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.

Greenness and financial performance of European REITs

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Giacomo Morri ◽  
Rachele Anconetani ◽  
Luca Benfari
Keyword(s):  
Real Estate ◽  
Positive Relationship ◽  
Operating Performance ◽  
Ordinary Least Squares ◽  
Commercial Real Estate ◽  
Content Type ◽  
Return On Equity ◽  
Real Estate Sector ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to investigate the link between greenness and the operating performance in 50 listed European real estate investment trusts (REITs). Design/methodology/approach Using a sample of 50 listed European REITs, the analysis leverages on Ordinary least squares models to investigate the relationship between greenness and operating performance indicators. In particular, it examines three types of greenness indicators: the overall Green Real Estate Sustainability Benchmark (GRESB) rating, its two components (management and policy [MP] and implementation and measurement) and the seven aspect scores; return on equity (ROE) and return on assets (ROA) are the fundamental measures of REITs operating performance. Findings The results demonstrate a positive relationship between greenness indicators and operating performance in European REITs, but the impact on ROE and ROA differs depending on the GRESB variable analyzed. If the GRESB rating proved to be significant on ROE and ROA, none of its two components has an impact on ROA, and only the MP score has a positive relationship with ROE. Finally, of the seven aspect scores, only the stakeholder engagement is significant on the two dependent variables. Originality/value The commercial real estate sector has a significant role in tackling climate change issues. To incentivize the market to increase the investments in green buildings, it is essential to find a link between their sustainability characteristics and the improvements they deliver in terms of operating performance. Despite there being a substantial body of literature investigating this connection in the US REITs market, there is still limited knowledge on the relationship between green and operating indicators in the European REITs market.

scholarly journals Cap rates and risk: a spatial analysis of commercial real estate

2018 ◽  
Vol 35 (1) ◽  
pp. 25-43
Author(s):  
Florian Unbehaun ◽  
Franz Fuerst
Keyword(s):  
Real Estate ◽  
Risk Perceptions ◽  
Large Scale ◽  
Risk Premia ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
Data Series ◽  
Large Set ◽  
Content Type ◽  
The Impact

Purpose This study aims to assess the impact of location on capitalization rates and risk premia. Design/methodology/approach Using a transaction-based data series for the five largest office markets in Germany from 2005 to 2015, regression analysis is performed to account for a large set of asset-level drivers such as location, age and size and time-varying macro-level drivers. Findings Location is found to be a key determinant of cap rates and risk premia. CBD locations are found to attract lower cap rates and lower risk premia in three of the five largest markets in Germany. Interestingly, this effect is not found in the non-CBD locations of these markets, suggesting that the lower perceived risk associated with these large markets is restricted to a relatively small area within these markets that are reputed to be safe investments. Research limitations/implications The findings imply that investors view properties in peripheral urban locations as imperfect substitutes for CBD properties. Further analysis also shows that these risk premia are not uniformly applied across real estate asset types. The CBD risk effect is particularly pronounced for office and retail assets, apparently considered “prime” investments within the central locations. Originality/value This is one of the first empirical studies of the risk implications of peripheral commercial real estate locations. It is also one of the first large-scale cap rate analyses of the German commercial real estate market. The results demonstrate that risk perceptions of investors have a distinct spatial dimension.

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.

Does the commercial real estate industry need “more pussy on the block?”

2019 ◽  
Vol 37 (5) ◽  
pp. 627-637 ◽  
Author(s):  
Dustin C. Read
Keyword(s):  
Real Estate ◽  
Gender Bias ◽  
Second Generation ◽  
Commercial Real Estate ◽  
Real Estate Industry ◽  
Structured Interviews ◽  
Content Type ◽  
Local Chapter ◽  
Professional Credibility ◽  
The Impact

Purpose In a controversial 2018 interview, commercial real estate mogul Sam Zell insinuated that companies should promote their employees based exclusively on merit and avoid purposefully taking steps to get “more pussy on the block” in the name of gender equality. The comment was criticized not only for its crassness, but also for its failure to recognize the challenges many women working in the commercial real estate industry face in their efforts to obtain the same opportunities, compensation and status as similarly-qualified men. In an effort to overcome these disparities, the purpose of this paper is to focus on the pervasiveness of second-generation gender bias and stereotyping in the field through a qualitative analysis. Design/methodology/approach Semi-structured interviews were conducted with 39 women serving as local chapter presidents of a prominent commercial real estate trade group to explore the impact of gender on their career advancement and their experiences with second-generation gender bias. Findings The findings suggest unintentional discrimination often influences women’s careers by drawing their communication skills, professional credibility and commitment to the organizations for whom they work into question. Originality/value The research contributes to the existing literature by offering additional evidence that unintentional discrimination is common in male-dominated industries, such as commercial real estate. It also provides clear examples of social cues women perceive to heighten tension along gender lines and impinge upon their ability to ascend to leadership positions.

scholarly journals The impact of lease structures on the optimal holding period for a commercial real estate portfolio

