Risk Vs. Return: A Fresh Perspective‪.‬

It is always a challenge to confidently price commercial real estate. The concern generally heats up when space fundamentals are at their cyclical lows and cash flow forecasts are in question. But even in the best of times, the goal for investors is to earn returns at least as good or better than the rest of the market on a risk-adjusted basis. Still, who can predict what the future will bring, and how does this impact our expectation for risk and return? This article outlines an approach in developing an appropriate level of return given the amount of risk that is taken on. It also lays the foundation for bringing capital market behavior into focus, and discusses the author's view of the development of return expectations given an investor's outlook for risk.