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

Abstract

PurposeCommercial 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/approachThe 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.FindingsLondon 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/implicationsThe 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 implicationsMeasuring 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/valueThe 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.

Review of the methodological approach of analysing rental income of residential property in Abuja, Nigeria

“…Apo exhibits the 12th position in the mean income analysis and the eighth position in the yield ranking, but in reality, it has the highest growth in income to investors, while Maitama, which exhibits the highest mean income, was found at the 13th position in the income growth and 11th position in the yield analysis. This can be attributed to the variation in the adopted methodology in conformity with Poorvu (2003), Jadevicius and Huston (2015) and Devaney and Scofield (2020), who emphasised that for robust explanation and greater accuracy property performance to be achieved, simple analytical methods should be preferred to complex ones.…”

“…Devaney and Scofield (2020) modified the known perpetual inventory technique to make it simple, novel and practical towards the provision of detailed information on the value of investible corporate real estate (CRE) in cities of New York, London and Toronto. This was done through an innovative method to measure the value of investible CRE using transaction data sets and index them to produce a time series of values for each asset.…”

The impact of the COVID-19 crisis on global real estate capital flows

“…Devaney and Schofield, 2017) and ownership structure (e.g. Devaney and Schofield, 2021; Zhu and Lizieri, 2021). No previous papers have specifically addressed the significance of global real estate transactions during the more recent COVID-19 crisis over 2019–2022.…”

“…There is an extensive body of knowledge regarding real estate capital flows in a country-specific, regional and global context, in both a developed market and emerging market context. This includes Devaney et al (2019a, b), Devaney et al (2017a, b), Devaney and Schofield (2017, 2021), Fadeyi et al (2020, 2023), Fisher et al (2009), Gupta et al (2020), Ling et al (2009), McAllister and Nanda (2015, 2016a, b), McGreal and Kupke (2014), Newell et al (2010, 2013), Newell and McGreal (2015, 2017), Schofield and Devaney (2017) and Su and Taltavull (2020), Zhu and Lizieri (2021). A wide range of research issues were assessed, including determinants, ownership structures, turnover rates, investor type, investor preferences, impact on cap rates, return dynamics, asset price dynamics, role of foreign vs domestic investors, spatial dynamics and linked ownership networks.…”

“…Whilst a number of data sources were used across this real estate capital flows research, a significant number of these papers used the Real Capital Analytics (RCA) database. This includes Devaney et al (2017a, b, 2019a, b), Devaney and Schofield (2017, 2021), Fadeyi et al (2020), McGreal and Kupke (2014), Newell et al (2010, 2013), Newell and McGreal (2015, 2017), Schofield and Devaney (2017) and Zhu and Lizieri (2021). All of this previous capital flows research using this RCA data was done prior to COVID-19; hence this paper is the first paper to use this comprehensive RCA real estate transactions data to fully assess the impact of COVID-19 on global real estate capital flows.…”