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Research Areas
Research Areas
Real Estate Economics, Asset Pricing, Investments, Macroeconomics, Sustainability, Japanese Economy
Working Papers
Working Papers
Measuring Expectations in Real Estate Markets from Long-Term Lease Contracts (2025, with M. Takahashi)
Abstract: This paper develops a novel methodology to extract rent growth expectations from long-term commercial real estate lease contracts using geometric Brownian motion modeling. We analyze lease data for office, industrial, and retail properties across major US markets spanning approximately 20 years. Our approach derives rent growth expectations under both physical and risk-neutral probability measures, enabling the calculation of market-specific risk premiums embedded in lease pricing. Our findings reveal several key insights. First, spot rents exhibit substantially higher volatility than conventional Producer Price Index measures suggest, with particularly pronounced fluctuations during the Global Financial Crisis and COVID-19 pandemic. Second, property types show divergent post-COVID trajectories: office rents declined while industrial rents increased sharply, with considerable variation across metropolitan areas. Third, the term structure of rent growth expectations typically exhibits an upward slope, and risk premiums vary markedly by both property type and geographic location. This methodology addresses limitations in existing rent indices by providing more accurate measures of market expectations and location-specific risk premiums. The results offer valuable insights for real estate portfolio allocation, asset pricing, and investment decision-making in commercial property markets.The Dynamics of Residential Rents and the Natural Vacancy Period (2025, with H. Nishi, C. Shimizu)
Abstract: This study sheds light on the underutilization of owner-occupied housing by elderly households and examines the roles of bequest motives and inheritance taxes. A consumption choice model is developed to illustrate our conceptual framework and derive empirical hypotheses regarding underutilized housing. Data from Japanese households support these hypotheses and show that a bequest motive leads to the underutilization of housing through reduced mobility and increased renovation, even among working-age households. Housing underutilization is also associated with reduced short-term happiness, possibly because of suppressed consumption. These findings highlight the growing inefficiencies arising from the lumpy and inflexible nature of the housing stock under rapid demographic change and migration.What’s the Bottom Line? Central Bank Profits and Monetary Policy (with Spencer Yuan-Han Wang, 2024)
This study empirically examines the sources of profits for central banks and the relationship between monetary policy and central banks' profits. Case studies on the U.S. Federal Reserve, the Swiss National Bank, and the Reserve Bank of Australia demonstrate that policy rates and foreign exchange rates are crucial for central bank profits. We generalize this result for other central banks using balance sheets and income statements for 123 central banks between 1996 and 2023. Furthermore, this study reveals that central banks distort monetary policy to avoid realizing potential losses. We provide evidence that central banks worldwide put depreciation pressure on their local currency and undershoot their interest rate targets due to profit concerns. Abstract: This study demonstrates that, in the absence of significant tax distortions and information asymmetries between investors and insiders, firms actively issue equity to finance investment in productive capital in response to positive shocks to stock demand. We exploit a unique setting in which the Bank of Japan (BOJ), as part of its unconventional monetary policy, generates stock demand shocks by directly purchasing shares of real estate investment trusts (REITs). The BOJ intervenes following negative index returns at the end of the morning market, effectively providing put-option-like downside protection and reducing daily return volatility. At the monthly level, greater BOJ allocations to targeted REITs are associated with increased seasoned equity offerings (SEOs) and capital investment, particularly when idiosyncratic volatility declines. These findings support the market timing hypothesis and suggest that central bank can smooth out waves in SEOs and corporate investment by counter-cyclical price pressure. Abstract: This study quantifies the macroeconomic impact of population aging with a focus on large houses owned by elderly households for bequest motives, although younger generations may leave the inherited houses vacant. A quantitative overlapping generations model incorporates age-specific mortality rates and bequest motives to generate a hump-shaped age profile for consumption and an upward-sloping age profile for housing and savings. When calibrated to the Japanese economy, the model suggests that bequest-driven housing demand raises the output level but reduces consumption, the natural rate of interest, capital allocation to the goods sector, and housing affordability. These effects are more pronounced when households intend to bequeath housing rather than financial assets and when more houses become vacant upon inheritance.Stock Prices, Regional Housing Prices, and Aggregate Technology Shocks (2015).
