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1 – 10 of over 5000Lay Cheng Lim, James Berry and Karen Sieraki
The paper aims to assess property returns using yield differentials for prime and secondary properties as a real estate decision‐making tool. It seeks to demonstrate how property…
Abstract
Purpose
The paper aims to assess property returns using yield differentials for prime and secondary properties as a real estate decision‐making tool. It seeks to demonstrate how property portfolios can be optimized through rational stock selection within the respective sectors identified in the IPD Index.
Design/methodology/approach
The paper utilises IPD data over the period Q1 2001 to Q4 2011 to investigate the performance returns on an annual and quarterly basis across key market sectors. It measures the rolling four quarters total return to illustrate the shift in prime and secondary performance for the different sectors to analyse the buy and sell decisions of institutional investors.
Findings
This paper indicates that investors can optimise property performance through rational stock selection and that secondary commercial property values display greater volatility compared to prime stocks. Investors need to take calculated risk in anticipation of higher total returns based on a buy/sell strategy when secondary stock outperforms prime.
Research limitations/implications
These findings can have a number of implications for real estate decision making. Firstly, capital growth is still the main factor that influences return and these returns are sensitive to wider economic and market conditions. Secondly, rational stock selection is likely to have major benefits in a difficult and an illiquid market. Thirdly, the choice of prime or secondary does matter and strong heterogeneity exists in each of the sectors and therefore offers potential for sector diversification.
Originality/value
This paper contributes to an understanding of property investment decision making by evaluating the differential spread/gap between low and high yield properties to determine the opportunities to sell/buy prime/secondary property.
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James Giannarelli and Piyush Tiwari
This paper examines the extent of the short-run relationship between Australian real estate investment trusts (A-REITs) and direct real estate returns on both a commercial…
Abstract
Purpose
This paper examines the extent of the short-run relationship between Australian real estate investment trusts (A-REITs) and direct real estate returns on both a commercial property sector and a prime and secondary grade basis, i.e. a subsector basis.
Design/methodology/approach
Two-step methodology is used. First, we identify the dynamic interdependencies between A-REITs and each commercial property subsector to determine whether the returns of A-REITs lead each subsector or vice versa. Second, short-run deviations between these asset returns are estimated by measuring their individual response behaviours to changes in key economic and financial market factors that are expected to influence these returns.
Findings
Results suggest that each subsector shares a unique relationship to A-REITs, given each prime and secondary grade commercial property return series varies in behaviour. Some property subsector returns can be predicted by movements in A-REIT returns, whereas returns for others move independent to changes in A-REITs. Similarly, some subsectors commove with A-REITs in response to changes in certain market factors, whereas others diverge. As such, these findings have practical significance to fund managers and portfolio selection, as each commercial subsector embodies its own exposure to A-REITs and vulnerabilities to market forces. Subsectors that commove with A-REITs in response to certain market forces may be used as substitutes in a portfolio. Alternatively, subsectors that diverge from A-REITs in response to market forces may offer diversification benefits when combined.
Practical implications
These findings extend beyond existing research to offer critical decision-making guidance at the acquisition level, as fund managers may more closely consider the impact that prime or secondary grade properties within a given commercial sector may have on a portfolio that consists of public and private Australian real estate. Ultimately, a more informed acquisition may be carried out as consideration of a property's asset grade allows for a deeper insight into the property's risk profile and its anticipated short-run impact on a portfolio.
Originality/value
This paper extends previous studies that focus mostly on aggregate or sector-level returns by measuring REIT and real estate dynamics at the subsector level, allowing for practical significance at not only the portfolio level but crucially at the acquisition level, a pivotal decision-making stage for fund managers. This is also the first paper to study REIT and real estate causality and response patterns to changes in market factors at the Australian sector level.
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In the 1970s, yields on UK commercial investment property appear to have been influenced principally by the cost of long term capital and the rate of rental growth. Consequently…
Abstract
In the 1970s, yields on UK commercial investment property appear to have been influenced principally by the cost of long term capital and the rate of rental growth. Consequently, yields tended to respond to the economic cycle, falling in times of economic recovery and rising when the economy moved into recession. However, in the 1980s so far, yield trends appear anomalous by comparison. Yields failed to rise on the advent of the recession in 1980–81, despite a sharp rise in the cost of capital, yet rose in 1982 just when the economy began to emerge from recession, and have since continued to rise as economic recovery and rental growth have gathered pace. This paper seeks to explain recent movements in investment property yields and to reconcile these with trends in the 1970s. It concludes that the behaviour of yields in the 1980s can be explained by the dominance of institutional investors in the property market, and by their perception of the changing risk attributes of property (compared with alternative investments) which have resulted from changes taking place in the investment markets and the UK economy.
