IIJournals JPM-Special Real Estate Article Collection | Page 8

high- or low-barrier markets, with low-barrier markets
being those in which it is relatively easy to build properties, and therefore where there is greater new supply.
Many investors also place a great emphasis on the relationship between current prices and the cost to build
when attempting to time real estate market decisions.
Nordby and Taylor [2013] examine both of these issues
via an analysis based on Tobin’s Q, the ratio of market
value to replacement cost. They find that both new construction and future prices are related to whether Tobin’s
Q is higher or lower than normal. Key, however, is that a
“normal” level for this metric differs between high- and
low-barrier markets, thus providing insights into timing
and allocation decisions.
Investors increasingly place importance on technological and demographic changes, which have the
potential to affect real estate investment decisions substantially. New technology can alter the types of properties that are demanded by occupants; what is considered
a core property now could quickly become obsolete in
the face of changing needs. Further, average space per
employee metrics are changing, as new space configurations are adopted in response to changes in technology
and the workforce; the result is changing the overall
demand for space. Finally, preferred locations are also
changing, a ́