Abstract: The correlation between stock and housing prices, which is critical for household asset allocations, varies widely by metropolitan area and country. A general equilibrium model demonstrates that an aggregate positive technology shock increases stock prices and housing demand but can decrease housing prices where land supply is elastic because stable future rents are discounted at higher interest rates. Using panel data of U.S. metropolitan areas and OECD countries, I find that the housing price response to TFP shocks as well as the stock-housing correlation are smaller and even negative where the housing supply is elastic. I also find that household equity investment is positively related to housing supply elasticity.Why Do Team Projects Progress Slowly? A Model Based on Strategic Uncertainty (2015).
Abstract: This paper analyzes the investment timing for team projects. Under demand uncertainty, it is valuable to maintain flexibility in future investment alternatives. However, one party's flexibility creates strategic uncertainty for another party, which causes the other party to choose a higher level of flexibility. This strategic complementarity leads to delays in investments in contrast to the case of accelerated investments for preemption. This strategic effect is also distinct from the free-rider problem because this study focuses on the second moment of payoffs. The model also provides a rational alternative to the status-quo bias in organizational decision-making.Estimating Consumption Substitution between Housing and Non-Housing Goods using Macro Data (with Davidoff, T., 2013).
Abstract: The static elasticity of substitution (SES) between housing and non-housing consumption is important not only in understanding housing demand, but also in asset pricing because housing consumption influences the marginal utility of numeraire consumption. Previous estimates of the elasticity are low when micro data are used but high when macro data are used. We use aggregate time-series data to estimate SES by allowing for non-homotheticity in preferences. We obtain lower estimates of SES ranging from 0.4 to 0.9 when we allow for non-homotheticity than when we maintain homotheticity assumption. Homotheticity is rejected in the way that consumption share of housing decreases as income grows and as income is derived more from employment than from investments. We also obtain low IES ranging from 0.05 to 0.14.Does the Law of One Price Hold in Heterogeneous Asset Markets? A Test Using the U.S. Commercial Real Estate Market (with Park, S., 2012).
Abstract: The law of one price is a common assumption in finance. Even for heterogeneous assets, the law holds at the level of factor prices. However, the law is sometimes violated when markets are segmented as a result of limits of arbitrage. We examine market segmentations across investor types for commercial real estate. We propose an elaborate procedure to test price discrepancies by distinguishing three types of market segmentation. We find strong evidence against the law of one price. First, transaction prices for comparable assets sometimes differ by investor type. Second, even if the average prices are not different, marginal factor prices sometimes differ by investor type. Third, when different investors operate in different domains of investments, the implied factor price function sometimes exhibits discontinuity. In particular, we obtain evidence for REIT price premia over corporate users, developers, and individual investors. Individual investors consistently pay lower prices except for multifamily. Our paper serves as a guide to judging whether one should include investor characteristics in a hedonic regression model.Selected Publications
Selected Publications
Real Estate Markets in Japan (forthcoming). In the Oxford Handbook of the Japanese Economy. Oxford University Press.
