Non-Traditional Property Types:<i>Part of a Diversified Real Estate Portfolio?</i>

McIntosh, Will; Fitzgerald, Mark; Kirk, John

doi:10.3905/jpm.2017.43.6.062

Cited by 13 publications

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“…Despite being considered as a nascent asset investment class, the increasing significance of the alternative property sectors has attracted a number of empirical investigations on their risk-adjusted performance and portfolio enhancement attributes, both in the context of broad alternative property sectors (McIntosh et al , 2017) and sector-specific coverage such as healthcare properties (Newell and Marzuki, 2018a) and student accommodation (Newell and Marzuki, 2018b). Meanwhile, previous studies on data centre properties are confined to issues pertaining to valuation applications (McAllister and Loizou, 2009), planning considerations (Jones, Hillier and Comfort, 2013; Jones, Hillier, Comfort and Clarke-Hill, 2013), sustainability practices (Jones, Hillier and Comfort, 2013; Jones, Hillier, Comfort and Clarke-Hill, 2013; Shuja et al , 2016) and energy consumption and efficiency (Abaunza et al , 2018; Depoorter et al , 2015; Flucker et al , 2018; Oro et al , 2015).…”

Section: Introductionmentioning

confidence: 99%

The emergence of data centres as an innovative alternative property sector

Marzuki¹,

Newell

2019

JPIF

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Purpose As one of the increasingly important alternative property sectors, data centres are a technology-focused property sector that is taking advantage of the growing investment intensity in technology-related infrastructure, against the backdrop of constant innovation and advancement in technology. The purpose of this paper is to assess the preliminary risk-adjusted performance and portfolio diversification benefits of data centre Real Estate Investment Trusts (REITs) in the USA, Australia and Singapore. The strategic implications going forward for data centres as an innovative property sector in the property investment space are also highlighted. Design/methodology/approach Using monthly total returns, the average annual return, annual risk, risk-adjusted performance and portfolio diversification benefits of data centre REITs in the USA, Australia and Singapore over 2016–2018 are assessed. Optimal asset allocation analysis is performed to investigate the value-added role of data centre REITs in a mixed-asset portfolio. Findings Data centre REITs delivered strong average annual return performance, outperforming the composite REITs in all three markets. This also sees data centre REITs being riskier than the overall REIT sector due to the non-traditional and maturing status of the data centre property sector. On a risk-adjusted basis, competitive performance was recorded for data centre REITs, with data centre REITs in the USA and Singapore outperforming their respective composite REITs. This performance is also delivered with significant portfolio diversification benefits with the stock market, resulting in data centre REITs contributing to the US mixed-asset portfolios across a diverse risk spectrum. Practical implications Institutional investors are now giving increased emphasis to alternative property sectors with better risk-return trade-offs. Improved performance and diversification benefits are achieved by supplementing existing property portfolios with non-traditional property sectors with counter-cyclical risk-return profiles, one of which is the data centre property sector. This sees data centres as an important alternative property sector, having technology-based drivers and being recognised as having a clear path towards institutionalisation with the major investors in the near future. Originality/value This paper is the first published empirical research analysis that specifically assessed the preliminary performance and diversification benefits of data centre REITs in the USA, Australia and Singapore. This research enables empirically validated, more informed and practical property investment decision making by institutional investors regarding the future strategic role of the data centre property sector as an innovative sector in the institutional property investment space.

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Section: Introductionmentioning

confidence: 99%

The emergence of data centres as an innovative alternative property sector

Marzuki¹,

Newell

2019

JPIF

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“…The methodology used in this paper to examine these two important research questions are the standard procedures to examine the role of a specific property sector in a mixed-asset portfolio. Previous papers using these empirical procedures include the role of UK REITs (Newell and Marzuki, 2016), the role of German REITs (Newell and Marzuki, 2018a), the role of French REITs (Newell et al ., 2013), the post-GFC role of US commercial property (Marzuki and Newell, 2017), the role of property companies on the AIM stock market (Newell and Marzuki, 2018b) and the role of alternative property sectors in a US portfolio (McIntosh et al ., 2017). Importantly, these standard procedures have enabled a very clear picture to emerge regarding the strategic role of student accommodation in a mixed-asset portfolio, with significant institutional investor implications.…”

Section: Methodsmentioning

confidence: 99%

“…(2013) considered student accommodation from a property perspective, assessing the importance of demand factors for student accommodation in a US university context. McIntosh et al . (2017) also considered student accommodation as a non-traditional property type (along with self-storage, healthcare, senior housing and medical office), using the US NCREIF direct property data along with six traditional property sectors (multifamily, office, mall, shopping centres, industrial and hotel) for a US property portfolio over 2005–2015, with the focus being on the fuller alternative property sectors contribution rather than student accommodation specifically.…”

