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| An Integrated Approach to the Evaluation
of Commercial Real Estate Author: Zahra Saderion, Barton Smith, and Charles A. Smith Start Page: 151 Abstract: Hedonic estimation
techniques have been applied to real estate markets for more than twenty years, but the
literature is dominated by analyses of the single-family residential market. This paper
focuses upon hedonic analysis as applied to commercial real estate when information is
known about complex characteristics and net operating income. The model presented
incorporates traditional hedonic specifications and rate of return analysis. The
empirical illustration focuses upon the apartment market in Houston, Texas, during 1980s.
It is found that the apartment complex price function displays the same type of
nonlinearities often found in the single-family market and that apartment market cap rates
vary substantially over time and across project types. This suggests that analysts of
commercial real estate should be wary of applying simple price per square foot rules or
common cap rates across all property types and across all locations. |
