Price Signals and Uncertainty in Commercial Real Estate Transactions

Matthew Cypher; S. Mc Kay Price; Spenser Robinson; Michael J. Seiler

doi:10.1007/s11146-017-9617-0

Price Signals and Uncertainty in Commercial Real Estate Transactions

Matthew Cypher, S. Mc Kay Price, Spenser Robinson, Michael J. Seiler

Finance And Law

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

Abstract

Using a sample of CCIM designees and candidates in an experimental setting, this study examines the impact of broker signaling in commercial real estate transactions. It also explores the effect of certainty of closure in commercial real estate transactions. Findings suggest brokers are able to influence transaction pricing. Moreover, detailed analysis reveals that when a signal is above a reference point implied by previous transactions, the strength of the signal matters; privately communicated signals from reliable sources have significantly greater impact than signals which are made widely available. Additionally, we find an approximately 10% premium in transactions with lower certainty of closure than one with high certainty. The latter result varies by transactional participant type; owner/developers require a larger premium than institutional sellers.

Original language	English
Pages (from-to)	246-263
Number of pages	18
Journal	Journal of Real Estate Finance and Economics
Volume	57
Issue number	2
DOIs	https://doi.org/10.1007/s11146-017-9617-0
State	Published - Aug 1 2018

Keywords

Broker
Commercial Real Estate
Execution Risk
Signaling
Uncertainty

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abstract = "Using a sample of CCIM designees and candidates in an experimental setting, this study examines the impact of broker signaling in commercial real estate transactions. It also explores the effect of certainty of closure in commercial real estate transactions. Findings suggest brokers are able to influence transaction pricing. Moreover, detailed analysis reveals that when a signal is above a reference point implied by previous transactions, the strength of the signal matters; privately communicated signals from reliable sources have significantly greater impact than signals which are made widely available. Additionally, we find an approximately 10% premium in transactions with lower certainty of closure than one with high certainty. The latter result varies by transactional participant type; owner/developers require a larger premium than institutional sellers.",

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AB - Using a sample of CCIM designees and candidates in an experimental setting, this study examines the impact of broker signaling in commercial real estate transactions. It also explores the effect of certainty of closure in commercial real estate transactions. Findings suggest brokers are able to influence transaction pricing. Moreover, detailed analysis reveals that when a signal is above a reference point implied by previous transactions, the strength of the signal matters; privately communicated signals from reliable sources have significantly greater impact than signals which are made widely available. Additionally, we find an approximately 10% premium in transactions with lower certainty of closure than one with high certainty. The latter result varies by transactional participant type; owner/developers require a larger premium than institutional sellers.

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Price Signals and Uncertainty in Commercial Real Estate Transactions

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