Rent Growth Overestimated, Study Shows

LOS ANGELES—Rent growth may be grossly overestimated, according to a new study from Xudong An, a visiting scholar at the UCLA‘s Ziman Center for Real Estate, GlobeSt.com reports exclusively. The study shows that the conventional “pro-forma” method of calculating rent growth actually inflates the results, but the authors developed a new method that tracks nationwide rent growth and fluctuations to produce more accurate results.

Current national rent growth is estimated at 3%, but An tells GlobeSt.com that is an inaccurate reading of the data. “The conventional estimation of commercial rent is an overestimation,” An says. “We discovered that the rental growth is much lower than 3%; it’s closer to 1%. This means that owners, investors and managers are over-estimating the income from their property and the value of the property. They need to look carefully at the actual income growth of their property.”