Real Estate Analysis: A
Marriage between Macro and Micro
¨Marriage Example 3:
¨Say you need to project the “good” and “bad” case
scenarios for 2 office projects located in City D
and City E respectively.
¨Say City D-OFF rental volatility is 0.25 while City
E-OFF is 0.30. [Volatility = standard deviation divided by average
of the period].
¨Hence one way is to project more or less a 25%
+/- (i.e. +25% in the good scenario, and -25% in the bad scenario)
for City D project and 30% +/- for City E project.
Naturally the future may not equal the past but
this also means it may.