Real Rates of Return: Does Real Estate Make Sense?

Fall/Winter 1992, Vol 17, No 2

Abstract: In a stagnant economy, there is limited comparable information to support assumptions and draw meaningful conclusions. Therefore, analysts must go beyond transactional data and examine Real Rates of Return for real estate as measured against other investments. Real estate value for investment grade properties represents a reasonable estimate of anticipated cash flow’s discounted at a rate which fairly compensates for the ‘risk premium’. This article focuses on investor motivations and the need for analysts to use alternative tools and not just wait for transactions.