Pub Date : 2021-02-21DOI: 10.1108/JERER-11-2020-0055
John V. Duca, Martin Hoesli, Joaquim Montezuma
Purpose: The article analyzes the effects of the COVID-19 pandemic on house prices. Design/Methodology/Approach: We start by discussing the possibility that house price indexes may not fully incorporate the effects of the pandemic as of yet. Against the background of the pandemic, we then analyze economic and behavioral effects affecting house prices. We also discuss how the linkages between tourism and house prices have been affected. We further present evidence of an emerging shift in preferences from urban locations to more peripheral ones. Findings: We report variance in the evolution of house prices across countries at the onset of the pandemic, with locations depending heavily on tourism showing slower price appreciation while appreciation has firmed in other places. We argue that the resilience of house prices is due not only to the low interest rate environment and government efforts to support firms and households, but also behavioral factors. In some locations, the price of condominiums has declined relative to the price of detached houses. This could indicate that wealthier households are seeking more space and larger units as a result of the crisis. There is also evidence of a downward pressure on rents, leading to increased price-rent ratios in the U.S. Originality/Value: By considering both economic and behavioral factors, this paper provides for a better understanding of the resilience and realignment of house prices at the onset of the COVID-19 pandemic.
{"title":"The resilience and realignment of house prices in the era of Covid-19*","authors":"John V. Duca, Martin Hoesli, Joaquim Montezuma","doi":"10.1108/JERER-11-2020-0055","DOIUrl":"https://doi.org/10.1108/JERER-11-2020-0055","url":null,"abstract":"Purpose: \u0000The article analyzes the effects of the COVID-19 pandemic on house prices. \u0000 \u0000Design/Methodology/Approach: \u0000We start by discussing the possibility that house price indexes may not fully incorporate the effects of the pandemic as of yet. Against the background of the pandemic, we then analyze economic and behavioral effects affecting house prices. We also discuss how the linkages between tourism and house prices have been affected. We further present evidence of an emerging shift in preferences from urban locations to more peripheral ones. \u0000 \u0000Findings: \u0000We report variance in the evolution of house prices across countries at the onset of the pandemic, with locations depending heavily on tourism showing slower price appreciation while appreciation has firmed in other places. We argue that the resilience of house prices is due not only to the low interest rate environment and government efforts to support firms and households, but also behavioral factors. In some locations, the price of condominiums has declined relative to the price of detached houses. This could indicate that wealthier households are seeking more space and larger units as a result of the crisis. There is also evidence of a downward pressure on rents, leading to increased price-rent ratios in the U.S. \u0000 \u0000Originality/Value: \u0000By considering both economic and behavioral factors, this paper provides for a better understanding of the resilience and realignment of house prices at the onset of the COVID-19 pandemic.","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2021-02-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86308025","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-02-06DOI: 10.1108/JERER-05-2020-0029
H. Cooke, R. Appel-Meulenbroek, Theo Arentz
Purpose The purpose of this paper is to identify the variables that influence corporate real estate (CRE) decision-making and gauge their relative importance to each other, thereby understanding the consequent challenges/implications for CRE managers (CREM’s). Design/methodology/approach Interviews were undertaken with experienced CREM’s using the causal network elicitation technique to create decision networks for the variables they considered for the specifically defined scenario: dealing with surplus property from a change of business strategy. These networks illustrate the complexity of the mental representations required for the realignment of the CRE portfolio. The key variables are more extensive than alignment theory suggests, namely, financial stakeholders. Additional variables identified include risk, lease accounting, costs, financial analysis, business metrics and motivational drivers. The latter indicates the importance of self-esteem and peer recognition for CREM’s and financial benefits for the C-suite. Accordingly strategy alignment needs to incorporate CRE both in terms of strategy creation and implementation. Findings These networks illustrate the complexity of the mental representations required for the realignment of the CRE portfolio. The key variables are more extensive than alignment theory suggests, namely, financial stakeholders. Additional variables identified include risk, lease accounting, costs, financial analysis, business metrics and motivational drivers. The latter indicates the importance of self-esteem and peer recognition for CREM’s and financial benefits for the C-suite. Accordingly, strategy alignment needs to incorporate CRE both in terms of strategy creation and implementation. Originality/value This research appears to be the first that looks in detail at the mental representations used by decision-makers while making CRE decisions.
