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Estimating the value, ownership structure and turnover rate for investible commercial real estate from transaction datasets

Steven Devaney (Real Estate and Planning, Henley Business School, University of Reading, Reading, UK)
David Scofield (Department of Real Estate, Ted Rogers School of Management, Ryerson University, Toronto, Canada)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 10 November 2020

Issue publication date: 21 June 2021

192

Abstract

Purpose

Commercial real estate (CRE) is a major investment asset. Yet detailed information on the value of investible CRE in different cities is lacking. The authors propose an innovative method to measure the value of investible CRE using transaction datasets.

Design/methodology/approach

The authors take transaction prices and index them to produce a time series of values for each asset. The sum of the values at each point represents the value of investible CRE at that date. The authors’ method is applied to transaction data for New York, London and Toronto.

Findings

London had the highest proportions of institutional and foreign ownership, and its turnover was more resilient to the downturn in global CRE following the GFC. The results illustrate the potential of the authors’ method to shed light on the characteristics of investible CRE markets.

Research limitations/implications

The authors use data from Real Capital Analytics (RCA). This provides good coverage of transactions for investible CRE in the cities that the authors examine, but data from other sources might lead to different estimates.

Practical implications

Measuring the value and turnover of investible CRE is important for portfolio strategies that account for the size and liquidity of investment markets. Knowledge of these features, and of ownership patterns, provides a better understanding of market operation.

Originality/value

The authors’ modification of the perpetual inventory technique is simple, novel and practical. The authors propose this approach given the absence of a building-by-building inventory of investible CRE in many markets.

Keywords

Acknowledgements

The authors thank Real Capital Analytics for the provision of data required to undertake this study. They thank the anonymous reviewers and the participants at both the 2018 REALPAC/Ryerson symposium and the 2019 American Real Estate Society meeting for comments and feedback.

Citation

Devaney, S. and Scofield, D. (2021), "Estimating the value, ownership structure and turnover rate for investible commercial real estate from transaction datasets", Journal of Property Investment & Finance, Vol. 39 No. 4, pp. 366-382. https://doi.org/10.1108/JPIF-05-2020-0052

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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