ARES and the Formation of the International Real Estate Society

Since 1991 the American Real Estate Society (ARES) Board has been working with representatives from around the world to establish an umbrella organization--the International Real Estate Society (IRES). The intent of the organization is to link real estate researchers and educators on an international basis. This paper highlights the progress that has been made and the role ARES has played in establishing IRES, as well as the two new regional societies--the European Real Estate Society and the Pacific Rim Real Estate Society. Along with ARES, these organizations were the founding members of the International Real Estate Society.

European Economic Integration and Commercial Real Estate Markets: An Analysis of Trends in Market Determinants

Economic theory predicts economic integration in the European Community (EC) will result in single markets for individual goods, services and factors of production. The specific characteristics of commercial real estate make it unlikely that a single market will result. However, even without a single market, theory predicts that markets for similar real estate (commercial office, industrial and retail) will converge as a result of economic integration. This paper examines several market determinants to see if we can find evidence of the predicted convergence. Looking at data from 1983 to 1994 we find evidence of some convergence but the extent is small and major institutional differences within the countries remain. Implications are that barriers to the efficient flow of investment funds into real estate remain and distinct markets will continue to characterize real estate within the EC.

The Real Estate Research Interests of the Plan Sponsor Community: Survey Results

This study extends the literature that investigates the use of buyer and seller characteristics in traditional hedonic price equation regressions. This study adds to the existing literature on the relationship between parcel size and price, coined plattage by Colwell and Sirmans (1980). The results reveal statistically significant buyer and seller effects. Also, the results confirm the existence of the plattage effect and reveal a statistically significant change in the plattage effect over time. The findings of this study should prove useful to those interested in the behavior of land markets on an urban fringe.

Adversarial Brokerage in Residential Real Estate Transactions: The Impact of Separate Buyer Representation

Although substantial research effort has been directed to the examination of optimal search and pricing behavior under traditional brokerage arrangements, market outcomes under conditions of undisclosed subagency and buyer representation have not been fully explored. This study applies the legal and economic theory of agency to real estate markets with cooperating brokers. The existence of cooperating brokers acting as subagents of the seller with the buyer’s full knowledge does not change the buyer’s and seller’s net payoffs relative to the single-agent case. However, when the buyer mistakenly believes that the cooperating broker/subagent is acting as his agent in negotiations, there may be informational gains that result in a higher selling price and a higher payoff to the seller at the expense of the buyer. The analysis indicates that buyer brokers may be a potential solution to this agency problem. When both parties to a real estate transaction have separate representation, their net payoffs are shown to be higher and the sales price lower than under traditional brokerage arrangements. The result is dependent on several factors, including: market conditions, relative bargaining power of the parties, method of broker compensation, and disclosure of the status of the buyer broker.

Are property prices non-linear? An investigation of the behaviour of US REITs and UK property company shares

Linear models of market performance may be misspecified if the market is subdivided into distinct regimes exhibiting different behaviour. Price movements in the US Real Estate Investment Trusts and UK Property Companies Markets are explored using a Threshold Autoregressive (TAR) model with regimes defined by the real rate of interest. In both US and UK markets, distinctive behaviour emerges, with the TAR model offering better predictive power than a more conventional linear autoregressive model. The research points to the possibility of developing trading rules to exploit the systematically different behaviour across regimes

Real Interest Regimes and Real Estate Performance: A Comparison of UK and US Markets

Linear models of market performance may be misspecified if the market is subdivided into distinct regimes exhibiting different behavior. Price movements in the United States real estate investment trusts and United Kingdom property companies markets are explored using a threshold autoregressive (TAR) model with regimes defined by the real rate of interest. In both U.S. and U.K. markets, distinctive behavior emerges, with the TAR model offering better predictive power than a more conventional linear autoregressive model. The research points to the possibility of developing trading rules to exploit the systematically different behavior across regimes.

Hedging Private International Real Estate

The performance of an international real estate investment can be critically affected by currency fluctuations. While survey work suggests large international investors with multi-asset portfolios tend to hedge their overall currency exposure at portfolio level, smaller and specialist investors are more likely to hedge individual investments and face considerable specific risk. This presents particular problems in direct real estate investment due to the lengthy holding period. Prior research investigating the issue relies on ex post portfolio measure, understating the risk faced. This paper examines individual risk using a forward-looking simulation approach to model uncertain cashflow. The results suggest that a US investor can greatly reduce the downside currency risk inherent in UK real estate by using a swap structure – but at the expense of dampening upside potential.International Real Estate, Investment, Hedging, Currency Derivative Markets

An International Perspective on Real Estate Research Priorities

Surveys of real estate research priorities for real estate fund managers in the United States, United Kingdom, Australia and Germany over 2000–03 are examined. Thirty-nine real estate research priorities are assessed, with much closer alignment forreal estate research priorities in the U.K., Germany and Australia than seen for the U.S. The role of real estate in a mixed-asset portfolio and real estate and portfolio risk management figure prominently amongst the general real estate research priorities. The top specific real estate research priorities were the impact of capital flows, real estate cycles and real estate portfolio diversification. The underlying general real estate research priorities ‘dimensions’ highlight the strategic issues involved in real estate research, particularly the changing real estate environment, strategic real estate issues and the role of real estate in the portfolio