{"title":"Lifting the lid on the black box of corporate real estate decision-making; dealing with surplus property","authors":"H. Cooke, R. Appel-Meulenbroek, Theo Arentz","doi":"10.1108/JERER-05-2020-0029","DOIUrl":"https://doi.org/10.1108/JERER-05-2020-0029","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to identify the variables that influence corporate real estate (CRE) decision-making and gauge their relative importance to each other, thereby understanding the consequent challenges/implications for CRE managers (CREM’s).\u0000\u0000\u0000Design/methodology/approach\u0000Interviews were undertaken with experienced CREM’s using the causal network elicitation technique to create decision networks for the variables they considered for the specifically defined scenario: dealing with surplus property from a change of business strategy. These networks illustrate the complexity of the mental representations required for the realignment of the CRE portfolio. The key variables are more extensive than alignment theory suggests, namely, financial stakeholders. Additional variables identified include risk, lease accounting, costs, financial analysis, business metrics and motivational drivers. The latter indicates the importance of self-esteem and peer recognition for CREM’s and financial benefits for the C-suite. Accordingly strategy alignment needs to incorporate CRE both in terms of strategy creation and implementation.\u0000\u0000\u0000Findings\u0000These networks illustrate the complexity of the mental representations required for the realignment of the CRE portfolio. The key variables are more extensive than alignment theory suggests, namely, financial stakeholders. Additional variables identified include risk, lease accounting, costs, financial analysis, business metrics and motivational drivers. The latter indicates the importance of self-esteem and peer recognition for CREM’s and financial benefits for the C-suite. Accordingly, strategy alignment needs to incorporate CRE both in terms of strategy creation and implementation.\u0000\u0000\u0000Originality/value\u0000This research appears to be the first that looks in detail at the mental representations used by decision-makers while making CRE decisions.\u0000","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2021-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81974515","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-18DOI: 10.1108/JERER-04-2020-0027
Martin Hoesli
Purpose The purpose of this paper is to analyze papers that have been published in the Journal of European Real Estate Research since its inception in 2008. Design/methodology/approach The author analyzes papers published from 2008 to 2019 in the Journal of European Real Estate Research by authors’ country of affiliation, by country of study and by theme. Findings The Journal of European Real Estate Research publishes papers from scholars from an increasing number of countries, in particular in Central and Eastern Europe. Papers that provide a comparative analysis of countries constitute the largest category of contributions. The three most popular themes remain housing, valuation and investment/portfolio management. However, the dynamics of the three categories differ notably. Originality/value This paper provides for a clearer understanding of key dimensions of real estate research in Europe.
本文的目的是分析《欧洲房地产研究杂志》自2008年创刊以来发表的论文。设计/方法/方法作者根据作者所属国、研究国家和主题分析了2008年至2019年在《欧洲房地产研究杂志》上发表的论文。《欧洲房地产研究杂志》(Journal of European Real Estate Research)发表的论文来自越来越多的国家，尤其是中欧和东欧的学者。提供各国比较分析的论文构成了贡献的最大类别。最受欢迎的三个主题仍然是房地产、估值和投资/投资组合管理。然而，这三个类别的动态差异明显。原创性/价值本文对欧洲房地产研究的关键维度提供了更清晰的理解。
{"title":"An analysis of papers published in the Journal of European Real Estate Research, 2008-2019","authors":"Martin Hoesli","doi":"10.1108/JERER-04-2020-0027","DOIUrl":"https://doi.org/10.1108/JERER-04-2020-0027","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to analyze papers that have been published in the Journal of European Real Estate Research since its inception in 2008.\u0000\u0000\u0000Design/methodology/approach\u0000The author analyzes papers published from 2008 to 2019 in the Journal of European Real Estate Research by authors’ country of affiliation, by country of study and by theme.\u0000\u0000\u0000Findings\u0000The Journal of European Real Estate Research publishes papers from scholars from an increasing number of countries, in particular in Central and Eastern Europe. Papers that provide a comparative analysis of countries constitute the largest category of contributions. The three most popular themes remain housing, valuation and investment/portfolio management. However, the dynamics of the three categories differ notably.\u0000\u0000\u0000Originality/value\u0000This paper provides for a clearer understanding of key dimensions of real estate research in Europe.\u0000","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2021-01-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89909405","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-01DOI: 10.1108/jerer-02-2021-0009
A. Anundsen, Christian Bjørland, Marius Hagen
