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An Approach to Industrial Real Estate Market Segmentation and Valuation Using the Arbitrage Pricing Paradigm
Author(s) -
Grissom Terry V.,
Hartzell David,
Liu Crocker H.
Publication year - 1987
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00428
Subject(s) - real estate , valuation (finance) , capitalization rate , economics , risk–return spectrum , arbitrage , cost approach , perspective (graphical) , financial economics , market segmentation , corporate real estate , real estate investment trust , microeconomics , finance , computer science , artificial intelligence , portfolio
This paper investigates whether a segmented market exists for industrial real estate with respect to risk and return characteristics. Given the existence of industrial market segmentation, the next issue examined is whether a submarket perspective or an integrated real estate market orientation provides better rate of return estimates for individual industrial properties using an Arbitrage Pricing Theory (APT) framework. The results support the existence of regional markets for industrial real estate. A submarket orientation rather than an integrated perspective is also found more appropriate in predicting returns on industrial real estate.