defence
2010-12-20, D2, Lindstedtsv 5 Entreplan, KTH, 09:00 (English)
Opponent
Supervisors
Note
QC 20101201Available from: 2010-12-01 Created: 2010-11-29 Last updated: 2010-12-09Bibliographically 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: 2017-12-14Bibliographically approved
2. The effect of accessibility on retail rents: testing integration value as a measure of geographic location
Open this publication in new window or tab >>The effect of accessibility on retail rents: testing integration value as a measure of geographic location
2013 (English)In: Journal of Property Research, ISSN 0959-9916, E-ISSN 1466-4453, Vol. 30, no 1, 1-23 p.Article in journal (Refereed) Published
Abstract [en]

This article investigates cross-sectional variation in retail rents on the micro level, i.e. differences in rent for shops on street X compared to shops on street Y. Retail rents from the inner city of Stockholm are analysed. Free standing shops dominate the database (i.e. not located in malls). Differences in rent across locations is modelled with distance to the city centre, distance to sub-centres within inner city Stockholm, city part dummies and so-called integration values. Integration values have shown a strong correlation to pedestrian and other types of traffic. Loosely speaking, the integration value for a particular location in an urban area is the average number of turns a pedestrian must make to reach other locations in the city. In this study it is interpreted as a measure of accessibility. It is hypothesised that locations with high (low) integration values typically have high (low) retail rent. Integration values are found to complement the traditional location measures distance to city centre/sub-centres and city part dummies. Integration values can be calculated for urban areas that have not yet been built. They may, thus, be useful in the planning of new urban areas and for predicting retail rents.

Keyword
retail rent, space syntax, geographic distribution, hedonic, Stockholm
National Category
Economics
Identifiers
urn:nbn:se:kth:diva-26949 (URN)10.1080/09599916.2012.713974 (DOI)2-s2.0-84875959688 (Scopus ID)
Note

Updated from "Submitted" to "Published" QC 20131209

Available from: 2010-11-30 Created: 2010-11-30 Last updated: 2017-12-12Bibliographically approved
3. 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
4. A method for combining transaction- and valuation-based data in a property price index
Open this publication in new window or tab >>A method for combining transaction- and valuation-based data in a property price index
(English)Article in journal (Other academic) Submitted
Abstract [en]

This paper presents a method for combining transaction- and valuation-based data in a property price index. The methodology is devised for a world where observable transaction prices can be used to construct a price index that constitutes a noisy, unbiased signal of the ”true” price index. It is furthermore assumed that valuations can be used to construct a market value index which does not contain noise but that suffers from so called appraisal ”smoothing”. The valuation-based index is thus assumed to lag the ”true” value index and exhibit lower volatility. The model of the valuation-based index follows Geltner (1993). By regressing the transaction-based index on the valuation-based index (contemporaneous and lagged one period) it is possible to filter out the noise in the observable price index thus estimating the ”true” price index. The method may be seen as a way of ”de-smoothing” a valuation-based index without knowing the smoothing parameter beforehand. The methodology may also be used as a way of estimating the smoothing parameter.

Keyword
real estate, price index, smoothing, valuation, transaction
National Category
Economics
Identifiers
urn:nbn:se:kth:diva-26950 (URN)
Note
QS 20120328Available from: 2010-11-30 Created: 2010-11-30 Last updated: 2012-03-28Bibliographically approved

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