This study examines commercial real estate market dynamics and valuation performance using an applied panel-data econometric framework within the context of an emerging market economy. While traditional valuation approaches primarily emphasize static income–capitalization relationships, they often overlook the combined influence of liquidity conditions, market risk, and macroeconomic environment on commercial real estate performance. The empirical analysis is based on a balanced panel dataset of commercial properties in Azerbaijan covering the period 2021–2025. The dataset includes net operating income, capitalization rates, liquidity conditions, market risk indicators, and macroeconomic variables. A two-equation modelling framework is employed to separate valuation determinants from capitalization rate dynamics, thereby reducing potential endogeneity between property values and return expectations. The empirical findings indicate that net operating income is consistently and positively associated with commercial property values across the estimated panel-data models. In addition, the results suggest that market liquidity and market risk provide complementary information for understanding commercial real estate performance within the analyzed emerging market setting. Higher values of the risk index are positively associated with capitalization rates, while the estimated relationship between market risk and property value remains sensitive to model specification. Macroeconomic variables exhibit limited statistical significance and are interpreted primarily as indicators of common market-wide conditions. The study contributes to the literature by applying an integrated panel-data framework to an illustrative emerging market case (Azerbaijan) while providing a transparent empirical framework that may be adapted to comparable commercial real estate markets.
Gafarbayli et al. (2026) studied this question.