Determination of Effective Capitalization Rates for Commercial Real Estate

E A Kubina,M A Bareicheva,N R Stepanova

doi:10.1088/1755-1315/666/6/062121

E A Kubina, M A Bareicheva + Show 1 more

Open Access

https://doi.org/10.1088/1755-1315/666/6/062121

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Abstract

For effective management of the commercial real estate, it is important to determine the capitalization rate. For this purpose, the revenue approach is used. In order for the result to be real for each segment of commercial real estate, it is important to determine the capitalization rates as accurately as possible. This article discusses two methods for calculating the capitalization rate. For the purity of the experiment, the same commercial real estate items in three different segments were used for both methods. This is an office, retail and industrial warehouse. Based on the comparison, one of the two options is selected, which is optimal and detailed. All calculations were made on the example of the city of Yekaterinburg. The time period is six months. Based on the experience gained, the authors suggest using the data obtained for further calculation of the capitalization rate. For clarity of the results obtained, graphs of the dependence of values were compiled. To calculate this indicator, the authors formed a sample of 26 pairs of offers that were simultaneously in the status of full sale and lease. The article presents a constructive and consistent analysis of the capitalization rate calculation using various methods, as well as informative conclusions. We hope that this method will be useful for practical evaluation.

Highlights

Every entrepreneur faces the problem of choosing a commercial space
In order for the result to be real for each segment of commercial real estate, it is important to determine the capitalization rates as accurately as possible
Based on the experience gained, the authors suggest using the data obtained for further calculation of the capitalization rate

Summary

Introduction

Every entrepreneur faces the problem of choosing a commercial space. He was faced with a few questions. 2. Problem statement The calculated indicators are used to determine the best option when choosing between renting a commercial space or buying it [2,3]. The novelty lies in the fact that for the city of Yekaterinburg (on the example of which the authors consider the differences in the use of two calculation methods) there are no effective indicators of the capitalization rate. The authors set the following tasks: 1) Analyze the calculation algorithm for two methods of finding the capitalization rate of commercial real estate; 2) Create a sample of 26 pairs of sale-lease offers for each segment of commercial real estate in Yekaterinburg; 3) perform the necessary calculations and create scatter diagrams; 4) Compare the resulting capitalization rate indicators and choose the most accurate one; 5) draw Meaningful conclusions. The trends put forward by experts based on the results of previous years and the analysis of investments in this industry are analyzed [4,5,6,7]

Research of the group of pairs method

Industrial 2000

Conclusions