2015 ◽  
Vol 33 (2) ◽  
pp. 121-139 ◽  
Author(s):  
Charles-Olivier Amédée-Manesme ◽  
Michel Baroni ◽  
Fabrice Barthélémy ◽  
Mahdi Mokrane
Keyword(s):  
Real Estate ◽  
Portfolio Management ◽  
Cash Flows ◽  
Commercial Real Estate ◽  
Content Type ◽  
Holding Period ◽  
Specific Risk ◽  
The Impact ◽  
Real Estate Assets ◽  
Rental Value

Purpose – The purpose of this paper is to demonstrate the impact of lease duration and lease break options on the optimal holding period for a real estate asset or portfolio. Design/methodology/approach – The authors use a Monte Carlo simulation framework to simulate a real estate asset’s cash flows in which lease structures (rent, indexation pattern, overall lease duration and break options) are explicitly taken into account. The authors assume that a tenant exercises his/her option to break a lease if the rent paid is higher than the market rental value (MRV) of similar properties. The authors also model vacancy duration stochastically. Finally, capital values and MRVs, assumed to be correlated, are simulated using specific stochastic processes. The authors derive the optimal holding period for the asset as the value that maximizes its discounted value. Findings – The authors demonstrate that, consistent with existing capital markets literature and real estate business practice, break options in leases can dramatically alter optimal holding periods for real estate assets and, by extension, portfolios. The paper shows that, everything else being equal, shorter lease durations, higher MRV volatility, increasing negative rental reversion, higher vacancy duration, more break options, all tend to decrease the optimal holding period of a real estate asset. The converse is also true. Practical implications – Practitioners are offered insights as well as a practical methodology for determining the ex-ante optimal holding period for an asset or a portfolio based on a number of market and asset-specific parameters including the lease structure. Originality/value – The originality of the paper derives from its taking an explicit modelling approach to lease duration and lease breaks as additional sources of asset-specific risk alongside market risk. This is critical in real estate portfolio management because such specific risk is usually difficult to diversify.

New boundaries

2019 ◽  
Vol 37 (1) ◽  
pp. 118-135 ◽  
Author(s):  
Patrick Lecomte
Keyword(s):  
Real Estate ◽  
Smart Cities ◽  
Active Role ◽  
Commercial Real Estate ◽  
Smart Environments ◽  
Current Debate ◽  
Smart Space ◽  
Content Type ◽  
Smart Technologies ◽  
The Impact

Purpose The purpose of this paper is to fill a gap in the real estate academic literature by defining the essence of real estate in smart urban environments. Space has traditionally been a silent component of real estate. Smart technologies powered by Ubi-comp are turning space into an active part of real estate, which represents a paradigm shift for commercial real estate. This shift requires new concepts and tools to analyse and model real estate in smart cities. Design/methodology/approach The paper defines the notions of smart space and smart real estate. Several concepts and tools are formulated, starting with a model of space users in smart cities, called the Cyber-Dasein inspired by Heidegger’s existential phenomenology of space. Findings The paper then analyses smart space’s attributes and proposes several metrics for commercial real estate in smart environments. After introducing three regression models for constructing a price index of smart real estate, the paper concludes by advocating that commercial real estate take an active role in the current debate about smart cities. Research limitations/implications The paper does not provide any empirical analysis of smart real estate. Practical implications Smart environments offer real estate a unique opportunity to set up methodologies, concepts and tools for new properties in new cities. Now is the time to think carefully about the impact smart technologies will have on commercial properties before other stakeholders (in particular smart cities vendors and multinational technology giants) have fully modelled smart space and its nexus with smart real estate. Originality/value This paper is the first paper to provide a conceptual framework for the analysis of commercial real estate in smart cities.

Cognitive bias, intuitive attributes and investment decision quality in commercial real estate in Uganda

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moses Munyami Kinatta ◽  
Twaha Kigongo Kaawaase ◽  
John C. Munene ◽  
Isaac Nkote ◽  
Stephen Korutaro Nkundabanyanga
Keyword(s):  
Real Estate ◽  
Loss Aversion ◽  
Cognitive Bias ◽  
Investment Decision ◽  
Commercial Real Estate ◽  
Decision Quality ◽  
Content Type ◽  
Real Estate Sector ◽  
Confidence Degree ◽  
The Relationship

PurposeThis study examines the relationship between investor cognitive bias, investor intuitive attributes and investment decision quality in commercial real estate in Uganda.Design/methodology/approachA cross-sectional research survey was used in this study, and data were collected from 200 investors of commercial real estate in Uganda using a structured questionnaire. Hierarchical regression analysis was used to test the hypotheses derived under this study.FindingsThe results indicate that investor cognitive bias and investor intuitive attributes are positive and significant determinants of investment decision quality in commercial real estate. In addition, the two components of Investor cognitive bias (framing variation and cognitive heuristics) are positive and significant determinants of investment decision quality, whereas mental accounting is a negative and significant determinant of investment decision quality. For investor intuitive attributes, confidence degree and loss aversion are positive and significant determinants of investment decision quality, whereas herding behavior is a negative and significant determinant of investment decision quality in commercial real estate in Uganda.Practical implicationsFor practitioners in commercial real estate sector should emphasize independent evaluation of investment opportunities (framing variation), simplify information regarding investments (Cognitive heuristics), believe in own abilities (Confidence degree), be risk averse (loss aversion) and avoid making decisions based on subjective visual mind (mental accounting) and group think/herding in order to make quality investment decisions. For policymakers, the study has illuminated factors such as provision of reliable information that ought to be taken into account when promulgating policies for regulation of the commercial real estate sector. This will help investors to come up with investment decisions which are plausible.Originality/valueFew studies have focused on investor cognitive bias and investor intuitive attributes on investment decision quality in commercial real estate. This study is the first to examine the relationship, especially in the commercial real estate sector in a developing country like Uganda.

