The majority of studies that explore property portfolio construction and management strategies utilise highly aggregated ex-post data, but stock selection is known to be a significant determinant of portfolio performance. Thus, here we look at stock selection, focusing on the choices faced by investors, necessitating the collection and analysis of primary data, carried out utilising conjoint analysis. This represents a new step in property research, with the data collection undertaken using a simulation exercise. This enables fund managers to make hypothetical purchase decisions, viewing properties comprising a realistic bundle of attributes and making complex contemporaneous trade-offs between attributes, subject to their stated market and economic forecasts and sector specialism. In total 51 fund managers were surveyed, producing 918 purchase decisions for analysis, with additional data collected regarding fund and personal characteristics. The results reveal that 'fixed' property characteristics (location and obsolescence) are dominant in the decision-making process, over and above 'manageable' tenant and lease characteristics which can be explicitly included within models of probabilities of income variation. This reveals investors are making ex-ante risk judgements and are considering post acquisition risk management strategies. The study also reveals that behavioural factors affect acquisition decisions. 3 1.

Location is of paramount importance within the retail sector, yet defining locational obsolescence remains overlooked, despite significant concerns over the viability of parts of the complex sector. This paper reviews the existing literature and, through this, explores retail locational obsolescence, including the multi-spatial nature of the driving forces that range from the global economy, local markets and submarkets, to individual property-specific factors; and, crucially, the need to disentangle locational obsolescence from other important concepts such as depreciation and functional obsolescence that are often mistakenly used. Through this, a conceptual model, definition and diagnostic criteria are presented to guide future studies, policy development and the allocation of resources. Importantly, three stages are presented to enable the operationalization of the model, essential to future academic and industry studies as well as the ongoing development of policy in this economically important, complex and contentious area.

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Investment theory dictates that capitalisation (cap) rates for freehold real estate should be determined by the risk free nominal rate of return plus the risk premium (RP) less the expected growth rate, with an allowance for depreciation. However, importing the concept of the RP from the capital markets fails to guide investors through the complexities of the asset, or enable exploration of purchaser preferences and behaviour. A refined pricing model for real estate is proposed, based on a concept termed a risk scale, to distinguish between macro (market) and micro (stock) determinants of risk and growth within the RP. This pricing model is estimated for a major global investment market, using a cross-sectional intertemporal framework, with a dataset of 497 transactions in the London office sector over 2010Q2-2012Q3. Average cap rates are estimated at just over 5%, with asset-specific attributes dominating yield determination, with submarket quality and tenant covenant most important; and unexpired I investors bought at lower cap rates, despite the ongoing economic and financial instability of the study period. Improving understanding of pricing behaviour and market transparency is important and may be advanced through the pricing model. Key wordsProperty investment, office market, London, capitalisation rates, risk premium. 2Refining the real estate pricing model IntroductionThe nature and behaviour of commercial investors have radically altered in the wake of the globalisation and liberalisation of capital and investment markets during the second half of the 20 th Century and the first few years of the 21 st . A consequence of these changes has been that the ownership of larger, more valuable real estate has shifted from small local entrepreneurs to major real estate companies, financial institutions and funds, both national and international, with banks acting as a major source of finance for much of this change. Subsequently, commercial investment real estate pricing has developed within an increasingly sophisticated, analytical and global environment.However, the relative lack of transaction volumes in the direct real estate market, and the fact that many transactions are not in the public domain, has restricted analysis of pricing and investor behaviour in the acquisition and sale process, in performance measurement and in bank lending decision-making. This is significant given that G pricing model, used within real estate markets, has been adopted from the capital markets and might struggle to cope with the unique and complex nature of the asset. The aim of this study is to redress this imbalance by revisiting and extending the theoretical pricing model to fully reflect both the complex characteristics of the real estate market and of the asset attributes that drive returns, to provide a framework for systematic asset pricing.This new, explicit framework is operationalised in the second half of the paper, to provide an example of its utility by empirically estimating the perceived risk attached to...

This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link:http://openaccess.city.ac.uk/17300/ Link to published version: http://dx

It is widely established that economic policy uncertainty (EPU) affects investment decisions and performance, yet research in this area has overlooked the direct property investment market. This paper seeks to rectify this and proposes a multi-stage multi-level analytical framework to offer new insights and a richness of findings. Using a news-based measure of EPU in the UK, and controlling for economic conditions, a national level analysis reveals some evidence of Granger Causality between EPU and total returns, indicating that pricing is responsive to uncertainty. These findings suggest that EPU is an important risk factor for direct property investments, with pricing implications. Differences in data and performance measure are important, however, with income returns unresponsive. A micro-level investigation begins to reveal some of the asset-pricing decisions underpinning the national results, indicating investors' concerns for income streams are consistently high, regardless of varying EPU. Pricing can also cause changes in EPU, such as in the retail and industrial markets (increasingly linked through logistics) reflecting sector-specific stakeholder groups and newsworthy issues. This evidence highlights how important it is for policymakers to understand the complex and bi-directional relationship, that indecision can undermine investment confidence and cause investment market volatility, in turn raising EPU.This study aims to fill this gap by examining whether, and how, the commercial property investment market and, further, investment decision-making, varies in times of uncertainty. The study focuses on the office, retail, industrial, leisure and hotel sectors, the largest part of the UK commercial property investment market, and uncertainty as measured by EPU data. Subsequently,

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