Economic transition and commercial property markets : China and Poland

This paper discusses the economic transition and the property market emergence in transition economies. It compares the Chinese property market with the Polish market. It preliminarily examines market emergence and maturity in the context of economic transition, comparing the transitions with the emphasis placed on commercial property markets especially their formation and behaviour. Supply and demand for commercial space in China and Poland are also contrasted. As commercial property market behaviour is somewhat driven by market structure formation process and the business cycle, the transition has provided a “common ground” that enables similarities between the property markets in China and Poland. The challenge for state intervention is mainly due to the agency problem which is also a problem in mature markets; it appears that transitional economies do share common features in their emerging property markets. This paper suggests state intervention in market formation and emergence is necessary and essential. However the actual formation and behaviour of property markets have some distinctive characteristics. Value or implication of the study include: knowing the stage of market emergence is essential for making investment decisions, especially when identifying markets with varying backgrounds. This paper is also relevant to policy-makers in the process of facilitating transitions in emerging markets.

Economic transition and commercial property cycles in China

Drawn from a recently completed study, this paper aims at a better understanding of commercial property cycles in the transitional economy of China. It examines the behaviour of the property submarket system in China and considers structural changes in the socio-economic system as a primary factor in addressing the research problem. The study suggests that the underlying social and economic structure has greatly determined market behaviour. It finds that radical changes can alter the formal structure (the designed structure) of the market system, including the property market structure, but cannot alter the informal structure (i.e. the emergent structure) at the similar rate. As the study shows, cycles in the commercial property market in the economic transition is largely a key resulting feature of the continuous structural change both at formal and informal levels in a way that is often imbalanced and not always consistently changing together. The same situation also applies to the transformation of inner-city built form, which is featured by a delayed change of physical building stock against the space demand trend that is underpinned by the socio-economic transition. Put simply, there is a supply lag, mainly in the form of changing land use and building stock replacement, against economic change (the business cycle). This affects the level of effective demand for office space and hence becomes a major force in shaping current office cycles.

Valuation and sustainability : are rating tools enough?

The lack of sufficient financial drivers are preventing significant investment in sustainability because stakeholders have only very limited ability to measure the sustainability of the building or understand the impact upon the value. Valuers are unable to indicate or clarify whether sustainability is affecting market value as there is an absence of detailed market evidence, sales data and lease transactions of sustainable building. Leaving both Valuers and other stakeholders uncertain of the value implication as there is no reliable evidence as to whether sustainable buildings are feasible (Lutzkendorf and Lorenz, 2005). One of the key barriers is the confusion evident in the industry particularly the measurement of sustainability in commercial property. Although a range of environmental rating tools exist for buildings globally in commercial property, the synergy between these tools and identification of the relationship between the measurement and market value is inherently blurred due to the unique nature of the compilation of points attributed in the rating tools for sustainability or energy certificates in commercial property. The paper examines the challenges that face the Valuation profession in assessing the impact of sustainability on market value.

Sustainability - the crucial challenge for the valuation profession

Valuation has a pivotal role in increasing the level of sustainability in the built environment. To date, sustainability has received limited attention in valuation practice, and as a result the relationship between sustainability and market value has not been clearly defined. As a consequence, the commercial investment community are hesitant to invest in sustainability beyond best practice management techniques. Valuers’ lack of acknowledgement of sustainability in valuation practice and its changing role in property investment in the built environment, has had a potentially detrimental impact by limiting investment in sustainability in commercial property. Consequently, this lack of acknowledgment and incorporation of sustainability in practice has the potential to cause chaos within the market in the future. It was found that valuers, per se, are inexperienced and have limited knowledge of sustainability in commercial property. Due to differences between generations of valuers, this paper examines whether ‘younger’ valuers’1 knowledge of sustainability, as a concept, measurement and any possible relationship with market value is more extensive than senior valuers. Or whether senior valuers experiences in the market are more sensitive to the change sustainability is having in the commercial property market. A key issue for the profession concerning sustainability and its effect on the market is the limited channels for knowledge development. The implications of this research are the need for increased curriculum in university education, so knowledge dissemination across the profession can be achieved. The development of knowledge of sustainability and its relationship in commercial property will progress the incorporation of sustainability in valuation practice. As a consequence, this will increase the investment in sustainability in the commercial property market.

