Economic forces shaping investment in office markets

Abstract

Divides investors into two types: tax‐paying investors and tax‐exempt pension funds. Tax‐paying investors will worry about the expected after‐tax variance of return on real estate, while tax‐exempt pension funds will worry about the expected pre‐tax variance of return. States this is an important observation because the after‐tax variance of return is apt to be significantly less than the pre‐tax variance of return (particularly during the early 1980s when tax‐paying investors were able to use real estate losses to offset other income). The model developed by the author suggests this reduced expected after‐tax variance of return helps explain the seemingly irrational construction that took place in US office markets during the 1980s.

Citation

Shilling, J.D. (1997), "Economic forces shaping investment in office markets", Journal of Property Finance, Vol. 8 No. 4, pp. 283-302. https://doi.org/10.1108/09588689710190324