UK commercial property investment: time-series characteristics and modelling strategies

Ball, Michael; Grilli, Maurizio

doi:10.1080/095999197368537

Cited by 17 publications

(10 citation statements)

References 9 publications

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“…Scott and Judge (2000) from a study of British commercial property values between 1956 and 1996 suggest a property cycle of 7.8 years, consistent with an interval between development starts and completions of three years. Ball and Grilli (1997) identified a long cycle that ran from 1955 to 1980 and a shorter one from 1980 to 1996, finding some evidence of a Kuznets‐style building cycle.…”

Section: Modelling Property Cyclesmentioning

confidence: 99%

Property cycles

Grover

2013

Journal of Property Investment &Amp; Finance

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PurposeThe purpose of this paper is to review what is known about property cycles following the financial crisis of 2008.Design/methodology/approachThe method is to review the literature on property cycles published since the 1930s, to examine the extent to which endogenous causes have been identified as distinct from exogenous factors that may have produced cyclicality resulting from weak adjustment mechanisms but not cycles.FindingsWhilst there is broad consensus that the property market has delays in adjustment which produce oscillations resulting from external shocks, it is more difficult to identify endogenous causes of cycles, though there are some possible candidates, notably technical progress.Practical implicationsThe slump after 2008 has cost savers and taxpayers dear, so better means of predicting cycles so that policy makers can mitigate them is desirable.Originality/valueThe debate about whether property cycles result from exogenous shocks or endogenous causes is in danger of being lost sight of. If the former, then the property industry is a channel through which external factors feed through to the economy, albeit magnified by weak adjustment factors. If there are endogenous causes, then policy makers would be unwise to overlook their potential destabilising impact on the economy.

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Section: Modelling Property Cyclesmentioning

confidence: 99%

Property cycles

Grover

2013

Journal of Property Investment &Amp; Finance

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“…Although the new-retail-orders series does not refer to the final completion of retail structures but to the time that the project starts it does represent a consistent series through time that covers the United Kingdom as a whole. As a result, it is considered a good indicator of the forthcoming supply of new retail space at the aggregate level, despite concerns expressed by some authors about the quality of the series (Ball and Grilli, 1997). Time series to allow for the effects of the other components of supply, that originate in existing buildings, at the aggregate level do not exist.…”

Section: Influences On Retail Rentsmentioning

confidence: 99%

Forecasting Models of Retail Rents

Brooks

Tsolacos²

2000

Environ Plan A

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The authors model retail rents in the United Kingdom with use of vector-autoregressive and time-series models. Two retail rent series are used, compiled by LaSalle Investment Management and CB Hillier Parker, and the emphasis is on forecasting. The results suggest that the use of the vector-autoregression and time-series models in this paper can pick up important features of the data that are useful for forecasting purposes. The relative forecasting performance of the models appears to be subject to the length of the forecast time-horizon. The results also show that the variables which were appropriate for inclusion in the vector-autoregression systems differ between the two rent series, suggesting that the structure of optimal models for predicting retail rents could be specific to the rent index used. Ex ante forecasts from our time-series suggest that both LaSalle Investment Management and CB Hillier Parker real retail rents will exhibit an annual growth rate above their long-term mean.

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“…This research had an explicit supply-side focus and spawned conceptual and empirical models of the building cycle (see Barras, 1983;Barras and Ferguson, 1987). Subsequently, although some others extended this work by modelling the rate of development activity (see Ball and Grilli, 1997;Giussani and Tsolacos, 1994;, most of the UK empirical studies that followed sought to explain movements in rental values by including macroeconomic indicators to proxy demand-side changes (Dobson and Goddard, 1992;Gardiner and Henneberry, 1988;Key et al, 1994a;Silver and Goode, 1990;Tsolacos, 1996).…”

Section: Modelling Property-market Dynamicsmentioning

confidence: 99%

Understanding Property Market Dynamics: Insights from Modelling the Supply-Side Adjustment Mechanism

Nanthakumaran

Watkins

Orr³

2000

Environ Plan A

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The volatility of commercial property markets in the United Kingdom has stimulated the development of explanatory models of ‘price’ determination. These models have tended to focus on the demand-side as the driver of change. A corollary of this is that, despite the fact that construction lags are known to exacerbate cyclical fluctuations, the supply-side adjustment mechanism has been subject to relatively little research effort. In this paper the authors develop a new model of commercial property markets in the United Kingdom. The model is adapted from Poterba's two-equation asset-market approach to modelling the housing market. The first equation is an arbitrage relationship where the return on property is made up of rent, as determined in the user market for property services, and the capital gain, which is dependent on the return on alternative assets. This can be interpreted as a ‘stock’ demand equation. The second equation explains that ‘flow’ supply is determined by real capital values. The long-run empirical generalisation of the two-equation model allows the authors to estimate two key behavioural parameters required in explaining supply-side adjustment to market change. First, the authors interpret the coefficient on the capital value variable in the supply equation as an estimate of the long-run ‘price’ elasticity of supply. Second, from the demand equation, they estimate the extent to which new supply can act as an ‘automatic stabiliser’ on property values. It is argued that although increases in demand drive up property values, new development is also initiated and will, in turn, dampen down the growth in real capital values. The equations are estimated for the office, industrial, and retail sectors. Although there are no comparable estimates of supply elasticities in the real estate economics literature, the results are generally consistent with prior knowledge. Estimates of the stabiliser effect are also plausible and, taken together, the supply-side parameters help provide insights required in understanding property market dynamics in the last twenty-five years.

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UK commercial property investment: time-series characteristics and modelling strategies

Cited by 17 publications

References 9 publications

Property cycles

Property cycles

Forecasting Models of Retail Rents

Understanding Property Market Dynamics: Insights from Modelling the Supply-Side Adjustment Mechanism

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