Economic performance analysis of the Australian property sector using input-output tables

The property sector has played an important role with its growing contribution in the national income and employment in the Australian economy. There is an increasing research need in measuring and analysing the economic performance of the Australian property sector at a country level and input-output tables are considered as an appropriate tool. This paper aims to analyse and measure the performance and sectoral linkages of the Australian property sector using the five latest input-output tables compiled by the Australian Bureau of Statistics. Findings suggested that the Australian residential property sector had played a more important role than the commercial sector in the economy. The backward linkage of the residential property sector showed a decreasing economic pull, while that of commercial property presented an upward pattern. Moreover. the Australian property sector showed a medium economic push to the national economy over the examined period. Findings can aid policy makers, the property sector and researchers in evaluating the competitive ability of the property sector in Australia.

A green profession? A global survey of RICS members and their engagement with the sustainability agenda

Purpose – This study seeks to provide a review of the background and context to the engagement of RICS members with the sustainability agenda, and to examine the extent to which the surveying profession uses relevant information, tools and techniques to achieve the key objectives of sustainable development (or sustainability).

Design/methodology/approach – The paper analyses results from a major international online survey of 4,600 RICS respondent members, supported by 31 structured telephone interviews.

Findings – The results suggest that, although sustainability is highly relevant to RICS members' work, a lack of knowledge and expertise is making it more difficult for sustainability tools and other information to be used effectively.

Research limitations/implications – The survey is based on a substantial number of responses which are broadly representative of the global RICS population. A key implication is that “laggard” faculties include the disciplines of commercial property and valuation.

Practical implications – The research suggests that key stakeholders must work together to provide better information, guidance and education and training to “hardwire” the sustainability agenda across RICS faculties.

Originality/value – This is the first truly global survey of its kind and focuses particularly on those faculties that play a major role in property investment and finance (i.e. valuation and commercial property), comparing their position with that of other faculties in an international context.

Property development

David Cadman’s Property Development has long been the standard textbook on the commercial property development process in the UK, and with this fifth edition the book is brought completely up to date for a new generation of readers. Accessible to students of all disciplines within the built environment, the book is geared directly towards students of property development at undergraduate or graduate levels. It provides a clear and practical overview of the property development process, together with critical analysis of the key issues faced by property professionals today.

The fifth edition retains the established structure of previous editions, by focusing on land acquisition, development appraisal, finance, planning, construction, market research and promotion. Additionally, reflecting changes in practice, there is also new material on the environmental impacts of property development, with a chapter on Sustainable Property Development, and on the growth of international working in the property sector. Excellent case studies, which are enhanced by discussion questions, illustrate the process at work. This fully revised and updated edition of a classic text for all property development students will also be of interest to early career professionals and those pursuing a professional degree in the industry.

Investor perception of the business case for sustainable office buildings : evidence from New Zealand

Over recent years the global market for sustainable commercial property has been growing in importance, with rapid growth occurring overseas that has led to substantial changes in the property markets. The New Zealand property industry has been recently introduced to the concept of sustainability, and although still at an early stage is already noticing the accelerating uptake of sustainability in the industry. Although certain measures have been taken by the New Zealand Green Building Council and government mandates, there remains still a common assumption that there is considerable hesitation and skeptism in the market from both an investor’s and a building owner’s perspective.

The research presented in this paper reports on the results of an investigation into the market perception toward sustainable buildings from the investment community in New Zealand. Property developers and investors from New Zealand were surveyed about their perception of sustainable buildings in New Zealand and their actions with regards to their own commercial portfolios, as well as the impact sustainability is having upon investment decisions. This paper presents the results of research conducted into the relationship between the elements of sustainability and the market value of an office building. The paper provides an insight into the rapidly evolving area of sustainability and office buildings, with the emphasis placed on the valuation process that seeks to assess a hypothetical purchaser’s perspective of this relationship.