Section: Introductionmentioning

confidence: 99%

The emergence of student accommodation as an institutionalised property sector

Newell

Marzuki

2018

JPIF

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Purpose Amongst the alternative property sectors, student accommodation has recently become an important institutionalised property sector for pension funds and sovereign wealth funds in the global property landscape, particularly in the UK. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of student accommodation in a UK property and mixed-asset portfolio over 2011–2017. Drivers and risk factors for the ongoing development of the student accommodation sector are also identified. The question of student accommodation being a proxy for residential property exposure by institutional investors is also assessed. Design/methodology/approach Using annual total returns, the risk-adjusted performance and portfolio diversification benefits of UK student accommodation over 2011–2017 is assessed. Asset allocation diagrams are used to assess the role of student accommodation in a UK property portfolio and in a UK mixed-asset portfolio for a range of property investor types. Findings UK student accommodation delivered superior risk-adjusted returns compared to UK property, stocks and REITs over 2011–2017, with portfolio diversification benefits. Importantly, this sees UK student accommodation as strongly contributing to the UK property and mixed-asset portfolios across the entire portfolio risk spectrum and validating the property industry perspective of student accommodation being low risk and providing diversification benefits. Student accommodation is also not seen to be a proxy for residential exposure by institutional investors. Practical implications Student accommodation is an alternative property sector that has become increasingly institutionalised in recent years. The results highlight the important role of student accommodation in a UK property portfolio and in a UK mixed-asset portfolio. The strong risk-adjusted performance of UK student accommodation compared to UK property, stocks and REITs over this timeframe sees UK student accommodation contributing to the mixed-asset portfolio across the entire portfolio risk spectrum. This is particularly important, as many investors (e.g. pension funds, sovereign wealth funds) now see student accommodation as an important property sector in their overall portfolio. Originality/value This paper is the first published empirical research analysis of the risk-adjusted performance of UK student accommodation, and the role of student accommodation in a UK property portfolio and in a UK mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision making regarding the strategic role of student accommodation as an alternative property sector in a portfolio.

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“…It is advisable that assets of the same portfolio are located in international geographic contexts since there is poor correlation from an economic, political or tourist point of view, so as to reduce the probability that local events can negatively affect the entire investment, compromising its performance (Beckers et al, 1996;Glascock and Kelly, 2007;Lizieri and Pain, 2014;Gibilaro and Mattarocci, 2016;Berk, 2017). Regarding typological diversification within real estate asset, McIntosh et al (2017) find that adding non-traditional property types (self-storage, healthcare, senior living, student housing and manufactured homes) to traditional ones (residential, office, commercial and hotel) would improve risk-adjusted performance, due to the low level of return correlations between different property typologies (Oertel et al, 2019). As regards to the investment period -factor b) -Campbell et al (2003) underline that return predictability has great impact on the optimal longterm asset allocation for low risk profile investors (Fugazza et al, 2007).…”

Section: Introductionmentioning

confidence: 99%

An asset allocation model for defining optimal property portfolios in terms of risk/return

Locurcio¹,

Giudice²,

Tajani³

et al. 2022

Valori E Valutazioni

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The widespread uncertainty that characterizes the current world economic situation has also influenced the real estate market, leading investors towards generally lower risk profiles and more stable returns. However, in the absence of adequate skills, it is difficult to carefully manage the main risks factors which occur during the decision-making process. The aim of the research is to define and implement an asset allocation evaluation model able to support public and private investors for the identification of the most suitable allocation of limited financial resources for core/core plus real estate investments. The computational logic of goal programming is applied for detecting the optimal composition of property portfolios in terms of risk/return. The proposed model has been implemented to an Italian case study, proving to be a valid support tool in the definition of efficient real estate investment strategies. L’instabile congiuntura economica ha determinato un atteggiamento prudente degli investitori immobiliari pubblici e privati, indirizzandoli verso strategie di allocazione delle risorse caratterizzate da rischi contenuti e da rendimenti costanti. Nonostante ciò, i fattori di rischio che possono influenzare la performance di un portafoglio immobiliare sono molteplici e spesso difficilmente gestibili senza le competenze adeguate. L’obiettivo della presente ricerca riguarda la definizione e la sperimentazione di un asset allocation model che, attraverso la logica e gli algoritmi del Goal Programming, possa supportare il generico investitore – dotato di budget finanziario prestabilito e interessato ad investimenti di tipo core e core-plus - nel complesso processo decisionale finalizzato alla costruzione di portafogli immobiliari “ottimali” in termini di rischio/rendimento. I risultati ottenuti dall’applicazione a un ipotetico caso studio inerente a immobili ubicati nel contesto territoriale italiano, evidenziano le potenzialità del modello proposto, quale valido strumento di supporto alle decisioni nella definizione di strategie d’investimento immobiliare efficienti.

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Non-Traditional Property Types:Part of a Diversified Real Estate Portfolio?

Cited by 13 publications

References 13 publications

The emergence of data centres as an innovative alternative property sector

The emergence of data centres as an innovative alternative property sector

The emergence of student accommodation as an institutionalised property sector

An asset allocation model for defining optimal property portfolios in terms of risk/return

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