WHAT MOVES RETAIL PROPERTY RETURNS AT THE METROPOLITAN LEVEL

In this article the determinants of metropolitan-level appraisal-based retail property returns are examined by estimating a six-equation mod el of retail construction starts, retail sales, stock-market returns, commercial mortgage rates, inflation, and the logarithm of stock-marke t volatility. Residuals from these equations are then used to explain actual movements in retail real estate returns. Our empirical procedur e looks at both unadjusted and unsmoothed appraisal-based retail real estate returns. The general finding is that unsmoothed appraisal-based retail real estate returns lag significantly behind market conditions . Furthermore, the results suggest that very little of the variation i n metropolitan-level appraisal-based retail real estate returns can be explained by macroeconomic news events.