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Commercial Real Estate Evaluation: The Real Options Approach

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Innovative Mobile and Internet Services in Ubiquitous Computing (IMIS 2018)

Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 773))

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Abstract

Investors of commercial real estate tend to sell their investment property when its price rises to a level high enough to realize capital gains, and they also consider selling the investment when its price declines to a level that triggers stop-loss selling. We assume that the investors of commercial real estate have embedded call and put options in their investment when they are engaged in the transaction of commercial real estate property. By using the real options model with given risk parameters, we derive the valuation model of commercial real estate. The model can provide more insights into the evaluation of commercial real estates by considering risk factors like vacancy rate, interest and tax rate, and transaction cost. Based on this theoretical model, further analysis can also be conducted according to the different classes of commercial real estates.

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Author information

Authors and Affiliations

  1. Department of Finance, Asia University, No. 500, Liu-Feng Road, Wu-Feng District, Taichung, Taiwan

    Shyh-Weir Tzang, Chun-Ping Chang & Yung-Shun Tsai

  2. Department of Money and Banking, National Kaohsiung First University of Science and Technology, Kaohsiung, Taiwan

    Chih-Hsing Hung

Authors
  1. Shyh-Weir Tzang
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  2. Chih-Hsing Hung
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  3. Chun-Ping Chang
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  4. Yung-Shun Tsai
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Corresponding author

Correspondence to Yung-Shun Tsai .

Editor information

Editors and Affiliations

  1. Department of Information and Communication Engineering, Fukuoka Institute of Technology, Fukuoka, Japan

    Leonard Barolli

  2. Technical University of Catalonia, Barcelona, Spain

    Fatos Xhafa

  3. Department of Computer Science, COMSATS Institute of Information Technology, Islamabad, Pakistan

    Nadeem Javaid

  4. Rissho University, Tokyo, Japan

    Tomoya Enokido

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Tzang, SW., Hung, CH., Chang, CP., Tsai, YS. (2019). Commercial Real Estate Evaluation: The Real Options Approach. In: Barolli, L., Xhafa, F., Javaid, N., Enokido, T. (eds) Innovative Mobile and Internet Services in Ubiquitous Computing. IMIS 2018. Advances in Intelligent Systems and Computing, vol 773. Springer, Cham. https://doi.org/10.1007/978-3-319-93554-6_79

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