Karlson, Stephen H.
B.S. (Bachelor of Science)
Department of Economics
I analyze the viability of planned construction as a leading indicator to commercial price appreciation through application of fundamental economic principles, and linear regression. My experience as a commercial real estate appraiser has brought me to suspect that the commercial real estate market is a thinly traded market where information asymmetries are common, and exploitation opportunities may exist. The potential leading indicators that I analyze are the Architectural Billing Index (ABI), building permits, housing starts, and the combination of all three. The regression analysis results in strong correlations between each leading indicator and commercial appreciation. The strong correlations lead me to believe that the current commercial real estate market is not a perfectly competitive market, and arbitrage opportunities may currently exist for investors who are able to analyze the market using leading indicators, and quickly enter or exit the market.
Frayn, Scott, "Planned construction as a leading indicator of commercial real estate price appreciation" (2010). Honors Capstones. 895.
Northern Illinois University
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