Jaakko Aspara, Amitav Chakravarti and Arvid O. I. Hoffmann
This study aims to examine the interplay between focal and background goals in consumer financial decision-making and identify conditions that lead individuals to trade-off…
Abstract
Purpose
This study aims to examine the interplay between focal and background goals in consumer financial decision-making and identify conditions that lead individuals to trade-off financial returns for background goals.
Design/methodology/approach
The current research reviews the relevant literature on consumer financial decision-making and goal systems theory to develop a set of hypotheses that is tested using three experiments.
Findings
The experiments show that individuals who have been subtly primed with self-expressive background goals, or experienced progress toward the focal goal of financial returns, accept lower financial returns for the opportunity to invest in stocks that allow for increased self-expression. Further, while subtly primed background goals exert a non-normative influence on investment decisions, explicit cues about an investment’s background goal-instrumentality create a backlash effect, and decrease individuals’ willingness to trade-off financial returns.
Research limitations/implications
Future research could confirm the robustness of the findings of the present research by using different priming tasks and alternative ways of making the background goal explicit to individuals.
Practical implications
To achieve greater attraction among individual investors, it helps to frame a financial product or stock in communications materials in a way that sends subtle signals with which investors can identify. Such signals could include stressing the product/company’s home country (addressing individuals’ patriotism) or a particular product domain (addressing individual investors’ desire for interesting/exciting current/future products).
Originality/value
While previous research suggests that investment choices may be influenced by self-expressive motivations, to date, it remains unclear whether and when individual investors are actually willing to trade-off the focal goal of maximizing financial returns for the opportunity to satisfy alternative background goals.
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Kim Hin David Ho and Faishal bin Ibrahim Muhammad
From the perspective of the macro‐economy and real estate sector interaction, this paper aims to examine the maturing prime retail real estate sector versus the developing…
Abstract
Purpose
From the perspective of the macro‐economy and real estate sector interaction, this paper aims to examine the maturing prime retail real estate sector versus the developing suburban retail real estate sector.
Design/methodology/approach
This paper adopts a highly specific dynamic computable general equilibrium model under system dynamics programming to structure the resulting system complexity within the context of Singapore.
Findings
Ex post and ex ante model estimations find that the suburban retail real estate sector is on the whole more susceptible to gross domestic product (GDP) growth policy that affects both GDP expansion and retail rents in actual and expectation terms as well as returns.
Research limitations/implications
The DCGE model ex ante estimations for the planned scenarios, under low or high GDP growth for the prime and suburban retail real estate sectors, enhances understanding of structural factors and dynamic interaction in the maturation phase of the prime retail real estate sector in Singapore.
Practical implications
In comparison, Singapore's suburban retail real estate sector is found to be in a developing phase.
Originality/value
There is limited local research on the underlying relationship between the economy and the retail real estate sector, although Singapore's retail sector and retail real estate sector form an integral part of sustainable economic expansion.
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Alastair Adair, Jim Berry, Stanley McGreal, Joanna Poon, Norman Hutchison, Craig Watkins and Kenneth Gibb
Property performance indices have invariably focused upon prime markets with a variety of approaches used to measure investment returns. However, there is relatively little…
Abstract
Purpose
Property performance indices have invariably focused upon prime markets with a variety of approaches used to measure investment returns. However, there is relatively little knowledge regarding the investment performance of property in regeneration areas. Indeed, there is a perception that such locations carry increased risk and that the returns achieved may not be sufficient to offset the added risk. The main objective of this paper, therefore, is to construct regeneration property performance indicators consistent with the CBRE rent index and average yield monitor.
Design/methodology/approach
Local market experts were asked to estimate rents and yields for hypothetical standardised offerings for a range of regeneration locations throughout the UK, covering the period 1995 to 2002.
Findings
The results show that rental growth was similar in regeneration locations compared to the prime market. However, the analysis highlights a major yield shift for property in regeneration areas in the short to medium term. The downward pressure in yields would suggest that once a regeneration area becomes established and rental growth emerges, investor interest is stimulated resulting in increased competition and a shortening of yields.
Originality/value
The significance of this research is the quantification of property investment performance from regeneration areas that previously has not been available to investment institutions and decision makers. From a policy perspective this analysis is of relevance in confirming the maturing of locations that have received high levels of public sector support and indicating the effectiveness of regeneration policy mechanisms in creating sustainable urban environments capable of meeting private sector investment goals.
