As every landlord knows, operating expenses (OPEX) are an important element of commercial real estate investment performance. In spite of the important role OPEX plays in investment performance, there is very little research that analyzes the structure of these costs or identifies what drives the differences in these costs across markets. This article aims to share the latest findings on the drivers and structure of OPEX.
… That industrial variable costs have a lower elasticity than those of the other property types accords with what investors in this asset class generally experience: that these properties are usually cheaper to operate. A perhaps more surprising finding is that the elasticity coefficients for office, multifamily, and retail—property types with significantly different operating structures—are fairly similar to one another. We are conducting further research to better understand this finding.
Three related research pieces from the guy about whom former Fed Chairman Paul Volcker said had a degree of detail that is “mind-blowing” and admits to feeling sometimes that “he has a bigger staff, and produces more relevant statistics and analyses, than the Federal Reserve.”- The Economist
Ray Dalio | October 2008 (Updated March 2012): The economy is like a machine. At the most fundamental level it is a relatively simple machine, yet it is not well understood. I wrote this paper to describe how I believe it works. My description is not the same as conventional economists’ descriptions so you should decide for yourself whether or not what I’m saying makes sense. I will start with the simple things and build up, so please bear with me. I believe that you will be able to understand and assess my description if we patiently go through it.
Ray Dalio | June, 2011: This study looks at how different countries’ shares of the world economy have changed and why these changes have occurred, with a particular emphasis on the period since 1820. As explained in this study, the rises and declines in countries’ shares of the world economy occur as a result of very long-term cycles that are not apparent to observers who look at economic conditions from a close-up perspective.
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