74 research outputs found

    The Growth of Private Property Vehicles in the UK: Causes and Conditions

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    The UK private indirect real estate market has seen a rapid growth in the last seven years. The gross asset value (GAV) of the private property vehicle (PPV) market has about tripled from a GAV of £22.6bn in 1998 to a GAV of £67.1 billion at the end of 2005 (OPC, 2006).  Although this trend of growing syndication of real estate is not only a UK phenomenon, the rate of growth has been significantly faster in the UK. For example the German open-ended funds have grown over the same period from €50.4bn to €85.1bn (BVI, 2006). In the US the market capitalization of equity real estate investment trusts (REIT) has grown 155% since 1999 to US$ 301bn (NAREIT, 2006). Each jurisdiction is offering different formats to invest indirectly into real estate but at the core all these vehicles are the same in that they provide a different route for investors to access real estate. In the UK, although the range of ‘products’ is now quite diverse, all structures have in common the ‘wrapping’ of property assets into a multi-investor vehicle. This paper examines the nature, pattern and process of market growth in PPVs and constructs a series of associations between causes and effects to explain this market shift. Private Property Vehicle, PPV, REIT,

    The Impact of Energy Performance Certificates on the Rental and Capital Values of Commercial Property Assets: Some Preliminary Evidence from the UK

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    This paper focuses on the effect of energy performance ratings on the capital values, rental values and equivalent yields of UK commercial property assets.  Of which a small number are also BREEAM rated, the study is based upon 708 commercial property assets held in the IPD UK Universe drawn from across all PAS segments. Incorporating a range of controls such as unexpired lease term, vacancy rate and tenant credit risk, hedonic regression procedures are used to estimate the effect of EPC rating. The study finds no evidence of a strong relationship between environmental and/or energy performance and rental and capital value. Bearing in mind the small number of BREEAM rated assets, there was a small but statistically significant effect on equivalent yield only. Similarly, there was no evidence that the EPC rating had any effect on Market Rent or Market Value with only minor effects of EPC ratings on equivalent yields.  The preliminary conclusion is that energy labelling is not yet having the effects on Market Values and Market Rents that provide incentives for market participants to improve the energy efficiency of their commercial real estate assets.Energy Performance Certificates, commercial property, values

    The Production and Consumption of Commercial Real Estate Market Forecasts

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    Whilst the vast majority of the research on property market forecasting has concentrated on statistical methods of forecasting future rents, this report investigates the process of property market forecast production with particular reference to the level and effect of judgemental intervention in this process. Expectations of future investment performance at the levels of individual asset, sector, region, country and asset class are crucial to stock selection and tactical and strategic asset allocation decisions.  Given their centrality to investment performance, we focus on the process by which forecasts of rents and yields are generated and expectations formed.  A review of the wider literature on forecasting suggests that there are strong grounds to expect that forecast outcomes are not the result of purely mechanical calculations.Real Estate, Forecast, Real Estate Markets, Commercial Real Estate

    Analysing Uk Real Estate Market Forecast Disagreement

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    Given the significance of forecasting in real estate investment decisions, this paper investigates forecast uncertainty and disagreement in real estate market forecasts.  Using the Investment Property Forum (IPF) quarterly survey amongst UK independent real estate forecasters, these real estate forecasts are compared with actual real estate performance to assess a number of real estate forecasting issues in the UK over 1999-2004, including real estate forecast error, bias and consensus. The results suggest that real estate forecasts are biased, less volatile compared to market returns and inefficient in that forecast errors tend to persist.    The strongest finding is that real estate forecasters display the characteristics associated with a consensus indicating herding.Real Estate Forecasting, Forecast Accuracy, Forecast Disagreement, Consensus.

    An Evaluation Of The Performance Of UK Real Estate Forecasters

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    Given the significance of forecasting in real estate investment decisions, this paper investigates forecast uncertainty and disagreement in real estate market forecasts. It compares the performance of real estate forecasters with non-real estate forecasters. Using the Investment Property Forum (IPF) quarterly survey amongst UK independent real estate forecasters and a similar survey of macro-economic and capital market forecasters, these forecasts are compared with actual performance to assess a number of forecasting issues in the UK over 1999-2004, including forecast error, bias and consensus. The results suggest that both groups are biased, less volatile compared to market returns and inefficient in that forecast errors tend to persist. The strongest finding is that forecasters display the characteristics associated with a consensus indicating herding.Real Estate Forecasting, Forecast Accuracy, Forecast Disagreement, Individual Forecast, Consensus

    Taking the LEED? Analyzing Spatial Variations in Market Penetration Rates of Eco-Labeled Properties

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    This paper investigates the impact of policies to promote the adoption of LEED-certified buildings across CBSA in the United States. Drawing upon a unique database that combines data from a large number of sources and using a number of regression procedures, the determinants of the proportion LEED-certified  space for more than 170 CBSA in the US is modeled.  LEED-certified space still accounts for a relatively small proportion of commercial stock in all markets.  The average proportion is less than 1%.  There is no conclusive evidence of a positive impact of policy intervention on the levels of LEED-certified space. However, after accounting for bias introduced by non-random assignment of policies, we find preliminary evidence of a positive impact of city-level green building incentives. There is a significant positive association between market size and indicators of economic vitality on proportions of LEED-certified space.energy efficiency, LEED, real estate, innovation diffusion, eco-labeling

    Private Property Vehicles: The Valuation of Interests in Limited Partnerships

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    This paper examines the extent to which the valuation of partial interests in private property vehicles should be closely aligned to the valuation of the underlying assets.    A sample of vehicle managers and investors replied to a questionnaire on the qualities of private property vehicles relative to direct property investment. Applying the Analytic Hierarchy Process (AHP) technique the relative importance of the various advantages and disadvantages of investment in private property vehicles relative to acquisition of the underlying assets are assessed.  The results suggest that the main drivers of the growth of the this sector have been the ability for certain categories of investor to acquire interests in assets that are normally inaccessible due to the amount of specific risk.  Additionally, investors have been attracted by the ability to ‘outsource’ asset management in a manner that minimises perceived agency problems.  It is concluded that deviations from NAV should be expected given that investment in private property vehicles differs from investment in the underlying assets in terms of liquidity, management structures, lot size, financial structure inter alia.  However, reliably appraising the pricing implications of these variations is likely to be extremely difficult due to the lack of secondary market trading and vehicle heterogeneity. Private Property Vehicles, PPV, Valuation
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