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Allyn Young′s lectures, as recorded by the young Nicholas Kaldor,survey the historical roots of the subject from Aristotle through to themodern neo‐classical writers. The focus…
Abstract
Allyn Young′s lectures, as recorded by the young Nicholas Kaldor, survey the historical roots of the subject from Aristotle through to the modern neo‐classical writers. The focus throughout is on the conditions making for economic progress, with stress on the institutional developments that extend and are extended by the size of the market. Organisational changes that promote the division of labour and specialisation within and between firms and industries, and which promote competition and mobility, are seen as the vital factors in growth. In the absence of new markets, inventions as such play only a minor role. The economic system is an inter‐related whole, or a living “organon”. It is from this perspective that micro‐economic relations are analysed, and this helps expose certain fallacies of composition associated with the marginal productivity theory of production and distribution. Factors are paid not because they are productive but because they are scarce. Likewise he shows why Marshallian supply and demand schedules, based on the “one thing at a time” approach, cannot adequately describe the dynamic growth properties of the system. Supply and demand cannot be simply integrated to arrive at a picture of the whole economy. These notes are complemented by eleven articles in the Encyclopaedia Britannica which were published shortly after Young′s sudden death in 1929.
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Sotiris Tsolacos and Nicole Lux
This paper offers empirical evidence on factors influencing credit spreads on commercial mortgage loans. It extends existing work on the pricing of commercial mortgage loans. The…
Abstract
Purpose
This paper offers empirical evidence on factors influencing credit spreads on commercial mortgage loans. It extends existing work on the pricing of commercial mortgage loans. The authors examine the relative significance of a range of factors on loan pricing that are lender, asset and loan specific. The research explores and quantifies the sources of spread differentials among commercial mortgage loans. The paper contributes to a limited literature on the subject and serves the purpose of price discovery in commercial property lending. It offers a framework to compare actual pricing with fundamental-based estimates of loan spreads.
Design/methodology/approach
Panel analysis is deployed to examine the cross-section and time-series determinants of commercial mortgage loan margins and credit spreads. Using an exclusive database of loan portfolios in the United Kingdom (UK), the panel analysis enables the authors to analyse and quantify the impact of a number of theory-consistent and plausible factors determining the cost of lending to commercial real estate (CRE), including type and origin of lender, loan size, loan to value (LTV) and characteristics of asset financed – type, location and grade.
Findings
Spreads on commercial mortgages and, therefore, loan pricing differ by the type of lender – bank, insurance company and debt fund. The property sector is another significant risk factor lenders price in. The LTV ratio has increased in importance since 2012. Prior to global financial crisis (GFC), lenders made little distinction in pricing different LTVs. Loans secured in secondary assets command a higher premium of 50–60bps. The analysis establishes an average premium of 35bps for loans advanced in regions compared to London. London is particularly seen a less risky region for loan advancements in the post-GFC era.
Research limitations/implications
The study considers the role of lender characteristics and the changing regulation in the pricing of commercial mortgage loans and provides a framework to study spreads or pricing in this market that can include additional fundamental influences, such as terms of individual loans. The ultimate aim of such research is to assess whether mortgage loans are correctly priced and spotting risks emanating from actual loan spreads being lower than fundamental-based spreads pointing to tight pricing and over-lending.
Practical implications
The analysis provides evidence on lender criteria that determine the cost of loans. The study confirms that differences in regulation affect loan pricing. The regulatory impact is most visible in the increased significance of LTV. In that sense, regulation has been effective in restricting lending at high LTV levels.
Originality/value
The paper exploits a database of a commercial mortgage loan portfolio to make loan pricing more transparent to the different types of lender and borrowers. Lenders can use the estimates to assess whether commercial loans are fairly priced. Borrowers better understand the relative significance of risk factors affecting margins and the price they are charged. The results of this paper are of value to regulators as they can assist to understand the determinants of loan margins and gauge conditions in the lending market.
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Dale Rogers, Haozhe Chen and Zac Rogers
The circular economy is a system that aims to conserve resources at every level for as long as possible with a minimization of waste. The core concept of the circular economy is…
Abstract
The circular economy is a system that aims to conserve resources at every level for as long as possible with a minimization of waste. The core concept of the circular economy is to improve resource efficiency and prevent valuable materials from leaking out of the system. Better use of increasingly scarce resources can provide both economic and environmental benefits. When excess inventory, returned products, and end-of-life products are disposed of improperly, unnecessary waste is created, often with a detrimental impact to the environment. An effective system must exist to facilitate the proper handling of these products, and secondary markets are a crucial component in this system. In this chapter, we discuss the secondary markets’ role as an important mechanism for achieving a circular economy.
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