Possibility of a Middle-Income Trap in China

Chapter 9 discusses the possibility of China falling into the middle-income trap in terms of three checkpoints: innovation capability, big businesses, and inequality. The main finding is that China is performing well in terms of the first two criteria, but there is some uncertainty in the last criterion of whether it generates Kuznets curve-type dynamics of growth leading to better equality. First, China has increasingly become innovative; thus, it differs from other middle-income countries. It has been pushing strongly for considerable R&D expenditure and has been ahead of the typical middle-income countries. Second, China has many world-class big businesses, which is more than its size predicts, not only in finance, energy, and trading as in the past but also increasingly in manufacturing. Thus, it differs from other middle-income countries with few globally competitive large businesses. Third, China faces some uncertainty in terms of inequality. The Gini coefficient continuously increased from approximately 0.3 in 1981 to reach its peak of 0.49 or so in 2008–2009 but has decreased to 0.42 since then. This recent decrease may be a sign that China is following the Kuznets curve. However, China is now facing new sources of inequality, such as wealth (including financial and real estate assets) and non-economic factors (including corruption).

The pricing of corporate real estate holdings on the UK capital market

Purpose The purpose of this study is to find out if corporate real estate ownership is priced into the capital market performance of non-property companies in the UK. This is of particular interest because ownership still represents a significant weight on the balance sheets and is predominantly considered unfavourable due to its bulkiness and difficult revisability in the event of changes in space demand. This draws attention to the UK as one of the most important European economies that have been exposed to strong uncertainties and dynamics, for example, due to the withdrawal voting of the United Kingdom from the European Union (BREXIT). Design/methodology/approach A first look at the real estate assets reported in balance sheets provides insight into possible changes in ownership strategy. This serves as a basis for subdividing companies based on their real estate assets using a portfolio-based approach and that are then analysed using the Fama and French multi-factor model with regard to their influence on capital market returns. Findings In general, the share of real estate assets has fallen over the past 10 years, although coinciding with BREXIT voting, some industries such as manufacturing show a turnaround. At the same time, ownership is priced in as a factor on the capital market, which applies to a sample across industries, as well as to separately considered sectors in the manufacturing and service industries. The pricing also shows a counter-cyclical pattern. Practical implications Corporate real estate management should be aware of the negative influence of ownership, especially against the background of economic fluctuations. The reduction of ownership can reduce the associated cost of capital and increase company success. Originality/value Previous UK-related studies mostly refer to a period before the global economic crisis in 2008, and therefore, are too old to reflect a changed view on corporate real estate ownership because of new corporate environmental conditions, based on inaccurate proxies or mainly refer to the retail segment. This research gap is closed.

Urban Demolition: Application of Blight Elimination Programs and Flood Buyout Programs to the Italian Case

In recent years, there has been a growing awareness that not all decommissioned and obsolete real-estate assets can be recovered and reused. After the paradigm of urban growth, and following the paradigm of regeneration, a new paradigm seems to be looming on the horizon: the paradigm of shrinkage. Due to this change in perspective, discussions on the potential of demolition policies as an alternative to regeneration and reuse are gaining support in the debate about urban growth. In the United States, there are two on-going programs using demolition as their main tool for urban planning: the blight elimination programs and the flood buyout programs. The former foresees the demolition of abandoned and decayed real-estate assets, while the latter envisions the demolition and relocation of buildings within areas under flooding risks. Given their successful employment in the U.S., this paper evaluates the applicability of these programs to an Italian case, which is characterized by a different building heritage and different territorial conditions. Simulations of the programs’ application are made using two case studies: Lecce nei Marsi (Abruzzo) and Moncalieri (Piemonte). The results demonstrate the substantial feasibility of the blight elimination programs’ usage in Italy, while the flood buyout programs instead demonstrates major obstacles that may hinder its successful application.

Quantification of financial consequences of buildings' ageing: analysis of panel building-level data from the Polish office space market

PurposeRelying on a unique proprietary Polish office market space database, the paper attempts to quantify the impact of buildings' age on the financial performance of real estate assets.Design/methodology/approachPanel econometric modeling was utilized to disentangle the impact of buildings' functional obsolescence and technical deterioration on their long-term financial performance.FindingsIn line with casual empiricism, our findings show a negative associative link between properties' age and potential lease revenue. The concomitant stickiness of service charges presages a possible long-term deterioration of financial outcomes of real estate investments. While older buildings generally have higher occupancy rates, the absorption rates are found to be negatively affected by the properties' age. On the bright side, the elasticity of vacancy rate with respect to rental rates is found to decrease as buildings get older. Further, the rent differential is confirmed to be more pronounced in higher age properties hinting at an existing potential for price discrimination, which may at least partially compensate for stagnant rents.Originality/valueOur empirical results confirm the properties' age to be a statistically significant factor in shaping the long-term performance of real estate assets, which should be better accounted for in financial projections for real estate developments.

The Value of Design in Real Estate Asset Pricing

Does design contribute to real estate value? Practicing architects require evidence to justify both functional and aesthetic building needs within the financial ecosystem. Some buildings that become real estate assets are valued using models that consider some proxies for understanding value, but these features are abstract and may misidentify the sub-optimal differentiation that design brings. The lack of feedback between real estate valuation and building design often leads to poor design and economic outcomes. To address this miscommunication, we investigate the transaction price performance of four external architectural form features—diagonality, curvature, setbacks and podiums. Whilst controlling for drivers that are known to explain transaction price variation, we find that diagonality and podiums have a positive pricing differential of 12.4 and 9.7% more than rectilinear control buildings, respectively. Buildings with setbacks have a negative pricing differential of 10%. Furthermore, these results are also consistent for rental valuation. Results suggest that there is a significant economic impact of some architectural form interventions that differentiate commercial buildings and contribute to the role of form in design, planning and commercial real estate.

Chile retail will struggle as COVID-19 hastens change

Significance Chile’s retail sector is reeling from the successive impacts of the social unrest that erupted in late 2019 and, since March, the COVID-19 pandemic, which has also affected the operations of its larger players in other countries. Even before these two events, the industry was struggling to adapt its business model to changing consumer habits. Impacts Even if domestic demand increases by 7.7% in 2021, as the Central Bank anticipates, it will remain well below its level in mid-2019. Retail is among the sectors where most jobs have been lost during the pandemic, affecting women in particular. Shopping malls may emerge as especially vulnerable to a likely reduction in the return on retail real estate assets.

Measuring the Effect of Location on House Prices in Italy

The Italian housing market is characterised by both a strong heterogeneity of real estate assets and a reduced number of property sales. These features, indeed, hamper the use of the hedonic price method, namely, the method that is mostly used for assessing the house prices and for estimating the monetary value of housing characteristics. In this paper, therefore, a hedonic model with dummy variables that identify housing submarkets is used to achieve two important results: enabling greater use of multiple regression analysis in the study of the Italian real estate market, and catching, in the simplest possible manner, the effect of location on house price. Indeed, the house's location is, together with the area in square metres, the housing characteristic that most influences the house price.