The 1990's property cycle in Hainan

The continuous debate between the radical and the conservative approaches on which one is more suitable for a successful economic transition seems to be in favour of the latter. With the recent upswing in the property market in Hainan, the review of the 1990s property cycle in Hainan is linked with economic transition in China. A case study approach is used to establish the importance of the 1990s Hainan property cycle to the formation process of the Chinese property market system. The analytical framework is an integration of the theories of property cycles and economic transition, using the conceptual model of typical commercial property markets modified according to the historical settings in Hainan. It is found that the 1990s Hainan property cycle is unique in that the economic transition has been the key driving force. The structural imbalance caused by the equally imbalanced reform process in different sectors in Hainan has been proved an unsuccessful practice. By and large, the 1990s cycle in Hainan lasted for about 10 years and was state-driven. It was considered an experiment conducted by the state in testing the radical approach of economic transition in the property and urban land sectors. It is suggested that current knowledge of emerging commercial property markets, especially their cyclical behaviour, is limited at both theoretical and empirical levels. Evidence from the past 15 years seems to suggest that the structural and investment imbalance in the economic transition was the main cause of the high volatility in the Hainan property market in the 1990s. The emergence of a commercial property market seems to require choosing the right places to start reform with great caution on investment structure and the fundame ntals of the real economy. Eventually, it is essential to adopt a systematic view to assess and to make decision in the process of emergence of property cycles, based on the basic demand and supply patterns in a city’s transitional economy.

Examining and quantifying the drivers behind alterations and extensions to commercial buildings in a central business district

The drive to undertake building adaptation has increased in momentum, the primary reason being adaptation can be less expensive than new build and conventionally result in faster project delivery times. The issue of sustainable development is another clear driver for adaptation and collectively buildings contribute around half of all greenhouse gas emissions. At the same time governments seek effective and efficient ways of reducing the contribution of cities to climate change and building adaptation appears to offer a practical means of reducing building-related emissions. One example is the ‘1200 building program’ which aims to increase adaptation rates with a target of 1200 city centre office adaptations by 2020 as part of the strategy to achieve carbon neutrality. Through a longitudinal examination of building adaptations it is possible to identify the nature and extent of typical levels of adaptation, as well as determining the inter-relationship between different types of adaptation and building attributes. Melbourne city centre was used for a case study which analysed 5290 building adaptation events between 1998 and 2008. The findings promote the adaptive reuse of buildings in specific circumstances and are directly applicable for increasing sustainability in the built environment. The case study focused on existing buildings in a global city to ensure relevance to urban centres where existing commercial buildings can become part of the solution to mitigate climate change.

Bryan the builder-residential work only

The High Court, in the 1995 landmark case of Bryan v Maloney, held a builder of a residential house liable to a subsequent owner for economic loss suffered by way of the reduction in value of the house caused by its defective foundations. Since that decision, several cases in state courts have indicated that any extension of the principle in Bryan to commercial properties is a matter for the High Court. This year, Woolcock Street Investments Pty Ltd v CDG Pty Ltd provided the vehicle for the High Court to revisit the Bryan principle in a commercial context. Faced with the question 'can a subsequent owner of a commercial property who discovers faulty foundations sue the builder for the costs of fixing the problem before it causes any physical damage to person or property?', the resounding response from the High Court has been 'no'. Gleeson CJ, Gummow, Hayne and Heydon JJ in a joint judgment and McHugh J and Callinan J in separate judgements rejected any 'extension' of the Bryan principle to commercial premises. Much to the relief of the construction industry, the Court made it clear that it will be difficult for a subsequent owner to make out a case in negligence against the original builder unless it can show special vulnerability to the risk of injury. Kirby J, in a dissenting judgment, suggested that the extension of liability to commercial builders fits quite comfortably with general principles and lamented the 'incremental' approach to liability presently favoured by the Court. Consequent upon the retirement of Gaudron J, Kirby J appears to be a lonely light on the hill, shining a solitary beacon on matters of principle.

The revisitation of Bryan has long been anticipated. However, Woolcock does not provide the solid bricks and mortar craved by the construction industry. Close examination of the reasoning of the Court suggests that it may itself rest on faulty foundations. In his dissenting judgment, Kirby J questions some of the assumptions made by the majority and highlights the deficiencies of the 'stated case' procedure for a re-examination of this particular area of law, thus suggesting that Woolcock may not be completely sound.