Income and Appraised Values: A Reexamination of the FRC Returns Data

This paper compares the income of those office properties that are included in the FRC index, with the appraised values that are used to determine the index's appreciation component. We find that the appraised value of the portfolio was a constant multiple of its current income, over the 1978–1988 period. This seems at odds with what modern valuation theory would suggest, since both nominal interest rates and several measures of real rates varied widely over the sample. An alternate interpretation of our results is that the appraised values were based on a set of expectations about future income growth, that turned out over the period, to be continually at odds with respect to actual income.     

Asymmetric stock market volatility and the cyclical behavior of expected returns

Recent explanations of aggregate stock market fluctuations suggest that countercyclical stock market volatility is consistent with rational asset evaluations. In this paper, I develop a framework to study the causes of countercyclical stock market volatility. I find that countercyclical risk premia do not imply countercyclical return volatility. Instead, countercyclical stock volatility occurs if risk premia increase more in bad times than they decrease in good times, thereby inducing price–dividend ratios to fluctuate more in bad times than in good. The business cycle asymmetry in the investors’ attitude toward discounting future cash flows plays a novel and critical role in many rational explanations of asset price fluctuations.     

Do House Price Levels Anticipate Subsequent Price Changes within Metropolitan Areas?

This research examines the relationship between hedonically controlled housing price levels and subsequent changes in those prices across locations within MSAs. Are areas with a high price relative to an “imputed rent” paying for higher appreciation? In an efficient market (e.g., Gordon Growth Model), as fundamentals (impute rent) differ across locations and change over time, anticipation of these should generate a positive correlation between (residual) price levels and subsequent price changes. We undertake these tests in four different MSAs using a panel of repeat‐sale house price indices that have been scaled to price levels with the hedonic attributes of the house and ZIP code. In three markets we find that identical houses in higher priced ZIP codes subsequently appreciate faster. In one market we find that there is little statistical difference.     

100 Years of Commercial Real Estate Prices in Manhattan

This article is able to put together a database of 86 repeat-sales transactions for office properties in lower and midtown Manhattan spanning the years from 1899 to 1999. Using this very limited database, decade-interval changes in real property prices are estimated—with varying degrees of precision. Our conclusions are two fold. First, adjusting for inflation, commercial office property values were 30% lower in 1999 than they were in 1899. Second, within any decade values often rise and fall by 20–50% in real terms. With these results, the long-term historic return to New York commercial property must mostly comprise yield with capital gains limited to general inflation. Other historical studies consistent with this conclusion are reviewed.     

On the optimal distribution of income among cities

In a competitive land market, different consumers will bid differing amounts to be located at one or another points in space. This article demonstrates that consumers fare better by competing in land markets where other competitors have different bid structures than they. Since income has a strong effect on one's bidding, the paper formally proves that poor consumers would, ceteris paribus, prefer to locate in cities with rich consumers and vice versa. With respect to the market for urban land, the inference is that cities heterogeneous in income are preferred by all to homogeneous ones.     

Zooming-in zooming-out: a novel method to scale up local innovations and sustainable technologies

Based on two case studies from Bangladesh and Benin, the role of video in scaling up sustainable rice technologies is assessed. Both process and outcomes of participatory research increased the effectiveness of educational videos. At the same time, during the production of the videos researchers and development workers learnt about local innovations and changed their attitude towards working with farmers. To increase impact, learning topics should have a regional relevance. Hence a novel method called zooming-in zooming-out is presented. It starts with a broad stakeholder consultation to define regional issues. Only then are communities approached to get a better feel about their ideas, their innovations and the words they use in relation to the chosen topic (zooming-in). Key learning needs are defined and videos are produced in close consultation with the end-users. Consequently, while showing the draft videos to more villages (zooming-out), more insights are gathered about the innovations and their socio-cultural context, and further adjustments made. Based on a few well-selected local innovations, and merged with scientific knowledge, these videos were able to explain underlying biological and physical principles. The more these principles resonated with what farmers already knew and did, the more video became useful as a stand-alone method. Facilitation increased adoption of sustainable technologies, but was not always a prerequisiste.     

Percentage Rent in Retail Leasing: The Alignment of Landlord–Tenant Interests

Only retail tenants pay their landlord a percentage of revenue in addition to the traditional fixed rent. The latter has often been shown to vary widely across stores–inverse to the sales externalities generated by the store. This paper demonstrates that revenue percentages vary widely as well, and positively with fixed rent (sales externalities). It is then argued that existing theoretical explanations for percentage rent (involving generic risk sharing and tenant effort issues) are not specific to the retail sector and apply to all tenant–landlord relationships. Instead, a model is proposed where percentage rent gives the correct incentive to landlords–rather than to tenants. In this model, percentage rent ensures that with sales externalities, landlords do not act opportunistically and always have the interest of existing tenants in mind when expanding, altering or reletting space in a shopping center.     

The Cyclic Behavior of the Greater London Office Market

This paper applies structural econometric methodology to estimating and forecasting the greater London office market. We assemble a time series covering the 1970–1995 period and estimate equations for net space absorption, movements in rents, and new building orders. Together with two identities, calculating the stock and vacancy, these form a complete model. We estimate a generally inelastic supply and demand relationship that yields a dynamically stable system. Without unanticipated economic shocks, the market is noncyclic. Therefore the building boom of the 1980s largely is delayed response to the huge growth in service jobs that occurred over that period.