PurposeCommonly used rent indices are based on average developments or expert opinions. Such indices often suffer from compositional biases or low data coverage. The purpose of this paper is to overcome these challenges using the authors' approach.Design/methodology/approachThe authors construct a quality-adjusted rent index for the office market in Oslo using detailed data from 14,171 rental contracts.FindingsThe authors show that compositional biases can have a large impact on rental price developments. By adding building-fixed effects to a standard hedonic regression model, the authors show that the explanatory power increases considerably. Furthermore, indices excluding location-specific information, or which include less granular location controls than at the building level, portray quite a different picture of rent developments than indices that do take this into account. The authors also exploit information on contract signature date and find that a more timely detection of turning points can be achieved by using the signature date instead of the more typically used start date of the lease.Research limitations/implicationsThe study is confined to Norwegian data, and an avenue for future research would be to explore if similar results are obtained for other countries. A weakness with the paper is that authors' do not observe quality changes over time, such as renovation. Controlling for time-varying and unit-specific attributes in hedonic models for the commercial real estate (CRE) market would be useful to purge indices further for compositional effects and unobserved heterogeneity. While the authors do control for building-fixed effects, there are additional variations within a building (floor, view, sunlight, etc.) that the authors do not capture. Studies that could control for this would certainly be welcome, both in order to estimate the value of such amenities and to see how it affects estimated rent developments. Another promising avenue for future research is to link data on rental contracts in the CRE market with firm-specific information in order to explore how firm profitability and liquidity may affect rental contracts.Practical implicationsThe authors show that the hedonic index yields a sharper fall in rents after the global financial crisis and more muted developments in the period between 2013 and 2015 than the average rent index. The results show that rents have followed their estimated equilibrium closely and have re-adjusted quickly in periods of deviation. From a financial stability perspective, the risk of a sharp fall in rents is reduced because rents often are in line with their fundamentals.Social implicationsThe authors find that a more timely detection of turning points can be achieved by using information on the signature date. This is an important finding. The financial system is heavily exposed toward CRE, and timely detection of turning points is critical for policymakers.Originality/valueThe financial system i
{"title":"Location, location, location!*: a quality-adjusted rent index for the Oslo office market","authors":"A. Anundsen, Christian Bjørland, Marius Hagen","doi":"10.1108/jerer-02-2021-0009","DOIUrl":"https://doi.org/10.1108/jerer-02-2021-0009","url":null,"abstract":"PurposeCommonly used rent indices are based on average developments or expert opinions. Such indices often suffer from compositional biases or low data coverage. The purpose of this paper is to overcome these challenges using the authors' approach.Design/methodology/approachThe authors construct a quality-adjusted rent index for the office market in Oslo using detailed data from 14,171 rental contracts.FindingsThe authors show that compositional biases can have a large impact on rental price developments. By adding building-fixed effects to a standard hedonic regression model, the authors show that the explanatory power increases considerably. Furthermore, indices excluding location-specific information, or which include less granular location controls than at the building level, portray quite a different picture of rent developments than indices that do take this into account. The authors also exploit information on contract signature date and find that a more timely detection of turning points can be achieved by using the signature date instead of the more typically used start date of the lease.Research limitations/implicationsThe study is confined to Norwegian data, and an avenue for future research would be to explore if similar results are obtained for other countries. A weakness with the paper is that authors' do not observe quality changes over time, such as renovation. Controlling for time-varying and unit-specific attributes in hedonic models for the commercial real estate (CRE) market would be useful to purge indices further for compositional effects and unobserved heterogeneity. While the authors do control for building-fixed effects, there are additional variations within a building (floor, view, sunlight, etc.) that the authors do not capture. Studies that could control for this would certainly be welcome, both in order to estimate the value of such amenities and to see how it affects estimated rent developments. Another promising avenue for future research is to link data on rental contracts in the CRE market with firm-specific information in order to explore how firm profitability and liquidity may affect rental contracts.Practical implicationsThe authors show that the hedonic index yields a sharper fall in rents after the global financial crisis and more muted developments in the period between 2013 and 2015 than the average rent index. The results show that rents have followed their estimated equilibrium closely and have re-adjusted quickly in periods of deviation. From a financial stability perspective, the risk of a sharp fall in rents is reduced because rents often are in line with their fundamentals.Social implicationsThe authors find that a more timely detection of turning points can be achieved by using information on the signature date. This is an important finding. The financial system is heavily exposed toward CRE, and timely detection of turning points is critical for policymakers.Originality/valueThe financial system i","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89638003","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-12-04DOI: 10.1108/jerer-06-2020-0035
A. Zhukovskiy, Heidi Falkenbach, Ranoua Bouchouicha
