Transactions-Based Index (TBI)
2008 Quarter 1
Results for the 1st quarter of 2008 show a 2.1% capital return for the properties sold in the NCREIF database. The demand-side index continued to fall, by 4.6 percent, which is the third straight quarterly drop, for a cumulative decline of more than 14 percent versus the mid-2007 peak. However, the supply side of the market raised its reservation prices by 9.2 percent in the first quarter.
Please note that the TBI is a statistical methodology that produces estimates of price movements and total returns based on transactions of properties sold from the NCREIF Index database.
MIT makes no warranty or claim regarding the usefulness or implications of the index. It should also be noted that TBI results for the 1st, 2nd, and 3rd quarters of any year are considered preliminary and subject to revision until the calendar year is completed with the 4th quarter results.
Transactions Indexes Based on NCREIF Database
| 2008 Q1 |  Download all charts and data (ZIP, 56K) |
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| Price Index (Variable Liquidity) | Total Return Index (Variable Liquidity) | Supply and Demand Indexes | |||
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| Apartment |  View Chart |
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| Industrial |  View Chart |
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| Office |  View Chart |
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| Retail |  View Chart |
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What is TBI? | TBI Data and NCREIF | TBI Details and usage | Transactions Indexes
What is the TBI?
The MIT/CRE CREDL Initiative has developed a Transactions-Based Index (TBI) of Institutional Commercial Property Investment Performance. The purpose of this index is to measure market movements and returns on investment based on transaction prices of properties sold from the NCREIF Index database. This is a new type of index that offers advantages for some purposes over the median-price or appraisal-based indexes previously available for commercial real estate in the U.S. Median price indexes are not true price-change indexes because the properties that transact in one period are different from those that transacted in the previous period. Appraisal-based indexes are based on appraisal estimates rather than actual prices of actual transactions.
The type of transactions-based index being provided by MIT/CRE can often provide a more up-to-date or precise picture of movements in the real estate market than these other types of indexes, and is being provided for research purposes by the MIT Center for Real Estate as a service to the industry and academic research communities. However, it should be noted that transactions-based indexes are statistical products that can contain estimation error. MIT makes no warranty or claim regarding the usefulness or implications of the index.
TBI Data and NCREIF
The TBI is based on data received by MIT on a quarterly basis from the National Council of Real Estate Investment Fiduciaries. NCREIF is a not-for-profit industry association dedicated to improving knowledge about institutional real estate investment performance. The NCREIF Property Index (NPI) is produced quarterly by NCREIF and is available on the NCREIF website.
TBI Details and Usage
Using econometric techniques, the TBI estimates quarterly market price changes based on the verifiable sales prices of all and only properties sold from the NPI database each quarter. The TBI controls for differences in the properties that are sold each period, for transaction sample selection bias, and for estimation error noise. The details of the index methodology are described in Fisher, Geltner & Pollakowski (pdf, 692K). The TBI is a hedonic price index that uses the recent appraised values of the properties as a composite hedonic variable. The basic TBI represents transaction prices that reflect variable liquidity in the real estate marketplace over time. The TBI methodology also allows production of indexes that track movements on the demand side and supply side of the market separately, based on the methodology of Fisher, Gatzlaff, Geltner & Haurin (REE 2003) (pdf, 1,014K). The demand side index can be interpreted as a "constant-liquidity index." The basic TBI variable liquidity index is reported here in both price-change and total returns, while the demand and supply side indexes are reported only for price-changes.
TBI returns are comparable to NPI equal-weighted cash-flow based returns, with appreciation including capital expenditures. All indexes are updated quarterly, with postings generally within six weeks or less of the end of the quarter. Please note that TBI returns will occasionally exhibit backward adjustments in the past historical data. These will normally be very minor, as the TBI is not a "repeat-sales" index, but a "hedonic" index based on a "representative property" that mirrors the average characteristics of the NCREIF properties.
