Conference Agenda

Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).

Please note that all times are shown in the time zone of the conference. The current conference time is: 13th Aug 2022, 09:50:17am IST

Session Overview
Valuing CRE
Thursday, 07/July/2022:
11:15am - 1:00pm

Session Chair: Marc Francke, University of Amsterdam, Netherlands, The
Location: Room C

Room in the Arts Building, Trinity College Dublin. Exact details to be confirmed by May 31

External Resource:
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Are Multifamily Properties Priced Relatively Better in Secondary and Tertiary Markets? Causes and Implications for Renters

Fratantoni, Mike; Woodwell, Jamie

MBA, United States of America;

Utilizing data for metro-level capitalization rates for multifamily and office properties, this analysis identifies the key factors which influence differences in cap rates during the period 2009 to 2019, across property types within a market, and across markets for similar property types. For most property types, risk acceptance/avoidance appears to be an important factor in cap rate variations — with smaller, less liquid markets requiring cap rate premiums relative to larger, more active markets. A fundamental question we ask is why the cap rate gradient across metro markets is flatter for multifamily properties compared to office properties. Our analysis utilizes pooled time series and cross-sectional data at the metro level with controls for economic variables, capital flows and measures of relative liquidity, and other factors that could influence these relative cap rates across markets and over time. After describing the economic factors that are predictors of cap rates across markets, the analysis then examines whether cross-border capital flows and GSE acquisitions of multifamily loans have an impact on multifamily cap rates, and whether these factors could explain the differential cap rate gradients for multifamily and office properties.

The Agglomerative Effects of Neighborhood and Building Specialization on Office Values

Liu, Crocker H.1; Zheng, Chen2; Zhu, Bing3

1Cornell University; 2University of Reading; 3Technical University of Munich;

We investigate how horizontal (neighborhood) and vertical (tenants) agglomeration impacts the value of office buildings. We find that industry specialization of a building’s 5-digit zip code neighborhood and the extent to which a building is specialized by tenants within the same industry leads to a significantly higher rental rate and transaction price. By linking the within-building industry composition to its neighborhood industries, we find that spillovers are likely to be the most important attribute to the agglomeration gains in office building performance. We find that the agglomeration gains are also recognized by the stock market: REITs’ experience positive (negative) abnormal returns when acquiring (disposing) a building with higher tenant industry concentration or neighborhood industry specialization. Our findings suggest that agglomeration economies are operative at the neighborhood level as well as within individual buildings. Commercial rents reflect horizontal and vertical agglomeration gains which can in turn be used as proxies for agglomeration economies.

Work From Home and the Office Real Estate Apocalypse

Gupta, Arpit2; Mittal, Vrinda1; Van Nieuwerburgh, Stijn1

1Columbia University Graduate School of Business, United States of America; 2New York University Stern school of Business, united States of America;

We study the impact of remote work on the commercial office sector. We document large shifts in lease revenues, office occupancy, lease renewal rates, lease durations, and market rents as firms shifted to remote work in the wake of the covid-19 pandemic. We show that the pandemic has had large effects on both current and expected future cash flows for office buildings. Remote work also changes the risk premium on office real estate. We revalue the stock of U.S. commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 14% decline in office values, or about $600 billion in value destruction. These valuation changes have repercussions for local public finances and financial sector stability.

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