scholarly journals Capital flows and office markets in major global cities

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olawumi Fadeyi ◽  
Stanley McGreal ◽  
Michael McCord ◽  
Jim Berry
Keyword(s):  
New York ◽  
Real Estate ◽  
Capital Flows ◽  
International Capital Flows ◽  
International Capital ◽  
Content Type ◽  
Cross Border ◽  
Office Markets ◽  
Office Market ◽  
Short Run

PurposeOffice markets and particularly international financial centres over the past decade have experienced rapid financialisation, developments and indeed changes in the post-global financial crisis (GFC) landscape. Importantly, the volume and types of international capital flows have witnessed more foreign actors and vehicles entering into the investment landscape with the concentration of investment intensifying within key financial centres. This paper examines the interaction of international real estate capital flows in the London, New York and Tokyo office markets between 2007 and 2017.Design/methodology/approachUsing Real Capital Analytics (RCA) data comprising over 5,700 office property transactions equating to $563bn between 2007 and 2017, the direct global capital flows into the London, New York and Tokyo office markets are assessed using an autoregressive distributed lag (ARDL) approach. Further, Granger causality tests are examined to analyse the short-run interaction of international real estate capital flows into these three major office markets.FindingsBy assessing the relativity of internal to external investments in these three central business district (CBD) office markets, differences in market dynamics are highlighted. The London office market is shown to be highly dependent on international flows and the USA, the foremost source of cross-border investment on the global stage. The cointegration and causality analysis indicate that cross-border real estate investment flows in these markets (and financial centres) show both long- and short-run relationships and suggest that the London office market remains more distinct and the most reliant on international capital flows with a wider geographical spread of investment activities and investor types. In the case of New York and Tokyo, these markets appear to be driven by more domestic investment activity and capital seemingly due to subtle factors pertaining to investor home bias, risk aversion and diversification strategies between the markets in the aftermath of the GFC.Originality/valueGiven the importance of the CBD offices in London, New York and Tokyo as an asset class for institutional investors, this paper provides some insights as to their level of connection and the interaction of the international capital flows into these three major cities.

scholarly journals Influence of the global environment on capital flows in the London Office market

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olawumi Fadeyi ◽  
Stanley McGreal ◽  
Michael J. McCord ◽  
Jim Berry ◽  
Martin Haran
Keyword(s):  
Real Estate ◽  
Capital Flows ◽  
Global Environment ◽  
Real Estate Investment ◽  
Content Type ◽  
Cross Border ◽  
Distributed Lag ◽  
Long Run ◽  
International Environment ◽  
Office Market

PurposeThe London office market is a major destination of international real estate capital and arguably the epicentre of international real estate investment over the past decade. However, the increase in global uncertainties in recent years due to socio-economic and political trends highlights the need for more insights into the behaviour of international real estate capital flows. The purpose of this study is to evaluate the influence of the global and domestic environment on international real estate investment activities within the London office market over the period 2007–2017.Design/methodology/approachThis study adopts an auto-regressive distributed lag approach using the real capital analytics (RCA) international real estate investment data. The RCA data analyses quarterly cross-border investment transactions within the central London office market for the period 2007–2017.FindingsThe study provides insights on the critical differences in the influence of the domestic and global environment on cross-border investment activities in this office market, specifically highlighting the significance of the influence of the global environment in the long run. In the short run, the influence of factors reflective of both the domestic and international environment are important indicating that international capital flows into the London office market is contextualised by the interaction of different factors.Originality/valueThe authors provide a holistic study of the influence of both the domestic and international environment on cross-border investment activities in the London office market, providing more insights on the behaviour of global real estate capital flows.

Real estate risk, yield modelling and market sentiment: the impact on pricing in European office markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tony McGough ◽  
Jim Berry
Keyword(s):  
Real Estate ◽  
International Capital ◽  
Content Type ◽  
International Capital Markets ◽  
Real Estate Markets ◽  
Market Sentiment ◽  
Office Markets ◽  
Risk Pricing ◽  
Changes In Risk ◽  
The Impact

PurposeThe financial and economic turmoil that resulted from the Global Financial Crisis (GFC), included a marked increase in the volatility in real estate markets. Property asset prices were impacted by the real economy and market sentiment, particularly concerning the determination of risk. In an economic downturn, the perception of investment risk becomes increasingly important relative to overall total returns, and thus impacts on yields and performance of assets. In a recovery phase, and particularly within an environment of historically low government bonds, risk and return compete for importance. The aim of this paper is to assess the interrelationships and impacts on pricing between real estate risk, yield modelling outcomes and market sentiment in selective European city office markets.Design/methodology/approachThis paper specifically considers the modelling of commercial property pricing in relation to the appetite for risk in the financial markets. The paper expands on previous work by determining a specific measure of risk pricing in relationship to changing financial market sentiment. The methodology underpinning the research specifically examines the scope for using national and international risk pricing within specific real estate markets in Europe.FindingsThis paper addresses whether there is a difference between the impact of risk on the pricing of real estate in international versus regional cities in Europe. The analysis, therefore, determines which city centre office markets in Europe have been most impacted by globalisation including the magnitude on real estate prices and market volatility. The outcome of the paper provides important insights into how changes in risk preferences in the international capital markets have driven and continues to drive yield movements under different market conditions.Research limitations/implicationsThe paper considers the driving forces which have led to the volatile movements of yields, emanating from the GFC.Practical implicationsThis paper considers the property market effects on pricing of commercial real estate and the drivers in selected European cities.Originality/valueThe outcome of the paper provides important insights into how changes in risk preferences in the international capital markets have driven and continue to drive the yield movements in different real estate markets in Europe.

