John McGee

Document Type

Honors Thesis

Abstract

The purpose of this research paper is to validate the claims made by Jim Clayton, David C. Ling and Andy Naranjo in their paper Commercial Real Estate Valuation: Fundamentals Versus Investor Sentiment, which examines the effect of investor sentiment on the valuation of commercial real estate, for example how two different investors can underwrite the same commercial real estate asset but arrive at different results based their individual sentiments regarding the expectation of the investor for that given asset or the risk that the investor has towards a given asset class or property type. To validate the claim that investor sentiment does affect the value of commercial real estate, I conducted a regression analysis of local capitalization rates (used to represent quantitative variables) and the University of Michigan: Consumer Sentiment© Index value (used to describe qualitative variables) to see how much each variable affected or predicted market rents within the specific submarket, and property class in the DFW area that I chose. This project used the specific submarket of DFW Airport/Grapevine, and the property class of warehouse/industrial within the Dallas-Fort Worth Metroplex. I concluded based on regression analysis of the consumer sentiment index and local capitalization rates that investor sentiment should be taken into account when evaluating commercial real estate. The regression analysis provided a P-value of .094 for the sentiment variable and a .97 Pvalue for the capitalization variable showing that the sentiment variable was more significant regarding P-values, demonstrating that there is a relationship between investor sentiment and property valueations. Additionally, this indicates that investor sentiment should be taken into account when valuing commercial real estate, as it can influence the value of the asset or property.

Publication Date

5-1-2017

Language

English

Download

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.