An Approach to Industrial Real Estate Market Segmentation and Valuation Using the Arbitrage Pricing Paradigm
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Grissom, Terry V.; Hartzell, David J.; Liu, Crocker H.
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.
industrial real estate market; segmentation; valuation; Arbitrage Pricing Theory; APT
Required Publisher Statement: © Wiley. Final version published as: Grissom, T. V., Hartzell, D. J., & Liu, C. H. (1987). An approach to industrial real estate market segmentation and valuation using the arbitrage pricing paradigm. Real Estate Economics, 15(3), 199-219. DOI: 10.1111/1540-6229.00428. Reprinted with permission. All rights reserved.