This chapter provides an overview of Japan's real estate market. It begins by discussing the bubble economy of the 1980s, a period characterized by rapid increases in real estate prices, and the subsequent economic stagnation known as the "lost two decades". It also examines the asset and rental markets separately, highlighting property supply, price information, securitization, strong tenant protections, demand shifts, and housing affordability. The chapter then examines the physical characteristics that affect real estate markets, including topography, earthquakes, and rapid depreciation of structures. Regulatory and fiscal policies also play an important role, with national zoning laws promoting housing affordability and favorable tax treatment encouraging investment in rental properties. Supply-side and demand-side housing policies are also discussed. Finally, the chapter discusses the importance of real estate in the macroeconomy. Rapid depreciation of structures affects the national saving rate, real estate as collateral for loans acts as a financial accelerator, and real estate is a focal point for the effects of population aging.Japanese Housing Market (2025). In the Oxford Research Encyclopedia of Economics and Finance. Oxford University Press. https://doi.org/10.1093/acrefore/9780190625979.013.920
The Japanese housing market presents a unique blend of characteristics shaped by geographical constraints, historical developments, and public policies. One of the most striking features of the Japanese housing market is its adaptation to the country's geographical constraints. With only 29% of its land area being habitable, Japan has developed a housing sector that revolves around compact and efficient use of space. This space limitation, coupled with the frequent occurrence of earthquakes, has necessitated the development of earthquake-resistant buildings and stringent regulations. However, technological advances have led to the rapid depreciation of housing structures, a hallmark of the Japanese market, resulting in early demolitions and a high volume of construction activity.The post-World War II era brought significant economic growth and societal changes in Japan, influencing the housing demands and styles. Urban migration, particularly towards major metropolitan areas such as Tokyo, has resulted in high demand for housing in urban areas. Despite being the world's largest metropolitan area, Tokyo still enjoys affordable housing compared to other major global cities. The affordability is attributed in part to public policies, such as liberal and transparent land use regulations that encourage construction activity. Fiscal programs based on a series of five-year housing plans, such as the provision of public and quasi-public housing and subsidies and tax incentives to developers, have also addressed housing shortages, particularly in urban areas.However, tax incentives and legal protections for tenants created unintended distortions in the supply of housing, leading to an abundant supply of small rental units while failing to address the shortage of larger rental units for families. In addition, an aging and shrinking population poses a significant challenge to housing stock management, even in major metropolitan areas. As the population declines many houses become vacant or underutilized. Despite these significant challenges, Japan’s approach to urban planning, building technology, and market regulation offers valuable insights.Beyond Traditional Metrics: Pioneering Approaches to Housing Inflation (with B. Ambrose, O. Rust, and I. Jelic, 2024, truflation.com)
This research paper addresses the differences and shortfalls in the methods used by the Personal Consumption Expenditure Price Index (PCE) and the Consumer Price Index (CPI) to calculate the inflation in the shelter category, and proposes an alternative metric that better reflects the real rate of inflation in this important category. The authors independently publish two sets of alternative inflation indexes: The Pennsylvania State University ACY Inflation Index by Ambrose and Yoshida and the Truflation Index by Rust and Jelic. We collaborate in this article to provide new insight into a better measurement of shelter inflation in the United States.Shelter makes up 42.4% and 32.9% of the CPI-U index and the PCE Price Index, according to their most recent figures of relative importance for the respective categories. While Truflation’s definition is different, housing is still a significant portion of Truflation’s real-time US CPI index at 23.2%. As such, it is incredibly important to ensure that this portion of the index is an accurate representation of the situation on the ground. Both the PCE and CPI indexes have shown continuous increases in the shelter category over the past few years, with the CPI reporting nearly four straight years of monthly increases in the price of shelter. Truflation’s housing index, however, has shown a gradual slowdown over the past year, from 6.29% year-over-year (YoY) at the end of March 2023 to 1.55% on July 7th, 2024. Moreover, the Penn State ACY Marginal Rent Index (MRI) has shown negative YoY growth between December 2022 and November 2023. Though a re-acceleration has been seen in Truflation housing prices and ACY MRI in the early months of 2024 and these indexes fail to reflect anything like the steady price increases in the CPI-U shelter index is showing over the last few years.This paper delves into the reasons for this discrepancy, the effect it has on the