Lease audit: Optimising occupancy expense savings

An Empirical Analysis of Real Estate Lending and Bank Failures: 1863-2012

Alternative assets represent an increasing share of pension fund assets, and real estate is a cornerstone of that allocation. This article investigates the trends in pension fund real estate investments over the past 3 decades, both in private and in public real estate, focusing on the performance of the asset class for the ultimate asset owners. The development of pension fund allocations to real estate differs across regions, with allocations increasing in Canada, stationary in the US, and shrinking in Europe. Slightly more than 10% of the real estate exposure is through publicly listed vehicles. Within the real estate portfolio, the authors observe a continuing increase in the use of external fund managers. Investment costs are stationary, with pension funds in the US structurally paying more to their external private real estate managers than their peers in Canada and Europe. Costs relating to public real estate are more equal across regions. In terms of performance, the authors observe rather stable total returns for both private and listed real estate over the past 3 decades, contrasting volatile performance of private equity and infrastructure. Intermediated investment management for private real estate is costly, leading to disproportionately lower net returns. <b>Key Findings</b> ▪ Current pension fund allocation to real estate is 8.3%, on average, with a 90/10 split between private real estate and public real estate. ▪ Pension funds deploy a wide range of real estate allocation strategies, with intermediation growing in popularity over the past decades. ▪ Real estate has provided stable returns over the past decades, with gross returns similar to stocks, and net returns in between bonds and stocks.

Three Decades of Global Institutional Investment in Real Estate

The real estate portfolio is a dynamic process and an ffective way to spread risk. The article analyses the risk of real estate portfolio using VaR method, and on the basis of this, establishes an optimization model for real estate portfolio under VaR constraint , in ddition, arrives its efficient frontier and optimal strategy. Finally, through a case of real estate portfolio, the paper also discusses the risk dispersing and restricting effect of VaR constraint on real estate portfolio.

Diversification potential in real estate portfolios

This paper examines the risks associated with real estate investment, leveraging Modern Portfolio Theory (MPT) introduced by Harry Markowitz and later applied to real estate by Nigel Dubben and Sarah Sayce. MPT emphasizes balancing expected returns and risk through diversification, crucial in real estate due to its low correlation with other assets and its inflation-hedging properties. Despite global economic integration increasing systemic risks, real estate remains a key asset class for risk management. The literature review highlights traditional strategies focusing on diversifying by property type and geographic location. Studies show mixed results: some suggest property type diversification yields higher returns, while others find geographic diversification more effective for risk mitigation. Chinese market studies reveal that real estate investments can provide predictable returns and act as a hedge during economic downturns. Research on Beijing and Shanghai supports the effectiveness of geographic diversification within China. Applying MPT to real estate, the paper demonstrates through case studies how investment combinations can balance risk and returns. It discusses the Efficient Frontier, CAPM, and Arbitrage Pricing Theory to illustrate the relationship between risk and return in real estate portfolios. The analysis concludes that diversification strategies, though complex, are essential for optimizing performance and mitigating risks in real estate investments.

PurposeThe purpose of this paper is to explore a regime switching asset allocation model that includes six major real estate security markets (USA, UK, Japan, Australia, Hong Kong and Singapore) and focuses on how the presence of regimes affects portfolio composition.Design/methodology/approachA Markov switching model is first developed to characterize real estate security markets’ risk‐return in two regimes. The mean‐variance portfolio construction methodology is then deployed in the presence of the two regimes. Finally, the out‐of‐sample analyzes are conducted to examine whether the regime switching allocation outperforms the conventional allocation strategy.FindingsStrong evidence of regimes in the six real estate security markets in detected. The correlations between the various real estate security markets’ returns are higher in the bear market regime than in the bull market regime. Consequently the optimal real estate portfolio in the bear market regime is very different from that in the bull market regime. The out‐of‐sample tests reveal that the regime‐switching model outperforms the non‐regime dependent model, the world real estate portfolio and equally‐weighted portfolio from risk‐adjusted performance perspective.Originality/valueThe application of the Markov switching technique to real estate markets is relatively new and has great significance for international real estate diversification. With increased significance of international securitized property as a real estate investment vehicle for institutional investors to gain worldwide real estate exposure, this study provides significant insights into the investment behavior and optimal asset allocation implications of the listed real estate when returns follow a regime switching process.

What Makes A Household Landlord? Ownership of Real Estate U.S. Households

Real estate portfolio diversification takes many forms, most of which can be associated with size (value). Larger portfolios are assumed to have greater diversification potential than small portfolios. In addition, since greater diversification is generally associated with lower risk it is assumed that larger portfolios will also have reduced return variability compared to smaller portfolios. If large real estate portfolios can simply be regarded as scaled-up, better-diversified, versions of small real estate portfolios, then the greater a portfolio's size, the lower the risk. This suggests a negative relationship between size and risk. If however large real estate portfolios are not just scaled-up versions of small portfolios, these relationships may not hold. This paper explores the empirical relationship between real estate portfolio size, diversification and risk using the returns from 136 UK real estate portfolios over the period 1989 to 1999. Using a conceptually sound measure of overall portfolio diversification (R²) it is shown that a significantly positive correlation between size and diversification does not necessarily translate into the expected negative correlation between size and risk. The analysis shows that increasing portfolio size may lead to a larger reduction in specific risk than previous studies have identified, with the proviso that this increase is not accompanied by other risk- enhancing activities. In the context of portfolio management this leads to a view that performance evaluation and benchmarking should seek to control for the style and specialisation of the fund (managers) because it seems clear that systematic risk does vary to an appreciable extent because of these features.

