Commonalities across commercial real estate indexes

This study analyzes the long-run relationships and short-run dynamics of four commercial real estate indexes (NAREIT, NCREIF, CoStar and Green Street Advisors) to evaluate whether evidence of commonalities can be found across these indexes or whether they exhibit divergent behaviour over time. Evaluating a period beginning January 1998 and ending in December 2016, the findings indicate that each CRE index can be characterized as stochastic data generating processes. Further, evidence of statistically significant structural break is observed within each series, approximately towards the latter part of 2008. Multivariate analyses indicate that each index is integrated with one another and with economic indicators over the long-run. Next, macroeconomic shocks are imposed on each CRE index before and after the 2007-2009 housing crisis to analyse their behaviour over the short-run. Results indicate the reaction of each index from shocks to key economic indicators is similar although the NAREIT index reacts most vigorously while the NCREIF index responds least intensely. Finally, CRE shocks are imposed on each of the macro-economic indicators to evaluate whether the CRE indexes have a reciprocal impact. The findings suggest that each of the CRE indexes has a more pronounced effect on the economic indicators with the NAREIT index inducing the strongest response.