International capital flows with safe assets accumulation

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ly Dai Hung
Keyword(s):  
Economic Growth ◽  
Open Economy ◽  
Capital Flows ◽  
International Capital Flows ◽  
International Capital ◽  
Productivity Level ◽  
Content Type ◽  
Total Capital ◽  
The Impact

PurposeThe author studies the role of safe assets accumulation in shaping the pattern of international capital flows.Design/methodology/approachThe author combines a theoretical model and the empirical analysis. The model is a two-country open economy, while the evidence is based on a fixed-effect regression on a panel of 19 countries of the eurozone.FindingsIn an open two-country economy, a positive productivity shock raises both mean and variance of wealth accumulation rate, then, leading to a greater holding of safe assets for risk-sharing motivation. Upon financial integration, the shock can induce the outflows of net total capital. The evidence of 19 eurozone countries confirms the theory and also uncovers that the safe assets (bonds) are the dominant driver of cross-border capital flows within the eurozone.Research limitations/implicationsThe model can be extended to account for the impact of safe assets on the economic growth, then, analyzes the role of safe assets within financial globalization. Taking into account the impact of safe assets on the open-economy economic growth can be the next step to approach the issue.Practical implicationsThe paper also provides important policy implication. Since a higher productivity level can raise the outflows of net total capital through the accumulation of foreign safe assets, an economy needs to increase its supply of safe asset along with upgrading its domestic productivity level. This combination is important for the long-run capital accumulation and economic growth of an economy with an increasing path of the productivity level.Originality/valueThe paper seeks a balance between theory and evidence on international capital flows. Moreover, the paper bridges the gap between the literature on international capital flows and the literature on safe assets. And the paper also focuses on the economies of the eurozone.

scholarly journals How does liquidity in the financial market affect the real estate market yields?

2019 ◽  
Vol 37 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Kyung-Min Kim ◽  
Geon Kim ◽  
Sotiris Tsolacos
Keyword(s):  
Real Estate ◽  
Financial Markets ◽  
Financial Market ◽  
Commercial Real Estate ◽  
Content Type ◽  
Office Markets ◽  
Office Market ◽  
Excess Liquidity ◽  
The Impact ◽  
The Relationship

PurposeAfter the Global Financial Crisis in 2008, the impact of expanded liquidity in the financial market has drawn attention. The purpose of this paper is to examine the relationship between liquidity in financial markets and office markets across Asian countries. In particular, the research not only examines the effect of normal liquidity on real estate markets, but also the effects of excess liquidity are specifically highlighted.Design/methodology/approachThis paper uses panel estimation utilizing quarterly data from the first quarter of 2007 to the fourth quarter of 2015. Taking both time and location dimensions into account allows for a more precise estimate of the relationship between liquidity and office market’s yields.FindingsPer the empirical outcome, an increasing excess liquidity tends to decelerate the value of office yields in six major Asian office market centers due to the positive effect on commercial real estate value. This effect is also identified by comparing the difference between the level of fitted yields and actual yields.Practical implicationsThe results enhance the understanding of commercial real estate yield determinants. Furthermore, the results can be used to assess the impacts of liquidity on major office markets in Asia.Originality/valueThis paper attempts to uncover the impact of liquidity in financial markets on the office market yields. To better understand the relationship, the concept of excess liquidity is adopted and further exploration of each office market is conducted by comparing the fitted yields, which is computed considering the effects of excess liquidity on yield levels and actual yields.

scholarly journals International capital movement towards the Spanish real estate sector

2020 ◽  
Vol 38 (2) ◽  
pp. 107-127
Author(s):  
Su Zhenyu ◽  
Paloma Taltavull
Keyword(s):  
Real Estate ◽  
Capital Flows ◽  
Housing Prices ◽  
Real Estate Market ◽  
Capital Movement ◽  
International Capital ◽  
Content Type ◽  
Price Bubble ◽  
Real Estate Sector ◽  
International Investors

Purpose The purpose of this paper is to examine the determinants that affect international capital flows (ICF) toward the Spanish real estate market over the period 1995 first quarter to 2017 fourth quarter. Design/methodology/approach VECM methodology is used to analyze time series and panel methods using pooled EGLS regression. Findings VECM parameter results for construction and real estate activities sectors, quickly suggesting a stable performance of capital flows toward Spanish real estate sector that the short-term fluctuation of foreign investment results contributes to the long-term equilibrium relatively soon. By applying the Monetary theory of Johnson, the model identifies a relevant role of M3 explaining capital flows to real estate, together with the lagged variables of construction and real estate activities capital flows, Spanish real interest rate and Spain’s economic growth rate; they are the significant determinants on capital movement to Spanish real estate sector. Interestingly, Spanish housing prices as an exogenous variable, directly, significantly and negatively affect real estate capital flows in all cases as a way to capture the assets price bubble. Practical implications Findings highlight reasons affecting capital flows to real estate and construction activities to Spanish sectors which allow capital Funds to take into account those drivers in their investment decisions. Originality/value This paper is the first attempt to analyze the determinants of ICF to Spanish real estate market; it has a significant meaning for both Spanish economy and international investors.

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