overall inflation figure, and the rationale for an improved housing metric that better reflects the state of the US housing market. By analyzing the composition of the PCE, CPI, ACY-MRI, and Truflation US indexes and reviewing their key differences, we present a comprehensive picture of the inflation measurement landscape and set the scene for the ensuing discussion regarding the shelter/housing index methodology.Abstract: This is the first comprehensive study on the age profile of new rents, average rents, operating expenses, net operating income, capital expenditure, and net cash flow for office properties in Tokyo. The Intrinsic Estimator method is employed to decompose the observed depreciation into two components: physical deterioration and functional obsolescence. There are four main findings. First, the rate of rental depreciation in Japan is low and explains less than half of the rate of depreciation of property prices, although it is higher in earlier years. Second, average rents exhibit nominal rigidity. Third, approximately half of the observed depreciation in new rents is due to physical deterioration as opposed to functional obsolescence, which is driven by changes in tenant preferences and advances in building technology. Last, operating expenses are independent of age, whereas capital expenditure increases in the first 20 years. Our study contributes to the literature by estimating depreciation rates for commercial real estate rents, costs, and cash flows, with new insights into the detailed age profile and sources of economic depreciation.Amazon is coming to town: Sequential information revelation in the housing market (with Y. Chen and S. Wilkof, 2023, Real Estate Economics)
Abstract: This study demonstrates that the housing market can incorporate information quickly instead of slowly over time, using Amazon's gradual revelation of its new headquarters locations in Virginia and New York. Spatial difference-in-differences analysis shows that housing prices near the Virginia headquarters exhibit 4.9% premia months before the decision, while price premia for New York reach 17.5% before the decision but disappear upon cancellation. The absence of significant effects on transaction volume, construction, or price premia for other finalist cities rules out the possibility of speculation. Overall, this study provides a counterpoint to the commonly held belief that the real estate market is always slow to respond to information about future demand shocks.The Impact of Bank of Japan’s Exchange-Traded Fund Purchases (with Hattori, T., 2022, Forthcoming, the Journal of Financial Stability)
The Bank of Japan (BOJ) enhanced its large-scale asset purchases in October 2010 by purchasing equity exchange-traded funds (ETFs). This study is the first to demonstrate that the BOJ provides downside protection for stock prices through the countercyclical purchase of ETFs. The BOJ responds to a large negative stock return during the overnight and morning periods, and submits purchase orders during lunchtime. Using the BOJ’s March 2020 announcement of doubling the annual purchase amount during the COVID-19 pandemic, this study also finds that the announcement effect is small and temporary. In contrast, the flow effect of the actual purchases is significant and increases. The BOJ’s counter-cyclical ETF purchase prevents equity risk premia from rising during an economic downturn.Yield Curve Control (with Takahiro Hattori, 2023, International Journal of Central Banking 19(5):403-438)
Abstract: This is one of the first studies that analyze the Bank of Japan's (BOJ) innovation in yield curve control since 2016. BOJ imposes yield caps by making its bond purchases endogenous to market yields through both fixed-amount and fixed-price (i.e., unlimited-amount) operations. Investors' JGB yield expectations converge across the entire yield curve under YCC, although 10-year LIBOR swap rates are not immediately affected by fixed-price JGB operations. Both long and short-term JGB yields become stationary and less volatile when the yield caps are binding, but they become non-stationary and volatile when negative market yields make the yield caps slack.Cash to Spend: IPO Wealth and House Prices (with Hartman-Glaser, B. and Thibodeau, M., 2022, Real Estate Economics).
Abstract: In this study, we empirically demonstrate the positive impact of initial public offerings (IPOs) on local house prices in California from 1993 to 2017. Using the spatial difference-in-differences approach, we test whether hedonic price indexes increase after IPO events more for the areas around IPO firms' headquarters. We use the IPO events of public filing, issuing, and lockup expiration to distinguish changes in shareholders' expected wealth, assessed wealth, and immediately available wealth, respectively. On filing and issuing dates, house prices increase more for markets that are closer to the headquarters of IPO firms. On lockup dates, house price changes are positively associated with listing-to-lockup returns. This result suggests that original shareholders change their housing demand when their wealth changes. We also use the San Francisco Bay as a natural barrier to commuting. Relative to the East Bay, house prices in San Francisco exhibit sustained increases in response to IPO filings and more temporary increases in response to the issuing and lockup expiration dates.Working paper: https://ssrn.com/abstract=3329651
Featured in The Wall Street Journal, Business Insider, San Francisco Chronicle, Marketplace.
