Determining the Rental Rate on Commercial Real Estate Leases (2008)
AuthorsBoyle, G., Quigley, N., Guthrie, G.show all
Although the theoretical framework for determining equilibrium rental rates on commercial land is well-established, applying this framework in practice is difficult because of its dependence on unobservable parameters such as land growth and discount rates. We show how this problem can be overcome by a straightforward application of nonlinear regression methods to actual market transactions involving leased commercial land. This approach avoids the need to invoke ad-hoc parameter values, automatically incorporates any land liquidity premium into rental rates, and ensures that rental, growth, and discount rates are all estimated within a single analytically-consistent framework.
CitationG Boyle, G Guthrie and N Quigley (2008) Determining the Rental Rate on Commercial Real Estate Leases. Palmerston North, New Zealand: 2008 New Zealand Finance Colloquium, 14-15 Feb 2008.
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