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Econometric Integration of Real Estate's Space and Capital Markets

Author: Timothy W. Viezer

Start Page: 503
End Page: 519
Volume: 18
Issue Number: 3
Year: 1999
Publication: Journal of Real Estate Research

Abstract: This study presents the Real Estate Econometric Forecast Model (REEFM), a pooled recursive system that integrates real estate’s space and capital markets. The REEFM is empirically estimated using data from fifty-one metropolitan office markets over the years 1985–96. The core of the REEFM consists of six stochastic equations for each property type. These six equations predict occupancy, real rents, capitalization rates, market value per square foot, net change in stock and real construction costs. The model also produces synthetic investment return series called Implied Market Returns that can be used to guide investment acquisition activity and assess the representativeness of other investment returns.

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