Determination of Effective Capitalization Rates for Commercial Real Estate

Abstract

For effective management of the commercial real estate, it is important to determine the capitalization rate. For this purpose, the revenue approach is used. In order for the result to be real for each segment of commercial real estate, it is important to determine the capitalization rates as accurately as possible. This article discusses two methods for calculating the capitalization rate. For the purity of the experiment, the same commercial real estate items in three different segments were used for both methods. This is an office, retail and industrial warehouse. Based on the comparison, one of the two options is selected, which is optimal and detailed. All calculations were made on the example of the city of Yekaterinburg. The time period is six months. Based on the experience gained, the authors suggest using the data obtained for further calculation of the capitalization rate. For clarity of the results obtained, graphs of the dependence of values were compiled. To calculate this indicator, the authors formed a sample of 26 pairs of offers that were simultaneously in the status of full sale and lease. The article presents a constructive and consistent analysis of the capitalization rate calculation using various methods, as well as informative conclusions. We hope that this method will be useful for practical evaluation.

Financial literacy decision tree game: A system development exposé

“…The basis of the game concept is the ability to process a life experience, adapt to new conditions with budget adjustments, make impactful decisions and readjust the budget, while successfully responding to existing game rules, which implies modification, here and now in a limited time. A similar methodology was used by Kubina et al (2021), who designed a budget game model with illustrative elements in real-life scenarios; players had to adjust and make changes according to the changing conditions in a limited time. The advantage of gaming is experiencing the impact of a decision or reaction, copying a life event that adds to life experience.…”

“…Therefore, system development was suitable in this study as it efficiently presented an optimal mode to include various elements, descriptions, and rationale. In developing the game, autonomy in self-determination theory was applied where the students must manage their finances and budgeting decisions, as suggested by Kubina et al (2021).…”

“…Subsequently, the student has control over their personal finances and has to take responsibility for decisions. When a situation occurs, they can take ownership of it and consider available options (Kubina et al 2021). That way, they gain financial experience to help them make decisions in real life.…”