RT Journal Article SR Electronic T1 Do Different Price Points Exhibit Different Investment Risk and Return in Commercial Real Estate? JF The Journal of Portfolio Management FD Institutional Investor Journals SP 105 OP 119 DO 10.3905/jpm.2017.43.6.105 VO 43 IS 6 A1 David M. Geltner A1 Alex van de Minne YR 2017 UL https://pm-research.com/content/43/6/105.abstract AB Conventional real estate price indexes provide a single measure for the path of asset prices over time (controlling for the quality of the representative or average property). Properties could, however, have different price dynamics based on the price segment in which they are traded. On the demand side, investors at different price points are differentiated by the amount of capital they have at their disposal and the type and source of financing. Smaller, private investors cluster at lower price points, whereas large institutions dominate the high price points. On the supply side, properties at different price points may serve different space markets with different types of tenants and may reflect different supply elasticity and land/structure value ratios. In this article, the authors use an unconventional approach, quantile regression, to estimate price indexes for different price segments in commercial real estate. Their results show that there are indeed large differences in price dynamics for different price points. These differences are suggestive of a lack of integration in the property asset market because the authors find apparent differences in the risk–return relationship. Lower-price-point properties exhibit less risk (in the form of volatility and cycle amplitude) but have no evidence of lower total returns. Lower-price-point properties also show greater momentum and thus greater predictability.TOPIC: Real estate