Estimating commercial property prices: an application of cokriging with housing prices as ancillary information

A vast majority of the recent literature on spatial hedonic analysis has been concerned with residential property values, with only very few examples of studies focused on commercial property prices. The dearth of studies can be attributed to some of the challenges faced in the analysis of commercial properties, in particular the scarcity of information compared to residential transactions. In order to address this issue, in this paper we propose the use of cokriging and housing prices as ancillary information to estimate commercial property prices. Cokriging takes into account the spatial autocorrelation structure of property prices, and the use of more abundant information on housing prices helps to improve the accuracy of property value estimates. A case study of Toledo in Spain, a city for which commercial activity stemming from tourism is one of the key elements of the economy in the city, demonstrates that substantial accuracy and precision gains can be obtained from the use of cokriging.