Housing Rents and Inflation Rates (with Ambrose, B. W., & Coulson, N. E., 2022). Journal of Money, Credit and Banking, 12971.
Abstract: This paper develops a quality-adjusted measure of marginal housing rents using a monthly statistic of landlord net rental income. The Marginal Rent Index (MRI) exhibits deflation during recessions and leads the official rent index by seven months. The modified inflation rate based on MRI suggests that the annual official inflation rate was overestimated by 1.7 to 4.1% during the Great Recession but underestimated by 0.3 to 0.7% during the subsequent expansionary period.The Bank of Japan as a Real Estate Tycoon: Large-Scale REIT Purchases (with Hattori, T. 2022) in Handbook of Real Estate and Macroeconomics.
Abstract: This is the first study analyzing the Bank of Japan’s purchases of real estate investment trusts (REITs) that started in 2010 as part of enhanced unconventional monetary policy. The Bank purchases REIT shares after observing a significantly negative return over the previous night and during the morning market. The Bank continues purchases daily until the overnight and morning REIT returns become positive. This counter-cyclical behavior contributes to the objective of decreasing risk premia and stimulating spending. Our study sheds light on the unique program of a central bank’s equity purchases.Estimating Housing Rent Depreciation for Inflation Adjustments (with Lopez, L., 2022), Regional Science and Urban Economics 95, 103733
Abstract U.S. inflation measures, such as the Consumer Price Index, are adjusted for an aging-bias based on estimates of the average rent depreciation. This study analyzes the characteristics of rent depreciation using novel, market-based data on rental contracts in Las Vegas, NV. We find that the estimated annual depreciation rate for new properties is 0.9% for single-family residences and 1.5% for condominiums. The higher depreciation rate for condominiums is due to higher functional obsolescence instead of physical deterioration. Rent depreciation rates are lower for older and smaller structures and vary significantly across neighborhoods. Our results suggest that local inflation rates are biased downward where new and large units increased since the last update to the official rent depreciation estimates but upward where the housing stock became older. From an asset pricing perspective, failing to account for initially high depreciation results in an overvaluation of new properties and an undervaluation of old properties.Land scarcity, high construction volume, and distinctive leases characterize Japan’s rental housing markets (Brookings Institution Report, 2021)
The Japanese housing market is characterized by a large construction volume, rapid technological progress, fast depreciation of housing value, a thin secondary market, and low maintenance of existing properties. Legal and tax systems unintentionally encourage wealthy individuals to invest in studio apartments to rent out to young people living in urban areas. Thus, family housing is mainly available through ownership. The public sector played an important role in addressing housing shortages after World War II due to massive migration to large metropolitan areas. The public housing finance program encouraged homeownership, while public and quasi-public rental units provided shelter to low- and middle-income households. Roughly 36% of Japanese households rent their homes today. The biggest challenge is a mismatch between housing stock and demographics in a rapidly aging and shrinking society, exemplified by vacant housing units.The Economic Depreciation of Real Estate: Cross-Sectional Variations and Their Return Implications, 2020, Pacific-Basin Finance Journal 61: 101290.
