| 요약2 |
Capitalization rate (cap rate) is used not only as a rule-of-thumb measure of investment merits but also as part of sophisticated discounted cash flow analyses in the context of real estate appraisal, and investment and financial analyses. It has increasingly gained acceptance among Korean real estate professionals since the 1997 currency crisis and market opening. Nonetheless, the meaning of the measure, its proper usage, and its determinants have not been studied for lack of data and theoretical understanding. This paper intends to fill the gap by presenting the theoretical structure behind the cap rate, and by identifying determinants of the measure in Seoul office market. Actual transaction data was collected for period between 2000 and 2006, and regression models were run with independent variables based on theoretical discussions. Our data indicates that the cap rate for Seoul office market has declined from around 10% to 6% over the 6-year period. The regressions results show that macroeconomic factors and investment purpose variables, rather than building characteristics, are major determinants of the cap rate. Especially, interest rate and inflation rate have positive effects on the cap rate. |