Real estate investment: Market volatility and optimal holding period under risk aversion

Since the increase of value of real estate is no longer taken for granted, investors are looking for ways to ensure their direct return on real estate. Optimizing the occupancy rate and minimizing operating costs are important issues when calculating the direct return. For that reason, the role of the real estate manager that is responsible for daily management of the investor’s real estate portfolio, has become more important. The real estate manager has to demonstrate to the investor his or her capabilities in managing and controlling rental income and operating costs. The aim of this paper is to define the key indicators for measuring real estate management performances. The measurement of these indicators provides investors important information when improving their real estate management processes and evaluating their contracted real estate managers. Also the paper demonstrates how information about management performances can be shared by real estate investors as well as their managers by means of an online management information tool.

This paper aims to examine the issue of economic diversification in the context of the office markets in New York and London. These two markets are two of the most liquid office markets and attract a large degree of international investment. However, both cities are key financial service centres and are heavily interlinked. The paper analyses the diversification opportunities available and the linkages between the two markets. These results are then compared against tests concerning the entire UK and US markets. The paper also examines the key driving forces behind the two markets, incorporating key financial indicators in the modeling. Markets such as New York and London will be heavily influenced by the actual performance of the capital markets and the financial institutions. If the markets are performing well, the profitability of institutions will on average tend to increase, leading to increased occupational demand. Ironically, therefore, an institution's own corporate performance may be a highly influential factor on the performance of its real estate portfolio. In addition, the linkages between the stock and real estate markets would also potentially have implications for the role of such markets within a mixedasset portfolio framework. If markets such as New York and London are linked in a fundamental sense to the stock markets, then investment in such markets may provide reduced diversification benefits when the real estate portfolio is considered as part of an overall mixed-asset portfolio.

Shareholder value must remain central to the attention of corporate real estate officers (CREOs), even though senior executives have a number of competing agendas. One reason for this is that shareholder value is a vital performance indicator for any important ancillary service; another is that CREOs can help to improve shareholder’s wealth in a unique way. It is well known that occupancy costs directly affect the net earnings of the firm and thus the extent of any surplus it can generate over the annual charge for the use of capital. Occupancy costs also influence how large that charge for resources should be in the first place. Firms pay investors for the use of capital but, in efficient capital markets, the cost is only related to the risk that investors cannot remove by holding a basket of shares. This risk is the intrinsic variability of the cashflows derived from the activities of the firm. This variability is in turn influenced by the amount of company borrowing and by the ratio of fixed to variable costs. Even after allowing for the effect of gearing, the investor’s likely returns are determined by the amount of fixed costs required to generate sales revenues. This is important to CREOs because occupancy costs are a large proportion of most fixed costs. CREOs can therefore influence shareholder value both by the volume of all occupancy costs and by the proportion of fixed costs or leverage that their decisions incur. An indicator of the degree of real estate leverage (DREL) could therefore be a very valuable tool for CREOs. It would also give them more influence in key financial decisions and should raise more interest in real estate issues among shareholders and senior executives.

Nudging towards sustainability: A systematic review of digital strategies for achieving ESG goals in corporate real estate

&lt;p&gt;When planning to develop corporate real estate, Corporates have to choose between different forms of organization and sourcing. The choice of the most suitable form is a crucial decision and often problematic for companies and their corporate real estate management. Different forms like multiple prime contracts, general constructor or partnership based development forms differ with regard to their advantages, disadvantages and requirements for realization. In this context the purpose of this paper is to develop a decision support tool which helps Corporates to maximize their project outcome, project success and, in the long-term, to optimize their real estate portfolio when developing new corporate real estate.&lt;/p&gt;\n&lt;p&gt;To form a scientific basis firstly relevant objectives and requirements in decision-making processes from literature research will be presented. Secondly these decision-making processes and existing tools for comparable situations in literature will then be analyzed. Thirdly the deduced model, which shows the framework for decision-making from literature, is evaluated with a case study and aggregated to specific decision-making criteria from the CREM point of view. The underlying case study was a real estate development project for a German Corporate.&lt;/p&gt;\n&lt;p&gt;As a result 15 criteria, relevant in decision-making processes of Corporates, can be identified. On this basis, a model is chosen from decision theory, which supports the solution of such decision problems. This decision support tool sums up all decision criteria for CREM in a structure for the first time and will allow Corporates to structure their decision-making process for real estate development projects and will help to make them more transparent.&lt;/p&gt;