Appraiser behaviour and appraisal smoothing: some qualitative and quantitative evidence

There is a substantial literature which suggests that appraisals are smoothed and lag the true level of prices. This study combines a qualitative interview survey of the leading fund manager/owners in the UK and their appraisers with a empirical study of the number of appraisals which change each month within the IPD Monthly Index. The paper concentrates on how the appraisal process operates for commercial property performance measurement purposes. The survey interviews suggest that periodic appraisal services are consolidating in fewer firms and, within these major firms, appraisers adopt different approaches to changing appraisals on a period by period basis, with some wanting hard transaction evidence while others act on "softer' signals. The survey also indicates a seasonal effect with greater effort and information being applied to annual and quarterly appraisals than monthly. The analysis of the appraisals within the Investment Property Databank Monthly Index confirms this effect with around 5% more appraisals being moved at each quarter day than the other months. January and August have significantly less appraisal changes than other months.

Serial persistence in individual real estate returns in the UK

Persistence of property returns is a topic of perennial interest to fund managers as it suggests that choosing those properties that will perform well in the future is as simple as looking at those that performed well in the past. Consequently, much effort has been expended to determine if such a rule exists in the real estate market. This paper extends earlier studies in US, Australian, and UK markets in two ways. First, this study applies the same methodology originally used in Young and Graff (1996) making the results directly comparable with those in the US and Australian property markets. Second, this study uses a much longer and larger database covering all commercial property data available from the Investment Property Databank (IPD), for the years 1981 to 2002 for as many as 216,758 individual property returns. While the performance results of this study mimic the US and Australian results of greater persistence in the extreme first and fourth quartiles, they also evidence persistence in the moderate second and third quartiles, a notable departure from previous studies. Likewise patterns across property type, location, time, and holding period are remarkably similar leading to the conjecture that behaviors in the practice of commercial real estate investment management are themselves deeply rooted and persistent and perhaps influenced for good or ill by agency effects

Land re-use, complexity and actor-networks: a framework for research

This paper will present a conceptual framework for the examination of land redevelopment based on a complex systems/networks approach. As Alvin Toffler insightfully noted, modern scientific enquiry has become exceptionally good at splitting problems into pieces but has forgotten how to put the pieces back together. Twenty-five years after his remarks, governments and corporations faced with the requirements of sustainability are struggling to promote an ‘integrated’ or ‘holistic’ approach to tackling problems. Despite the talk, both practice and research provide few platforms that allow for ‘joined up’ thinking and action. With socio-economic phenomena, such as land redevelopment, promising prospects open up when we assume that their constituents can make up complex systems whose emergent properties are more than the sum of the parts and whose behaviour is inherently difficult to predict. A review of previous research shows that it has mainly focused on idealised, ‘mechanical’ views of property development processes that fail to recognise in full the relationships between actors, the structures created and their emergent qualities. When reality failed to live up to the expectations of these theoretical constructs then somebody had to be blamed for it: planners, developers, politicians. However, from a ‘synthetic’ point of view the agents and networks involved in property development can be seen as constituents of structures that perform complex processes. These structures interact, forming new more complex structures and networks. Redevelopment then can be conceptualised as a process of transformation: a complex system, a ‘dissipative’ structure involving developers, planners, landowners, state agencies etc., unlocks the potential of previously used sites, transforms space towards a higher order of complexity and ‘consumes’ but also ‘creates’ different forms of capital in the process. Analysis of network relations point toward the ‘dualism’ of structure and agency in these processes of system transformation and change. Insights from actor network theory can be conjoined with notions of complexity and chaos to build an understanding of the ways in which actors actively seek to shape these structures and systems, whilst at the same time are recursively shaped by them in their strategies and actions. This approach transcends the blame game and allows for inter-disciplinary inputs to be placed within a broader explanatory framework that does away with many past dichotomies. Better understanding of the interactions between actors and the emergent qualities of the networks they form can improve our comprehension of the complex socio-spatial phenomena that redevelopment comprises. The insights that this framework provides when applied in UK institutional investment into redevelopment are considered to be significant.

Rational expectations? Developer behaviour and development cycles in the central London office market

Purpose – Expectations of future market conditions are acknowledged to be crucial for the development decision and hence for shaping the built environment. The purpose of this paper is to study the central London office market from 1987 to 2009 and test for evidence of rational, adaptive and naive expectations. Design/methodology/approach – Two parallel approaches are applied to test for either rational or adaptive/naive expectations: vector auto-regressive (VAR) approach with Granger causality tests and recursive OLS regression with one-step forecasts. Findings – Applying VAR models and a recursive OLS regression with one-step forecasts, the authors do not find evidence of adaptive and naïve expectations of developers. Although the magnitude of the errors and the length of time lags between market signal and construction starts vary over time and development cycles, the results confirm that developer decisions are explained, to a large extent, by contemporaneous and historic conditions in both the City and the West End, but this is more likely to stem from the lengthy design, financing and planning permission processes rather than adaptive or naive expectations. Research limitations/implications – More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of large demand shocks and/or irrational behaviour. Practical implications – Developers may be able to generate excess profits by exploiting market inefficiencies but this may be hindered in practice by the long periods necessary for planning and construction of the asset. Originality/value – This paper focuses the scholarly debate of real estate cycles on the role of expectations. It is also one of very few spatially disaggregate studies of the subject matter.