Abstract: This study analyzes how real estate depreciates in economic value as it ages. The economic depreciation of real estate affects investment decisions by decreasing appreciation returns and increasing income returns. Data exhibit significant cross-sectional variation in depreciation rates for residential and commercial real estate for Japan and residential real estate for the U.S. The depreciation rate is larger if a property is commercial, newer, denser, located in a smaller city, more distant from the central business district, and in Japan. The depreciation rate of structures is approximately 6% for Japanese housing, 10% for Japanese commercial structures, and 1% for the U.S. housing. This study also proposes new methods to correct for survivorship biases. These results serve as essential inputs for the analysis of real estate investment, consumer choice of housing, sustainability, and the macroeconomy.Reassessing Taylor Rules Using Improved Housing Rent Data (with Ambrose, B. W., & Coulson, N. E., 2018). Journal of Macroeconomics 56, 243-257.
Abstract: There is a debate whether the federal funds rate deviated from the Taylor rule. We present evidence that standard inflation measures do not reflect the contemporaneous state of housing rents, which is a large part of consumption. Using a new housing rent index (RRI) developed by Ambrose et al. (2015), we compute the RRI-based Taylor rule for the period from 2000 to 2010. The modified Taylor rule indicates that seemingly large deviations are better understood as delays due to the stale information regarding housing rents. It also provides a justification for Quantitative Easing and a better alternative to other versions of Taylor rules.Energy Efficiency and Green Building Markets in Japan (with Junichiro Onishi and Chihiro Shimizu, 2017) in N. Edward Coulson, Cliff Lipscomb, and Yongsheng Wang (Eds.), Energy Efficiency and the Future of Real Estate Palgrave Macmillan. ISBN: 978-1-137-57445-9.
Abstract: This study presents a review of the extant studies on Japanese green buildings and a new empirical analysis of the relation between office rent, green building labels, and actual energy use. We provide evidence as to what causes the positive association between green building labels and office rents. We first show that sustainability related features of building are effective in reducing the actual consumption of electricity and water. After controlling for the effect of these observed sustainability features, we find that green labels have separate effects on the reduction of the consumption of electricity and water. Thus, various green features required by green building labels are effective in saving energy and water usage. However, green labels do not have a direct effect on office rents once we control for the effect of electricity and water usage. Thus, tenants pay a rent premium to green buildings not for a brand associated with green building labels but for material benefits of green buildings regarding lower costs of energy and water.Credit Rationing, Income Exaggeration, and Adverse Selection in the Mortgage Market (with Ambrose, B. W., & Conklin, J.). Journal of Finance, 71(6), 2637-2686. DOI #: 10.1111/jofi.12426.
Abstract: We examine the role of borrower concerns about future credit availability in mitigating the effects of adverse selection and income misrepresentation in the mortgage market. We show that the majority of additional risk associated with ``low-doc'' mortgages originated prior to the Great Recession was due to adverse selection on the part of borrowers who could verify income, but chose not to. We provide novel evidence that these borrowers were more likely to inflate or exaggerate their income. Our analysis suggests that recent regulations changes that have essentially eliminated the low-doc loan product would result in credit rationing against self-employed borrowers.Product Market Competition and Corporate Real Estate Investment under Demand Uncertainty (with Ambrose, B. W., & Diop, M.). Real Estate Economics, http://dx.doi.org/10.1111/1540-6229.12150.
Abstract: This paper theoretically and empirically analyzes the interactions among corporate real estate investment, product market competition, and firm risk. In our model, firms own strategic real estate or lease generic real estate. Our model predicts that strategic real estate ownership is positively correlated with industry concentration and negatively related to demand uncertainty. Also, firm risk is higher for firms with more strategic real estate operating in a more concentrated market. This prediction arises because smaller investments induce greater market competition, which effectively eliminates the right tail of the firm's profit distribution. We provide strong empirical support for our predictions. In particular, firm value is more volatile in less competitive markets for a given level of demand uncertainty.The Effects of Orientation and Elongation on the Price of the Homes in Central Pennsylvania (with Fadaei, S., Rahimi, S., & Iulo, L. D.). Proceedings from ICCCBE 2016. The International Society for Computing in Civil and Building Engineering.
The Repeat Rent Index (with Ambrose, B. W., & Coulson, N. E., 2015). Review of Economics and Statistics 97(5), 939-950 (second lead article).