Purpose This paper aims to examine the relationship between the use of public debt and investment activity of European listed real estate companies. Design/methodology/approach Using a hand-collected sample of debt structures of 102 European public real estate companies, and using European Central Bank lending standards survey as a proxy for bank credit availability, the authors test a conditional hypothesis on the relationship between investment rates and the use of public debt during period of constrained bank lending environment in Europe. Findings The results show that ex ante diversification of debt allows retaining higher investment rates when the main source of debt, bank lending, is shrinking. The effect is statistically and economically significant and increases during times of tight bank lending constraints. The authors find no support to debt capacity explanation of the effect. They neither find support of the higher investment rates to be indicative of overinvestment problem. The results are robust to alternative model specifications and estimators. Research limitations/implications The empirical analysis is limited to Europe. Practical implications Investments and the growth of real estate companies depend on their ability to seize value-increasing opportunities that arise in the competitive markets. This paper evaluates the role of a diversified debt structure in this context. The results suggest that debt structure can have material importance for the investment activity of European listed real estate companies and issuance of public debt can help companies to counterbalance the negative effects of restricted bank loan supply on the investment levels. Originality/value The paper extends the literature on debt structures of listed real estate firms by considering the effect of debt diversification on investments.
{"title":"Debt diversification and investments of European listed real estate companies","authors":"A. Zhukovskiy, Heidi Falkenbach, Ranoua Bouchouicha","doi":"10.1108/jerer-06-2020-0035","DOIUrl":"https://doi.org/10.1108/jerer-06-2020-0035","url":null,"abstract":"Purpose\u0000This paper aims to examine the relationship between the use of public debt and investment activity of European listed real estate companies.\u0000\u0000\u0000Design/methodology/approach\u0000Using a hand-collected sample of debt structures of 102 European public real estate companies, and using European Central Bank lending standards survey as a proxy for bank credit availability, the authors test a conditional hypothesis on the relationship between investment rates and the use of public debt during period of constrained bank lending environment in Europe.\u0000\u0000\u0000Findings\u0000The results show that ex ante diversification of debt allows retaining higher investment rates when the main source of debt, bank lending, is shrinking. The effect is statistically and economically significant and increases during times of tight bank lending constraints. The authors find no support to debt capacity explanation of the effect. They neither find support of the higher investment rates to be indicative of overinvestment problem. The results are robust to alternative model specifications and estimators.\u0000\u0000\u0000Research limitations/implications\u0000The empirical analysis is limited to Europe.\u0000\u0000\u0000Practical implications\u0000Investments and the growth of real estate companies depend on their ability to seize value-increasing opportunities that arise in the competitive markets. This paper evaluates the role of a diversified debt structure in this context. The results suggest that debt structure can have material importance for the investment activity of European listed real estate companies and issuance of public debt can help companies to counterbalance the negative effects of restricted bank loan supply on the investment levels.\u0000\u0000\u0000Originality/value\u0000The paper extends the literature on debt structures of listed real estate firms by considering the effect of debt diversification on investments.","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2020-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84917943","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-12-01DOI: 10.1108/jerer-05-2020-0030
G. Morri, Rachele Anconetani, Luca Benfari
Purpose The purpose of this paper is to investigate the link between greenness and the operating performance in 50 listed European real estate investment trusts (REITs). Design/methodology/approach Using a sample of 50 listed European REITs, the analysis leverages on Ordinary least squares models to investigate the relationship between greenness and operating performance indicators. In particular, it examines three types of greenness indicators: the overall Green Real Estate Sustainability Benchmark (GRESB) rating, its two components (management and policy [MP] and implementation and measurement) and the seven aspect scores; return on equity (ROE) and return on assets (ROA) are the fundamental measures of REITs operating performance. Findings The results demonstrate a positive relationship between greenness indicators and operating performance in European REITs, but the impact on ROE and ROA differs depending on the GRESB variable analyzed. If the GRESB rating proved to be significant on ROE and ROA, none of its two components has an impact on ROA, and only the MP score has a positive relationship with ROE. Finally, of the seven aspect scores, only the stakeholder engagement is significant on the two dependent variables. Originality/value The commercial real estate sector has a significant role in tackling climate change issues. To incentivize the market to increase the investments in green buildings, it is essential to find a link between their sustainability characteristics and the improvements they deliver in terms of operating performance. Despite there being a substantial body of literature investigating this connection in the US REITs market, there is still limited knowledge on the relationship between green and operating indicators in the European REITs market.
