Estimation Of NOI Growth, Volatility And Clustering By MSA

Overview: In this paper, the creation of metropolitan and property type indices of NOI is examined using repeat sales data from NCREIF. The advantage of creating such indices is that it allows investors and other market participants to understand the general trend in NOI that is often not observable (such as with commercial mortgage-backed securities and REITs). In addition, the clustering of properties revealed that with many metropolitan areas, there may e substantial clustering (or commonality) within a single property type, but not for another. For example, two metropolitan economies may seem different because of the element of distance (space) between the areas, but the residential property market has commonality in terms of NOI, and the office market has a completely different historical return. The clustering analysis indicates MSA regions that are clustered by NOI performance. The findings from this analysis assist investors, and property managers, in identifying the composition of locations that will reduce risk to their portfolios by considering how the dominant economic sectors influence localized performance, how locations are connected through similar economic structures.

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Format: PDF | Size: 371KB | Date: Feb 2003 | Pages: 38