What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates
Thesis: S.M. in Real Estate Development, Massachusetts Institute of Technology, Program in Real Estate Development in conjunction with the Center for Real Estate, 2018.
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| Format: | Thesis |
| Language: | eng |
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Massachusetts Institute of Technology
2019
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| Online Access: | http://hdl.handle.net/1721.1/120653 |
| _version_ | 1826190606601289728 |
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| author | Kettler, Frank (Frank Nitsche) |
| author2 | Walter Torous. |
| author_facet | Walter Torous. Kettler, Frank (Frank Nitsche) |
| author_sort | Kettler, Frank (Frank Nitsche) |
| collection | MIT |
| description | Thesis: S.M. in Real Estate Development, Massachusetts Institute of Technology, Program in Real Estate Development in conjunction with the Center for Real Estate, 2018. |
| first_indexed | 2024-09-23T08:42:54Z |
| format | Thesis |
| id | mit-1721.1/120653 |
| institution | Massachusetts Institute of Technology |
| language | eng |
| last_indexed | 2024-09-23T08:42:54Z |
| publishDate | 2019 |
| publisher | Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/1206532019-04-09T19:24:16Z What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates Kettler, Frank (Frank Nitsche) Walter Torous. Massachusetts Institute of Technology. Center for Real Estate. Program in Real Estate Development. Massachusetts Institute of Technology. Center for Real Estate. Program in Real Estate Development. Center for Real Estate. Program in Real Estate Development. Thesis: S.M. in Real Estate Development, Massachusetts Institute of Technology, Program in Real Estate Development in conjunction with the Center for Real Estate, 2018. Cataloged from PDF version of thesis. Includes bibliographical references (page 31). In equity markets, dividend yields are highly correlated with future returns, largely through capital appreciation. Taking the same logic and applying it to the commercial real estate market -- could cap rates therefore predict future appreciation return? This paper finds that absolute cap rates are not significantly correlated with future appreciation or depreciation. However, regressions of first-differenced cap rates on future price appreciation find strong statistical significance at one, two, and three-quarter forecasts. The relation is strongest at a two quarter forecast, declining at four-quarter forecasts and thereafter. These findings support a case for momentum in commercial real estate pricing. Pricing movements, via cap rate changes, predict future appreciation or depreciation. The statistical results show that changes in cap rates are inversely correlated with future price appreciation or depreciation. When cap rates shift downward. properties tend to appreciate in future quarters, on average. And when cap rates shift upward, properties tend to depreciate in future quarters, on average. The analysis is bifurcated by asset type and market size. When analyzing this relation on an asset-class level, the predictive power of cap rate changes on future appreciation and depreciation is strongest in retail. Additionally, this relation is stronger in Primary CSAs than in Secondary CSAs. Astute investors should keep a close watch on the capital markets as they implement portfolio management strategies. While not to be utilized in isolation, these findings on momentum should be taken in context of a greater acquisition and disposition strategy. by Frank Kettler. S.M. in Real Estate Development 2019-03-01T19:55:24Z 2019-03-01T19:55:24Z 2018 2018 Thesis http://hdl.handle.net/1721.1/120653 1088412144 eng MIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission. http://dspace.mit.edu/handle/1721.1/7582 45 pages application/pdf Massachusetts Institute of Technology |
| spellingShingle | Center for Real Estate. Program in Real Estate Development. Kettler, Frank (Frank Nitsche) What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates |
| title | What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates |
| title_full | What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates |
| title_fullStr | What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates |
| title_full_unstemmed | What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates |
| title_short | What goes up ... continues to go up : momentum in commercial real estate forecasting price appreciation via cap rates |
| title_sort | what goes up continues to go up momentum in commercial real estate forecasting price appreciation via cap rates |
| topic | Center for Real Estate. Program in Real Estate Development. |
| url | http://hdl.handle.net/1721.1/120653 |
| work_keys_str_mv | AT kettlerfrankfranknitsche whatgoesupcontinuestogoupmomentumincommercialrealestateforecastingpriceappreciationviacaprates |