Benchmarking and valuation issues in measuring depreciation for European office markets

Purpose – The paper addresses the practical problems which emerge when attempting to apply longitudinal approaches to the assessment of property depreciation using valuation-based data. These problems relate to inconsistent valuation regimes and the difficulties in finding appropriate benchmarks. Design/methodology/approach – The paper adopts a case study of seven major office locations around Europe and attempts to determine ten-year rental value depreciation rates based on a longitudinal approach using IPD, CBRE and BNP Paribas datasets. Findings – The depreciation rates range from a 5 per cent PA depreciation rate in Frankfurt to a 2 per cent appreciation rate in Stockholm. The results are discussed in the context of the difficulties in applying this method with inconsistent data. Research limitations/implications – The paper has methodological implications for measuring property investment depreciation and provides an example of the problems in adopting theoretically sound approaches with inconsistent information. Practical implications – Valuations play an important role in performance measurement and cross border investment decision making and, therefore, knowledge of inconsistency of valuation practice aids decision making and informs any application of valuation-based data in the attainment of depreciation rates. Originality/value – The paper provides new insights into the use of property market valuation data in a cross-border context, insights that previously had been anecdotal and unproven in nature.

Who owned Earls Colne in 1798....or how to squeeze more from the Land Tax

In this important article Richard Hoyle, one of the country’s leading historians of the early modern period, introduces new perspectives on the Land Tax and its use in the analysis of local communities in the late eighteenth and early nineteenth centuries. He uses as his case study the parish of Earls Colne in Essex, on which he has already written extensively with Professor Henry French. The article begins with an overview of the tax itself, explaining its history and the procedures for the collection of revenues – including the numerous changes which took place. The sizeable problems confronting any would-be analyst of the data are clearly identified, and Hoyle observes that because of these apparently insoluble difficulties the potential of the tax returns has never been fully realised. He then considers the surviving documentation in The National Archives, providing an accessible introduction to the sources and their arrangement, and describing the particularly important question o f the redemption of the tax by payment of a lump sum. The extent of redemption (in the years around 1800-1804) is discussed. Hoyle draws attention to the potential for linking the tax returns themselves with the redemption certificates (which have never been subjected to historical analysis and thereby proposes new ways of exploiting the evidence of the taxation as a whole. The article then discusses in detail the specific case of Earls Colne, with tabulated data showing the research potential. Topics analysed include the ownership of property ranked by size of payment, and calculations whereby the amount paid may be used to determine the worth of land and the structure of individual estates. The important question of absentee owners is investigated, and there is a very valuable consideration of the potential for looking at portfolio estate ownership, whereby owners held land in varying proportions in a number of parishes. It is suggested that such studies will allow us to be more aware of the entirety of property ownership, which a focus on a single community does not permit. In the concluding paragraph it is argued that using these sources we may see the rise and fall of estates, gain new information on landownership, landholding and farm size, and even approach the challenging topic of the distribution of wealth.

Long run relationships between City office rents and the economy in the UK: creating a database for research

This paper sets out progress during the first eighteen months of doctoral research into the City of London office market. The overall aim of the research is to explore relationships between office rents and the economy in the UK over the last 150 years. To do this, a database of lettings has been created from which a long run index of City office rents can be constructed. With this index, it should then be possible to analyse trends in rents and relationships with their long run determinants. The focus of this paper is on the creation of the rent database. First, it considers the existing secondary sources of long run rental data for the UK. This highlights a lack of information for years prior to 1970 and the need for primary data collection if earlier periods are to be studied. The paper then discusses the selection of the City of London and of the time period chosen for research. After this, it describes how a dataset covering the period 1860-1960 has been assembled using the records of property companies active in the City office market. It is hoped that, if successful, this research will contribute to existing knowledge on the long run characteristics of commercial real estate. In particular, it should add a price dimension (rents) to the existing long run information on stock/supply and investment. Hence, it should enable a more complete picture of the development and performance of commercial real estate through time to be gained.

The relationship between European Community agricultural Structural Policies and their implementation and agricultural succession and inheritance within Member States

This paper presents an overview of the European Union involvement in agricultural restructuring. By way of introduction it looks at the processes of farm replication operating in Europe and the forces behind them. It then considers the wider application of EU measures in each Member State and how they interrelate with the national property laws and social customs. In conclusion the paper appraises the restructuring policies by examining the balance between legitimising the concentration of property rights amongst a minority and the fragmentation of estates between the majority.