LOS ANGELES—Rent growth may be grosslyoverestimated, according to a new study from XudongAn, a visiting scholar at the UCLA'sZiman Center for Real Estate, GlobeSt.com reportsexclusively. 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 rentgrowth and fluctuations to produce more accurate results.

Current national rent growth is estimated at 3%, but An tellsGlobeSt.com that is an inaccurate reading of the data. “Theconventional estimation of commercial rent is an overestimation,”An says. “We discovered that the rental growth is much lower than3%; it's closer to 1%. This means that owners, investors andmanagers are over-estimating the income from their property and thevalue of the property. They need to look carefully at the actualincome growth of their property.”

The new method developed by the report looks at the actual rentsin Q2 2001 and Q2 2010 of 9,066 properties owned by theNational Council of Real Estate InvestmentFiduciaries. During this nine-year period, the marketexperienced a full growth cycle, making it an ideal time to showtrue rent growth. Using this method, the report authors, whoinclude Yongheng Deng, National Universityof Singapore, Jeffrey D. Fisher,Indiana University and Maggie RongHu, University of New South Wales,estimate a rent growth of 1% when all property types are combined.In addition to showing that rental growth is below the standardestimate, the report also shows that rental growth is much moreerratic than typically perceived.