Author: Joseph L. Pagliari, Jr. and James R. Webb

Start Page: 387
End Page: 422
Volume: 7
Issue Number: 4
Year: 1992
Publication: Journal of Real Estate Research

Abstract: Historical commercial real estate returns are attributed to three fundamental factors: initial current yield, growth in net operating income, and changes in going-in versus going-out capitalization rates (i.e., pricing movements). Separating returns into these three factors appears to provide more insightful information than the traditionally reported income and appreciation returns. Using this three-factor model, a two-dimensional matrix of projected ten-year real yields is estimated for each major type of commercial real estate.