Fall/Winter 1992, Vol 17, No 2

Abstract: Real estate performance indices – notably the Russell/NCREIF – show income yields below the capitalization rates seen on current acquisitions. Does this mean that the properties are overvalued? Are the property acquisition returns based upon unsustainable, above market rent assumptions? What accounts for the disparity between the indicated portfolio yields and expected acquisition returns? To resolve these questions, this article reviews the traditional appraisal lag by examining properties sold from the Russell NCREIF Index and reconciling current ‘market’ acquisition capitalization rates with reported income yields.