{"title":"Greenness and financial performance of European REITs","authors":"G. Morri, Rachele Anconetani, Luca Benfari","doi":"10.1108/jerer-05-2020-0030","DOIUrl":"https://doi.org/10.1108/jerer-05-2020-0030","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to investigate the link between greenness and the operating performance in 50 listed European real estate investment trusts (REITs).\u0000\u0000\u0000Design/methodology/approach\u0000Using a sample of 50 listed European REITs, the analysis leverages on Ordinary least squares models to investigate the relationship between greenness and operating performance indicators. In particular, it examines three types of greenness indicators: the overall Green Real Estate Sustainability Benchmark (GRESB) rating, its two components (management and policy [MP] and implementation and measurement) and the seven aspect scores; return on equity (ROE) and return on assets (ROA) are the fundamental measures of REITs operating performance.\u0000\u0000\u0000Findings\u0000The results demonstrate a positive relationship between greenness indicators and operating performance in European REITs, but the impact on ROE and ROA differs depending on the GRESB variable analyzed. If the GRESB rating proved to be significant on ROE and ROA, none of its two components has an impact on ROA, and only the MP score has a positive relationship with ROE. Finally, of the seven aspect scores, only the stakeholder engagement is significant on the two dependent variables.\u0000\u0000\u0000Originality/value\u0000The commercial real estate sector has a significant role in tackling climate change issues. To incentivize the market to increase the investments in green buildings, it is essential to find a link between their sustainability characteristics and the improvements they deliver in terms of operating performance. Despite there being a substantial body of literature investigating this connection in the US REITs market, there is still limited knowledge on the relationship between green and operating indicators in the European REITs market.\u0000","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90533963","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-12-01DOI: 10.1108/jerer-01-2020-0001
Carsten Lausberg, P. Krieger
Purpose Scoring is a widely used, long-established, and universally applicable method of measuring risks, especially those that are difficult to quantify. Unfortunately, the scoring method is often misused in real estate practice and underestimated in academia. The purpose of this paper is to supplement the literature with general rules under which scoring systems should be designed and validated, so that they can become reliable risk instruments. Design/methodology/approach The paper combines the rules, or axioms, for coherent risk measures known from the literature with those for scoring instruments. The result is a system of rules that a risk scoring system should fulfil. The approach is theoretical, based on a literature survey and reasoning. Findings At first, the paper clarifies that a risk score should express the variation of a property’s yield and not of its quality, as it is often done in practice. Then the axioms for a coherent risk scoring are derived, e.g. the independence of the risk factors. Finally, the paper proposes procedures for valid and reliable risk scoring systems, e.g. the out-of-time validation. Practical implications Although it is a theoretical work, the paper also focuses on practical applicability. The findings are illustrated with examples of scoring systems. Originality/value Rules for risk measures and for scoring systems have been established long ago, but the combination is a first. In this way, the paper contributes to real estate risk research and risk management practice.