Abstract: We employ a weighted repeat rent estimator to construct quarterly indexes that expand the professions ability to make cross-sectional comparisons of housing markets. Our analysis shows that (a) there is considerable heterogeneity in the behavior of rents across cities over the 2000-2010 decade, but the number of cities and years for which nominal rents fell is substantial; (b) rents fell in many cities following the onset of the housing crisis in 2007; and (c) the repeat rent and Bureau of Labor Statistics indexes differ due to sampling and construction methods.The Rent Term Premium for Cancellable Leases (with Seko, M., Sumita, K., 2015). Journal of Real Estate Finance and Economics. DOI: 10.1007/s11146-015-9528-x.
Abstract: This study analyzes the rent term premium for leases that can be cancelled by the lessee. We model the lessor? trade-off between leasing costs and the cost of cancellation options based on the recognition that many leases are cancellable by lessees, and lease markets involve significant transaction costs. We demonstrate that, regardless of the expected future rents, the rent term structure is upward-sloping when there is no leasing cost but U-shaped when the lessor faces moderate leasing costs. Residential leases in Japan, which are all cancellable by tenants, exhibit the term structure that is consistent with our calibrated model.The Effects of Multiple Green Factors on Condominium Prices (with Sugiura, A., 2015). Journal of Real Estate Finance and Economics, 50(3), 412-437.
Abstract: This paper analyzes the transaction prices of green buildings assessed on the basis of multiple green factors. Our theoretical model demonstrates that the initial green premium can be negative but becomes positive as the building ages if a green building has a higher life-cycle cost and a longer economic life. Our empirical analysis of green condominiums in Tokyo confirms this prediction. We additionally find that the longer-life design is associated with a price premium, but the use of renewable energy and recycled materials and water is associated with price discounts. The price discounts are interpreted as the capitalization of a greater life-cycle user cost.Architecture: A Missing Piece in Real-estate Studies of Sustainable Houses (with Shahrzad F. and L. Iuloa., 2015) Procedia Engineering, 118, 813-818.
Abstract: In the era of ecological and economic crisis, while the trend has drastically changed, most single-family houses in the United States are still built in a conventional way. The problem has roots in the fact that ecologically sustainable buildings are often initially more costly compared to ordinary ones. In a number of studies, lower life-cycle cost and longer economic life of sustainable buildings have been considered as a beneficial effect on the cost, having a positive impact in the real estate market of green residential properties. On the other hand, there has been research discussing the impact of architecture and architectural decisions on real estate and marketing of the buildings. Yet a lack of research investigating the importance of architecture in the marketplace of green buildings especially homes is evident.This study presents current literature and an analysis of the building appraisal process in different locations and mainly in the United States with special attention to the residential sector. The theoretical conclusion finds that architectural decisions can have a positive impact on the price of sustainable homes. This paper finally suggests direction for future research to be conducted in the interest of empirically proving this finding.On Demand: Cross-country Evidence from Commercial Real Estate Asset Markets (with Ott, S., Riddiough, T. J., Yi, H., 2008). International Real Estate Review, 11(1), 1-37.
Abstract: Using over 25 years of quarterly U.S. and Japanese time series data, this paper examines the determinants of demand for an important class of real assets: commercial real estate. We specify a structural model of market equilibrium that considers direct effects of real investment on built asset price. Our empirical findings are consistent across countries and produce several new results. First, we find that real investment exerts a significant positive direct effect on asset price, which in tum feeds back to impact investment decisions. Second, idiosyncratic risk is found to be strongly positively related to asset price, and to complement supply effects. Third, systematic risk is priced as expected, where the strength of the relation between asset price and systematic risk is found to be higher than in previous studies of capital asset prices. Fourth, lagged values of price determinants (of up to two years) are consistently important in real asset demand estimation. A1temative explanations for our findings are analyzed and discussed. Implications for asset pricing model specification and interpretation are also considered.
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