Transaction based indices for the UK commercial real estate market: an exploration using IPD transaction data

Devaney, Steven; Diaz, Roberto Martinez

doi:10.1080/09599916.2011.601317

Cited by 36 publications

(33 citation statements)

References 21 publications

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“…While the average property from the 2000 to 2002 sample is substantially smaller in value than the average asset bought in the 2005-2008 sample, median times to completion were significantly shorter in the 2005-2008 period. Moreover, that the average value of real estate bought during the 2005-2008 period was substantially higher than that sold during the 2000-2002 period is consistent with Devaney and Diaz (2011) who note that institutions have been selling smaller valued lots and buying larger valued assets over these periods. This is noteworthy as it suggests that despite the limited number of transactions sampled across the periods aggregate characteristics of the properties analysed are in-line with broader trends in the investment market.…”

Section: Resultssupporting

confidence: 81%

“…The data indicates the average value of commercial real estate acquired 2005-2008 was £25 million conforming to the £20 million "ideal" investment value (Table II). Meanwhile, assets sold (2000Meanwhile, assets sold ( -2002 were smaller on average, reflecting a trend to sell smaller assets from institution portfolios over the last decade (Devaney and Diaz, 2011) (Table II). This is further illustrated in data provided by the IPD indicating a general downward trend in the total number of properties held by those institutions who contribute to the IPD data (broadly, the largest institutions involved in commercial real estate investment in the UK).…”

Section: Transaction Analysismentioning

confidence: 99%

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Time to completion liquidity in UK commercial real estate investment: 2000‐2008

Scofield

2013

Journal of European Real Estate Research

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Purpose -The purpose of this paper is to provide new insights into asset liquidity in direct commercial real estate investment in the UK. Transaction data provided by four institutional investors of commercial real estate are used to test for changes in asset liquidity as manifest in recorded times from price agreement to deal completion. Median times to completion by stage of the transaction are presented alongside industry estimates. Design/methodology/approach -Stages of the transaction process are modelled and median times per stage calculated to track changes in asset liquidity over, and between, the two periods of the study (2000-2002 and 2005-2008). Real times to completion are considered in conjunction with estimated times compiled through interviews with senior level investment professionals. This paper applies the Wilcoxon rank-sum test to determine the significance of variation in median times across the two study periods. Findings -This paper provides empirical evidence that liquidity increased from 2000 to 2008. Median times from price agreement to completion decreased significantly ( p ¼ 0.015) from 2000-2002 to 2005-2008, indicating an increase in asset liquidity in step with an overall increase in transaction volume. Furthermore, senior investment actors were found to persistently over-estimate transaction efficiency and underestimate liquidity risk when acquiring and disposing of commercial properties. Research limitations/implications -This work offers new insights into the changing nature of asset liquidity over the last decade based on a limited number of transactions. Additional studies involving larger samples of transactions would provide still greater insight into commercial real estate liquidity dimensions. Practical implications -The paper presents evidence of pro-cyclicality; asset liquidity varies positively with overall transaction volumes, and investment actors were found to overestimate asset liquidity suggesting a persistent underestimation of liquidity risk. Originality/value -This paper addresses a gap in the extant literature offering real time on market-time to completion observations alongside investor estimates. Median times to completion have been modelled and presented, together with time estimates provided by industry experts. Also, for first time in real estate research, median times to completion are shown to shorten significantly in-line with increasing transaction volumes.

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Section: Resultssupporting

confidence: 81%

Section: Transaction Analysismentioning

confidence: 99%

Time to completion liquidity in UK commercial real estate investment: 2000‐2008

Scofield

2013

Journal of European Real Estate Research

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“…European experience is that valuation methods differ across countries and, to a lesser extent, by different valuers within countries (Kanutin, 2013). There is evidence of a dampening or smoothing of market price volatility and a tendency of appraisal indexes to lag market price indexes, see Devaney and Diaz (2011), Fisher and , and Geltner et al, (2003). Notably, users have an established preference for transaction-based indexes.…”

Section: A Appraisal-based Indexesmentioning

confidence: 99%

Commercial Property Price Indexes: Problems of Sparse Data, Spatial Spillovers, and Weighting

Silver

Graf²

2014

IMF Working Papers

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Transaction-price residential (house) and commercial property price indexes (RPPIs and CPPIs) have inherent problems of sparse data on heterogeneous properties, more so CPPIs. In an attempt to control for heterogeneity, (repeat-sales and hedonic) panel data regression frameworks are typically used for estimating overall price change. We address the problem of sparse data, demonstrate the need to include spatial price spillovers to remove bias, and propose an innovative approach to effectively weight regional CPPIs along with improvements to higher-level weighting systems. The study uses spatial panel regressions on granular CPPIs for the United States (US).

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“…(). See Devaney and Diaz () and Bokhari and Geltner () for applications of the hedonic regression methodology in the commercial property context.…”

mentioning

confidence: 99%

Commercial Property Price Indexes and the System of National Accounts

Diewert

Fox²,

Shimizu

2015

Journal of Economic Surveys

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The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country. Related service price indexes for the land and structure input components of a commercial property are required in the Production Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the System of National accounts. The paper reviews existing methods for constructing an overall Commercial Property Price Index (CPPI) and concludes that most methods are biased (due to their neglect of depreciation) and more importantly, not able to provide separate land and structure subindexes. A class of hedonic regression models that is not subject to these problems is discussed.

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Transaction based indices for the UK commercial real estate market: an exploration using IPD transaction data

Cited by 36 publications

References 21 publications

Time to completion liquidity in UK commercial real estate investment: 2000‐2008

Time to completion liquidity in UK commercial real estate investment: 2000‐2008

Commercial Property Price Indexes: Problems of Sparse Data, Spatial Spillovers, and Weighting

Commercial Property Price Indexes and the System of National Accounts

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