{"title":"Rules for a coherent real estate risk scoring","authors":"Carsten Lausberg, P. Krieger","doi":"10.1108/jerer-01-2020-0001","DOIUrl":"https://doi.org/10.1108/jerer-01-2020-0001","url":null,"abstract":"\u0000Purpose\u0000Scoring is a widely used, long-established, and universally applicable method of measuring risks, especially those that are difficult to quantify. Unfortunately, the scoring method is often misused in real estate practice and underestimated in academia. The purpose of this paper is to supplement the literature with general rules under which scoring systems should be designed and validated, so that they can become reliable risk instruments.\u0000\u0000\u0000Design/methodology/approach\u0000The paper combines the rules, or axioms, for coherent risk measures known from the literature with those for scoring instruments. The result is a system of rules that a risk scoring system should fulfil. The approach is theoretical, based on a literature survey and reasoning.\u0000\u0000\u0000Findings\u0000At first, the paper clarifies that a risk score should express the variation of a property’s yield and not of its quality, as it is often done in practice. Then the axioms for a coherent risk scoring are derived, e.g. the independence of the risk factors. Finally, the paper proposes procedures for valid and reliable risk scoring systems, e.g. the out-of-time validation.\u0000\u0000\u0000Practical implications\u0000Although it is a theoretical work, the paper also focuses on practical applicability. The findings are illustrated with examples of scoring systems.\u0000\u0000\u0000Originality/value\u0000Rules for risk measures and for scoring systems have been established long ago, but the combination is a first. In this way, the paper contributes to real estate risk research and risk management practice.\u0000","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75044088","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-10-06DOI: 10.1108/jerer-03-2020-0012
Peter Palm, M. Andersson
Purpose The purpose of this study is to evaluate the impact of theoretical knowledge related to financial behaviour and especially anchor effects. Design/methodology/approach The study design is based upon an experiment divided into two parts, before and after the development of the course curriculum for the course introducing behavioural finance for undergraduate real estate students. Findings The study concludes that the anchor effect is persistent also after introducing theoretical knowledge regarding financial behaviour and anchor effects. To conclude the results, in this study, indicates that the appraisal of properties are dependent on the individual’s cognitive capacity to mitigate anchor effects. There are epistemological assumptions underlying the belief in the individuals’ capacity to handle anchor effects that might provide biased appraisals. These assumptions need to be carefully tested and treated to increase the accuracy of property appraisals. Practical implications The study result also highlights the possibility that current literature in valuation, and learning activities, does not emphases and stimulate readers to critical thinking. This paper would, therefore, propose also other real estate education programmes to be aware of the potential lack of critical thinking among the students. Originality/value It provides an insight regarding how appraisal of properties is dependent on the individual’s cognitive capacity to mitigate anchor effects.
{"title":"Anchor effects in appraisals: do information and theoretical knowledge matter?","authors":"Peter Palm, M. Andersson","doi":"10.1108/jerer-03-2020-0012","DOIUrl":"https://doi.org/10.1108/jerer-03-2020-0012","url":null,"abstract":"\u0000Purpose\u0000The purpose of this study is to evaluate the impact of theoretical knowledge related to financial behaviour and especially anchor effects.\u0000\u0000\u0000Design/methodology/approach\u0000The study design is based upon an experiment divided into two parts, before and after the development of the course curriculum for the course introducing behavioural finance for undergraduate real estate students.\u0000\u0000\u0000Findings\u0000The study concludes that the anchor effect is persistent also after introducing theoretical knowledge regarding financial behaviour and anchor effects. To conclude the results, in this study, indicates that the appraisal of properties are dependent on the individual’s cognitive capacity to mitigate anchor effects. There are epistemological assumptions underlying the belief in the individuals’ capacity to handle anchor effects that might provide biased appraisals. These assumptions need to be carefully tested and treated to increase the accuracy of property appraisals.\u0000\u0000\u0000Practical implications\u0000The study result also highlights the possibility that current literature in valuation, and learning activities, does not emphases and stimulate readers to critical thinking. This paper would, therefore, propose also other real estate education programmes to be aware of the potential lack of critical thinking among the students.\u0000\u0000\u0000Originality/value\u0000It provides an insight regarding how appraisal of properties is dependent on the individual’s cognitive capacity to mitigate anchor effects.\u0000","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2020-10-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83967539","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-09-25DOI: 10.1108/JERER-12-2019-0049
