TY  - JOUR
AU  - Hendershott,Patric H.
TI  - Rental Adjustment & Valuation of Real Estate in Overbuilt Markets:      Fundamental vs. Reported Office Market Values in Sydney Australia
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4775
PY  - 1994
Y2  - June 1994
UR  - http://www.nber.org/papers/w4775
L1  - http://www.nber.org/papers/w4775.pdf
N1  - Author contact info:
Patric H. Hendershott
Fisher Hall
Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 218/963-1393
Fax: 218/963-9484
E-Mail: hendershott.2@osu.edu
AB  - Real estate markets are periodically plagued by excess supply, rent concessions and few arms-length transactions.  During such periods, valuation is problematic.  The model presented here requires the forecasts of future vacancy rates, and equilibrium and actual rental rates.  Vacancy rate forecasts of market participants are obtained, the equilibrium rental rate is specified as the cost of capital, and a rental adjustment equation is estimated in which real effective Sydney office market rents are related to gaps between both natural and actual vacancy rates and equilibrium and actual real effective rental rates. Value estimates (relative to replacement cost) for 1992, including that for above-market leases, are computed and the sensitivity to key assumptions is shown.  Value/replacement-cost calculations are then made for the entire 1985-92 period and contrasted with comparable estimates implicit in data published by BOMA and JLW, two prominent Australian real estate sources.  Lastly, the ratios of real effective rents to equilibrium rents and value to replacement cost are projected for the 1993-2006 period.
ER  -