An Approach to Industrial Real Estate Market Segmentation and Valuation Using the Arbitrage Pricing Paradigm |
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| Authors: | Terry V. Grissom David Hartzell Crocker H. Liu |
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| Affiliation: | Researcher, Texas Real Estate Research Center, Texas A&M University, College Station, Texas 77843.;Assistant Professor, Department of Finance, University of Texas at Austin, Austin, Texas 78712-1179. On leave to Salomon Brothers, Inc.;Ph.D. Candidate in Real Estate and Finance, Department of Finance, University of Texas at Austin, Austin, Texas 78712-1179. |
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| Abstract: | 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. |
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