Conference Agenda

Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).

Please note that all times are shown in the time zone of the conference. The current conference time is: 13th Aug 2022, 11:19:27am IST

Session Overview
Commercial Real Estate
Thursday, 07/July/2022:
9:00am - 10:45am

Session Chair: Stijn Van Nieuwerburgh, Columbia University Graduate School of Business, United States of America
Location: Room C

Room in the Arts Building, Trinity College Dublin. Exact details to be confirmed by May 31

External Resource:
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Price diffusion across international private commercial real estate markets

Zhu, Bing1; van Dijk, Dorinth2; Lizieri, Colin3

1Technical University of Munich; 2De Nederlandsche Bank; 3University of Cambridge;

We explore spatio-temporal aspects of global commercial real estate price movements and consider two channels where prices may spill over between global cities: (i) through a dominant market and (ii) through ``neighbouring'' markets. Neighbouring, here, is defined as the degree of overlap in ownership. We document significant ripple effects from both channels in commercial real estate prices across 22 markets from 2007 to 2020. In particular, London is found to be the dominant market and price shocks significantly diffuse across other global cities in the short- to medium-run. Additionally, shocks from neighbouring markets are important in the short- to medium-run. In the long-run, macroeconomic factors play a much more critical role. The spillover effect through both channels is more predominant during the financial crisis. In fact, the dominant market channel is mostly driven by the financial crisis. By contrast, the neighbouring market channel is significant throughout the economic cycle.

The role of the experienced return in the decision to sell commercial real estate

Vlaming, Willem; Francke, Marc

University of Amsterdam, Netherlands, The;

Holding periods of commercial real estate have a large impact on investment performance. One-off transaction costs can be smoothed out over the holding period and the timing of a sale, especially forced, can have a significant impact on the sale price. This research studies the determinants of holding periods in a selection of US markets. The paper focuses on the relation between the experienced market return and the likelihood of a sale and analyzes whether certain behavioural factors play a role in the decision to sell. We utilise a dynamic selection model where the probability of a sale and the market return are modelled simultaneously. We find a significant positive effect of experienced market returns in all markets, indicating that commercial property owners tend to dispose of their properties more quickly when the market has performed well. After investors have experienced some positive return, the likelihood of a sale increases rapidly indicating investors tend to avert losses. In addition the holding period is significantly impacted by property characteristics, owner’s objectives, investor type and origin. We also discuss and review the impact these findings have on standard transaction based price indexes. Unaccounted for the selection effects, price indexes are biased.

The Dynamic Relationship between Charge-off Rates, Funding and Market Liquidity and Asset Prices in Private Commercial Real Estate Markets

van Dijk, Dorinth1; Francke, Marc2,3; Wang, Yumei2

1De Nederlandsche Bank; 2University of Amsterdam; 3Ortec Finance;

Using a panel VAR model, we explore the dynamic interaction between the changes in banks' charge-off rates on commercial real estate (CRE) loans, funding liquidity, market liquidity, and prices across 25 US metropolitan statistical areas in the illiquid private CRE market. We find that the change in charge-off rates and the tightening in funding liquidity positively affect each other. Subsequently, we find that the changes in market liquidity and funding liquidity are mutually reinforcing. In addition, the change in the charge-off rate and a tightening of funding liquidity negatively affect future asset price returns and market liquidity. Our empirical findings also demonstrate that the price from the market demand side (i.e., the buyer reservation price) has a relatively stronger dynamic interaction with funding liquidity and market liquidity than the transaction price.

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