Retention rates, re-investment and depreciation in European office markets

The retention rate of a company has an impact on its earnings and dividend growth. Lease structures and performance measurement practice force real estate investment managers to adopt full distribution policies. Does this lead to lower income growth in real estate? This paper examines several European office markets across which the effective retention rates vary. It then compares depreciation rates across these markets. It is concluded that there is evidence of a relationship between retention and depreciation. Those markets with particularly inflexible lease structures exhibit low retention rates and higher levels of rental value depreciation. This poses interesting questions concerning the appropriate way to measure property performance across markets exhibiting significantly different retention rates and also raises important issues for global investors.

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.

"Oft expectation fails": a time-series analysis of construction starts in the London office market

Expectations of future market conditions are generally acknowledged to be crucial for the development decision and hence for shaping the built environment. This empirical study of the Central London office market from 1987 to 2009 tests for evidence of adaptive and naive expectations. Applying VAR models and a recursive OLS regression with one-step forecasts, we find evidence of adaptive and naïve, rather than rational expectations of developers. Although the magnitude of the errors and the length of time lags vary over time and development cycles, the results confirm that developers’ decisions are explained to a large extent by contemporaneous and past conditions in both London submarkets. The corollary of this finding is that 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. More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of unexpected exogenous shocks.

The influence of office location on commuting behaviour

To fully appreciate the environmental impact of an office building, the transport-related carbon dioxide (CO2) emissions resulting from its location should be considered in addition to the emissions that result from the operation of the building itself. Travel-related CO2 emissions are a function of three criteria, two of which are influenced by physical location and one of which is a function of business practice. The two spatial criteria are, first, the location of the office relative to the location of the workforce, the market, complementary business activities (and the agglomeration benefits this offers) and, second, the availability and cost of transport modes. The business criterion is the need for, and therefore frequency of, visits and this, in turn, depends on the requirement for a physically present workforce and face-to-face contact with clients. This paper examines the commuting-related CO2 emissions that result from city centre and out-of-town office locations. Using 2001 Census Special Workplace Statistics which record people’s residence, usual workplace and mode of transport between them, distance travelled and mode of travel were calculated for a sample of city centre and out-of-town office locations. The results reveal the extent of the difference between transport-related CO2 emitted by commuters to out-of-town and city centre locations. The implications that these findings have for monitoring the environmental performance of offices are discussed.

‘In the air’ and below the horizon: migrant workers in UK construction and the practice-based nature of learning and communicating OHS

Local, tacit and normally unspoken OHS (occupational health and safety) knowledge and practices can too easily be excluded from or remain below the industry horizon of notice, meaning that they remain unaccounted for in formal OHS policy and practice. In this article we stress the need to more systematically and routinely tap into these otherwise ‘hidden’ communication channels, which are central to how everyday safe working practices are achieved. To demonstrate this approach this paper will draw on our ethnographic research with a gang of migrant curtain wall installers on a large office development project in the north of England. In doing so we reflect on the practice-based nature of learning and sharing OHS knowledge through examples of how workers’ own patterns of successful communication help avoid health and safety problems. These understandings, we argue, can be advanced as a basis for the development of improved OHS measures, and of organizational knowing and learning.

Simple prompts reduce inadvertent energy consumption from lighting in office buildings

Building designs regularly fail to achieve the anticipated levels of in-use energy consumption. The interaction of occupants with building controls is often cited as a key factor behind this discrepancy. This paper examines whether one factor in inadvertent energy consumption might be the appearance of post-completion errors (when an intended action is not taken because a primary goal has already been accomplished) in occupants’ interactions with building controls. Post-completion errors have been widely studied in human-computer interaction but the concept has not previously been applied to the interaction of occupants with building controls. Two experiments were carried out to examine the effect of incorporating two different types of simple prompt to reduce post-completion error in the use of light switches in office meeting rooms. Results showed that the prompts were effective and that occupants switched off lights when leaving the room more often when presented with a normative prompt than with a standard injunction. Additionally, an over reliance on PIR sensors to turn off lights after meetings was observed, which reduced their intended energy savings. We conclude that achieving low carbon buildings in practice is not solely a technological issue and that application of user-models from human-computer interaction will encourage appropriate occupant interaction with building controls and help reduce inadvertent energy consumption.

Knowledge intensive processes characteristics and improvement: a banking best practice example

This paper identifies characteristics of knowledge intensive processes and a method to improve their performance based on analysis of investment banking front office processes. The inability to improve these processes using standard process improvement techniques confirmed that much of the process was not codified and depended on tacit knowledge and skills. This led to the use of a semi-structured analysis of the characteristics of the processes via a questionnaire to identify knowledge intensive processes characteristics that adds to existing theory. Further work identified innovative process analysis and change techniques that could generate improvements based on an analysis of their properties and the issue drivers. An improvement methodology was developed to harness a number of techniques that were found to effective in resolving the issue drivers and improving these knowledge intensive processes.

Amnesty international's language strategy put into practice: a case study of the translation of press releases

This paper investigates the language strategy and translation policies of Amnesty International by discussing the translation of a press release from a textual as well as an institutional point of view. Combining textual analysis with ethnographic methods of data collection and ideas from organisation studies, the paper aims to illustrate how the strategic use of language and translation play a vital role in mediating the NGO’s message and in contributing to its visibility and success. The findings of the textual analysis are contextualised within data collected at the local office of Amnesty International Vlaanderen to come to a better understanding of why particular translation strategies are being applied. The idea of an NGO spreading one consistent message is questioned by showing how different translation strategies apply to different languages and sections, thereby addressing the difficulty of defining translation in the context of news translation.