Transactions-Based Index (TBI): 60% of the time it works all the time...


What happens when you have some bored MIT overachievers with the insight that "repeat-sales" indexing is no good; an intelligent approach to commercial real estate evaluation… The name for this intelligent approach is Transactions-Based Index.

What is the TBI?

The Massachusetts Institute of Technology Center for Real Estate (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. Like all other indexing methods, it is not perfect and won’t be 100% accurate.


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.

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