D. Brounen, Alexander Michael Groh, M. Haran
PurposeThis paper aims to decompose the value effects of green retrofits on commercial real estate. The paper disentangles various sources of value capture mechanisms that can be attained through green retrofit actions and profiles the extent to which green retrofit solutions can be effectively capitalised using transaction evidence from the Munich housing market. The insights offered can help real estate owners and investors during theirex anteanalysis of future energetic retrofit investments.Design/methodology/approachThe authors offer their reader both a conceptual framework and the results from an empirical analysis to identify the value effects of retrofits and the associating gains in energy efficiency. The conceptual framework theorises the different value components that a deep retrofit has to offer. The regression analysis includes a multivariate analysis of 8,928 dwellings in the Munich residential real estate market.FindingsThis study’s framework disentangles the total retrofit value effect into three components: the capitalisation of energy savings, the exposure to the value discount because of stricter standards and the value uplift because of indirect benefits (health, employee satisfaction, marketing etc.). The regression results indicate that the value gains because of energy efficiency improvements are in the range of 2.4–7.4%, while the indirect benefits and reduced exposure to stricter standards amount to another 3%.Originality/valueWhile numerous studies have investigated the upside value effects of energy efficiency in the real estate sector, there is scant academic research which has sought to evidence the value of green retrofit solutions and the extent to which this can be capitalised. Instrumentalising the various value effects of energetic retrofit that have been identified is not straightforward. At the same time, inadequate value capture of energetic retrofit effects could delay intervention timelines or aborting of proposed retrofit actions which should be of primary concern to policymakers and stakeholders tasked with the decarbonisation of real estate assets.
{"title":"The value effects of green retrofits","authors":"D. Brounen, Alexander Michael Groh, M. Haran","doi":"10.1108/JERER-12-2019-0049","DOIUrl":"https://doi.org/10.1108/JERER-12-2019-0049","url":null,"abstract":"PurposeThis paper aims to decompose the value effects of green retrofits on commercial real estate. The paper disentangles various sources of value capture mechanisms that can be attained through green retrofit actions and profiles the extent to which green retrofit solutions can be effectively capitalised using transaction evidence from the Munich housing market. The insights offered can help real estate owners and investors during theirex anteanalysis of future energetic retrofit investments.Design/methodology/approachThe authors offer their reader both a conceptual framework and the results from an empirical analysis to identify the value effects of retrofits and the associating gains in energy efficiency. The conceptual framework theorises the different value components that a deep retrofit has to offer. The regression analysis includes a multivariate analysis of 8,928 dwellings in the Munich residential real estate market.FindingsThis study’s framework disentangles the total retrofit value effect into three components: the capitalisation of energy savings, the exposure to the value discount because of stricter standards and the value uplift because of indirect benefits (health, employee satisfaction, marketing etc.). The regression results indicate that the value gains because of energy efficiency improvements are in the range of 2.4–7.4%, while the indirect benefits and reduced exposure to stricter standards amount to another 3%.Originality/valueWhile numerous studies have investigated the upside value effects of energy efficiency in the real estate sector, there is scant academic research which has sought to evidence the value of green retrofit solutions and the extent to which this can be capitalised. Instrumentalising the various value effects of energetic retrofit that have been identified is not straightforward. At the same time, inadequate value capture of energetic retrofit effects could delay intervention timelines or aborting of proposed retrofit actions which should be of primary concern to policymakers and stakeholders tasked with the decarbonisation of real estate assets.","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2020-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73647427","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-31DOI: 10.1108/jerer-06-2020-0033
M. McCord, J. McCord, M. Haran, PT Davis
