Author: Brent W. Ambrose and Hugh O. Nourse

Start Page: 221
End Page: 238
Volume: 8
Issue Number: 2
Year: 1993
Publication: Journal of Real Estate Research

Abstract: This study examines the variations in quarterly mean "capitalization rates" for commercial and industrial investment properties. By explaining the variations in the capitalization rate, we hope to expand the research in explaining variations in the overall return to property. This study differs from other research on portfolio capitalization rates because we separately analyze these rates by property type. The results show that using "averaged" capitalization rates across property types eliminates important information. We use the band of investment approach to develop a theoretical model explaining the capitalization rate and test this model using both Seemingly Unrelated Regression (SUR) and cross-sectional/time-series regression (panel data).