scholarly journals Occupier satisfaction and its impact on investment returns from UK commercial real estate

2017 ◽  
Vol 35 (2) ◽  
pp. 135-159 ◽  
Author(s):  
Danielle Claire Sanderson ◽  
Steven Devaney
Keyword(s):  
Real Estate ◽  
Financial Performance ◽  
Customer Service ◽  
Positive Relationship ◽  
Global Financial Crisis ◽  
Commercial Real Estate ◽  
Property Management ◽  
Management Service ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to investigate the relationship between occupiers’ satisfaction with the property management service they receive and the financial performance of commercial real estate. Design/methodology/approach The study uses occupier satisfaction data for 240 UK commercial properties collected over a 12-year period and the annual total returns achieved by those properties. Various statistical techniques are employed to assess whether increasing occupier satisfaction leads to greater returns for investors. These include comparing excess returns and risk-adjusted returns with occupier satisfaction at each property to assess whether superior property management generates outperformance (“positive alpha”). The study also investigates whether the relationship between occupier satisfaction and returns is the same across all sectors and whether it is affected by market conditions. Findings A positive correspondence is found between benchmark outperformance and occupier satisfaction. The relationship is similar for all sectors of commercial property and is particularly strong during the Global Financial Crisis, indicating that paying attention to satisfying the needs of occupiers has particular benefits during periods when the supply of commercial real estate exceeds demand. Research limitations/implications The sample of properties was restricted to those for which occupier satisfaction data had been collected by RealService Ltd and whose owners permitted access to the financial performance results. This meant that the properties belong to only three landlords, all UK REITs that care sufficiently about occupier satisfaction to commission studies. Thus the findings might not apply to all commercial properties. The mechanism by which the positive relationship between satisfaction and financial performance occurs is not tested, but the conventional mechanisms of reputation and customer loyalty (the “service-profit chain”) are discussed. Practical implications The findings suggest that it is worthwhile for landlords, or property managers acting on their behalf, to understand the needs of their occupiers in order to deliver the level of service that those occupiers desire. Leases in the UK are generally “triple net” and the total returns used for this analysis are net of property management costs, so the positive relationship between satisfaction and performance is not the result of economising on service delivery. A further implication is that valuers should take more account of occupier satisfaction when assessing the capital value of a property, from which total returns are assessed. Originality/value Demonstrating the links between customer service, customer satisfaction and business profitability is rarely attempted because of the many confounding factors that affect profitability. UK listed real estate companies are typically reluctant to reveal the financial performance of individual properties, and information about occupiers’ satisfaction is not generally available. The authors were fortunate to be granted access to a time series of such data, and to be able to demonstrate that attention to delivering a property management service that satisfies occupiers is likely to bring financial rewards to the owners of the property.

Impact of safety management system on safety performance: the mediating role of safety responsibility

2020 ◽  
Vol 27 (10) ◽  
pp. 3155-3170 ◽  
Author(s):  
Ruipeng Tong ◽  
Na Zhang ◽  
Xiaolong Wang ◽  
Hui Zhao
Keyword(s):  
Real Estate ◽  
Management System ◽  
Safety Management ◽  
Safety Performance ◽  
Real Estate Industry ◽  
Content Type ◽  
Mediating Role ◽  
The Impact ◽  
The Relationship

PurposeSafety management system (SMS) has been widely adopted to explore its influence on safety performance (SP). However, most existing researches recognized SMS as a one-dimension structure and neglected the influences of its subdimensions. Similarly, the impact of safety responsibility (SR) on SP received little attention. This study aims to explore the relationship between subdimensions of SMS and SP, while incorporating the mediating effect of SR.Design/methodology/approachThe research data were gathered from safety management evaluation report of a large real estate enterprise in China during 2010–2017. This paper carries out a series of data analyses to explore the impact of SMS and SR on SP. In order to analyze the synergistic impacts of SMS and SR on SP, path analysis, correlation analysis and mediation analysis were conducted using hypotheses concerning with the main subdimensions.FindingsThe results indicated SMS and SR decreased the project risk level and improved SP of real estate projects. Furthermore, the effect of SR partially mediated the relationship between the SMS and SP.Practical implicationsFindings in this research contribute to improve SP in real estate industry as well as other industries by the active assumption of SR and the successful implementation of SMS.Originality/valueThis research shows the relationship between subdimensions of SMS and SP and the mediating role of SR on SMS–SP relationship to improve SP in real estate industry.

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.

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