PurposeA number of studies have investigated the relationship between energy performance certificates (EPCs) and house prices. A majority of studies have tended to model energy performance pricing effects within a traditional hedonic conditional mean estimate model. There has been limited analysis that has accounted for the relationship between EPCs and the effects across the pricing distribution. Moreover, there has been limited research examining the “standard cost improvements EPC score”, or “potential score”. Therefore, this paper aims to quantify and measure the dynamic effects of EPCs on house prices across the price spectrum and account for standardised cost-effective retrofit improvements.Design/methodology/approachExisting EPC studies produce one coefficient for the entirety of the pricing distribution, culminating in a single marginal implicit price effect. The approach within this study applies a quantile regression approach to empirically estimate how quantiles of house prices respond differently to unitary changes in the proximal effects of EPCs and structural property characteristics across the conditional distribution of house prices. Using a data set of 1,476 achieved transaction prices, the quantile regression models apply both assessed EPC score and bands and further examine the potential EPC rating for improved energy performance based on an average energy cost improvement.FindingsThe findings show that EPCs are valued differently across the quantiles and that conditional quantiles are asymmetrical. Only property prices in the upper quantiles of the price distribution show significant capitalisation effects with energy performance, and only properties with higher EPC scores display positive significant effects at the higher end of the price distribution. There are also brown discount effects evident for lower-rated properties within F- and G-rated EPC properties at the higher end of the pricing distribution. Moreover, the potential energy efficiency rating (score) also shows increased effects with sales prices and appears to minimise any brown discount effects. The findings imply that energy performance is a complex feature that is not easily “averaged” for valuation effect purposes.Originality/valueWhile numerous studies have investigated the pricing effects of EPCs, they have tended to provide a single estimate to determine the relationship with price. This paper extends the traditional analytical insights beyond the conditional mean estimate by examining the quantiles of the relationship between EPCs and house prices to enhance the understanding of this esoteric and complex issue. In addition, this research applies the assessed energy efficiency potential to establish whether effective cost improvements enhance the relationship with sales price and capitalisation effects.
{"title":"Energy performance certificates and house prices: a quantile regression approach","authors":"M. McCord, J. McCord, M. Haran, PT Davis","doi":"10.1108/jerer-06-2020-0033","DOIUrl":"https://doi.org/10.1108/jerer-06-2020-0033","url":null,"abstract":"PurposeA number of studies have investigated the relationship between energy performance certificates (EPCs) and house prices. A majority of studies have tended to model energy performance pricing effects within a traditional hedonic conditional mean estimate model. There has been limited analysis that has accounted for the relationship between EPCs and the effects across the pricing distribution. Moreover, there has been limited research examining the “standard cost improvements EPC score”, or “potential score”. Therefore, this paper aims to quantify and measure the dynamic effects of EPCs on house prices across the price spectrum and account for standardised cost-effective retrofit improvements.Design/methodology/approachExisting EPC studies produce one coefficient for the entirety of the pricing distribution, culminating in a single marginal implicit price effect. The approach within this study applies a quantile regression approach to empirically estimate how quantiles of house prices respond differently to unitary changes in the proximal effects of EPCs and structural property characteristics across the conditional distribution of house prices. Using a data set of 1,476 achieved transaction prices, the quantile regression models apply both assessed EPC score and bands and further examine the potential EPC rating for improved energy performance based on an average energy cost improvement.FindingsThe findings show that EPCs are valued differently across the quantiles and that conditional quantiles are asymmetrical. Only property prices in the upper quantiles of the price distribution show significant capitalisation effects with energy performance, and only properties with higher EPC scores display positive significant effects at the higher end of the price distribution. There are also brown discount effects evident for lower-rated properties within F- and G-rated EPC properties at the higher end of the pricing distribution. Moreover, the potential energy efficiency rating (score) also shows increased effects with sales prices and appears to minimise any brown discount effects. The findings imply that energy performance is a complex feature that is not easily “averaged” for valuation effect purposes.Originality/valueWhile numerous studies have investigated the pricing effects of EPCs, they have tended to provide a single estimate to determine the relationship with price. This paper extends the traditional analytical insights beyond the conditional mean estimate by examining the quantiles of the relationship between EPCs and house prices to enhance the understanding of this esoteric and complex issue. In addition, this research applies the assessed energy efficiency potential to establish whether effective cost improvements enhance the relationship with sales price and capitalisation effects.","PeriodicalId":44570,"journal":{"name":"Journal of European Real Estate Research","volume":null,"pages":null},"PeriodicalIF":1.3,"publicationDate":"2020-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87166117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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