Location density, systematic risk, and cap rates: Evidence from REITs

Gregg Fisher, Eva Steiner, Sheridan Titman, Ashvin Viswanathan

Research output: Contribution to journalArticlepeer-review


A property's location is often considered to be the ultimate determinant of its investment performance. But how exactly does a property's location influence its risk and return? We focus on the effects of location density on the risk and return of commercial real estate investments. We do this by studying the geographical characteristics of the property portfolios of U.S. equity Real Estate Investment Trusts (REITs). We show that REITs with property holdings in high-density locations experience higher rental growth and carry higher systematic risk than their otherwise comparable peers in low-density locations. Consistent with those higher rental growth rates, high-density REITs also have lower implied cap rates. Our results suggest that location density is an important determinant of REIT performance outcomes, implying that geographical characteristics can drive investment risk and return across commercial real estate markets.

Original languageEnglish (US)
JournalReal Estate Economics
StateAccepted/In press - 2021

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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