Saving the planet but losing the landscape: the impact of renewable energy policies on rural Britain

The main instrument of the Government's renewable energy policy is to promote wind power through regulation and subsidy. This gives rise to anomalies in rural planning when turbines are erected in sensitve areas in which other forms of development are strictly controlled. The situation is reviewed in the context of economic viability and considered also against the alternative of growing fuel crops. The latter are currently hampered by lack of Government support but could fulfil a useful secondary role of sustaining the agricultural sector and with it the management of lowland landscapes.

Liquidity in commercial property markets: deconstructing the transaction process

This paper draws from a wider research programme in the UK undertaken for the Investment Property Forum examining liquidity in commercial property. One aspect of liquidity is the process by which transactions occur including both how properties are selected for sale and the time taken to transact. The paper analyses data from three organisations; a property company, a major financial institution and an asset management company, formally a major public sector pension fund. The data covers three market states and includes sales completed in 1995, 2000 and 2002 in the UK. The research interviewed key individuals within the three organisations to identify any common patterns of activity within the sale process and also identified the timing of 187 actual transactions from inception of the sale to completion. The research developed a taxonomy of the transaction process. Interviews with vendors indicated that decisions to sell were a product of a combination of portfolio, specific property and market based issues. Properties were generally not kept in a ���readiness for sale��� state. The average time from first decision to sell the actual property to completion had a mean time of 298 days and a median of 190 days. It is concluded that this study may underestimate the true length of the time to transact for two reasons. Firstly, the pre-marketing period is rarely recorded in transaction files. Secondly, and more fundamentally, studies of sold properties may contain selection bias. The research indicated that vendors tended to sell properties which it was perceived could be sold at a ���fair��� price in a reasonable period of time.

Influences on secured lending property valuations in the UK

A significant part of bank lending in the UK is secured on commercial property and valuations play an important part in this process. They are an integral part of risk management within the banking sector. It is therefore important that valuations are independent and objective and are used properly to ensure that secured lending is soundly based from the perspective of both lender and borrower. The purpose of this research is to examine objectivity and transparency in the valuation process for bank lending and to identify any influences which may undermine the process. A detailed analysis of 31 valuation negligence cases has been followed by two focus groups of lenders and valuers and also questionnaire surveys of commercial lenders and valuers. Many stakeholders exist, for example lenders, borrowers and brokers, who are able to influence the process in various ways. The strongest evidence of overt influence in the process comes from the method of valuer selection with borrowers and brokers seen to be heavily involved. There is some also some evidence of influence during the draft valuation process. A significant minority of valuers feel that inappropriate pressure is applied by borrowers and brokers yet there is no apparent part of the process that leads to this. The panel system employed by lenders is found to be a significant part of the system and merits further examination. The pressure felt by valuers needs more investigation along with the question of if and how the process could dispel such feelings. This is seen as particularly important in the context of bank regulation.

Country, sector and regional factors in European property returns

For those portfolio managers who follow a top-down approach to fund management when they are trying to develop a pan-European investment strategy they need to know which are the most important factors affecting property returns, so as to concentrate their management and research efforts accordingly. In order to examine this issue this paper examines the relative importance of country, sector and regional effects in determining property returns across Europe using the largest database of individual property returns currently available. Using annual data over the period 1996 to 2002 for a sample of over 25,000 properties the results show that the country-specific effects dominate sector-specific factors, which in turn dominate the regional-specific factors. This is true even for different sub-sets of countries and sectors. In other words, real estate returns are mainly determined by local (country specific) conditions and are only mildly affected by general European factors. Thus, for those institutional investors contemplating investment into Europe the first level of analysis must be an examination of the individual countries, followed by the prospects of the property sectors within the country and then an assessment of the differences in expected performance between the main city and the rest of the country.

Changes in the relative importance of sector and regional factors: 1987-2002

A stylised fact in the real estate portfolio diversification literature is that sector (property-type) effects are relatively more important than regional (geographical) factors in determining property returns. Thus, for those portfolio managers who follow a top-down approach to portfolio management, they should first choose in which sectors to invest and then select the best properties in each market. However, the question arises as to whether the dominance of the sector effects relative to regional effects is constant. If not property fund managers will need to take account of regional effects in developing their portfolio strategy. Using monthly data over the period 1987:1 to 2002:12 for a sample of over 1000 properties the results show that the sector-specific factors dominate the regional-specific factors for the vast majority of the time. Nonetheless, there are periods when the regional factors are of equal or greater importance than the sector effects. In particular, the sector effects tend to dominate during volatile periods of the real estate cycle; however, during calmer periods the sector and regional effects are of equal importance. These findings suggest that the sector effects are still the most important aspect in the development of an active portfolio strategy.

Tenant mix variety in regional shopping centres: some UK empirical analyses

The variety and quality of the tenant mix within a shopping centre is a key concern in shopping centre management. Tenant mix determines the extent of externalities between outlets in the centre, helps establish the image of the centre and, as a result, determines the attractiveness of the centre for consumers. This then translates into sales and rents. However, the management of tenant mix has largely been based on perceived ���optimum��� arrangements and industry rules of thumb. This paper attempts to model the impact of tenant mix on the rent paid by retailers in larger UK shopping centres and, hence, the returns made by shopping centre landlords. It extends work on shopping centre rent determination (see Working Paper 10/03) utilising a database of 148 regional shopping centres in the UK, with detailed data for over 1900 tenants. Econometric models test the relationship between rental levels and the levels of retail concentration and diversity, while controlling for a range of continuous and qualitative characteristics of each tenant, each retail product, and each shopping centre. Factor analysis is then used to extract the core retail and service categories from the tenant lists of the 148 shopping centres. The factor scores from these core retailer factors are then tested against rent payable. The results from the empirical analysis allow us to generate some clear analytical and empirical implications for optimal retail management.

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 real estate 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 IPD Monthly Index confirms this effect with around 5% more appraisals being moved at each quarter day than the other months. More November appraisals change than expected and this suggests that the increased information flows for the December end year appraisals are flowing through into earlier appraisals, especially as client/appraiser draft appraisal meetings for the December appraisals, a regular occurrence in the UK, can occur in November. January illustrates significantly less activity than other months, a seasonal effect after the exertions of the December appraisals.

Office sustainability: occupier perceptions and implementation of policy

Purpose ��� The purpose of this research was twofold. First, to investigate the views of occupiers in a typical UK city on the importance of various sustainability issues, their perceived impact of different sustainability drivers and willingness to pay. Second, the environmental and social performance of existing buildings in that city was examined. Design/methodology/approach ��� The research focuses on buildings of 10,000 feet2 or more that have been constructed in the Bristol city-region in the UK over the past 50 years. The buildings in the sample are located in the city centre and in out-of-town business parks. A questionnaire survey investigated the views of occupiers and follow-up interviews looked more closely at the sustainability performance of the existing stock. Findings ��� The findings indicate that, as far as occupiers are concerned, the strongest drivers are consumer demand and staff demand. Green features of a building appear to rank low in the overall building selection preference structure and a willingness to pay a premium for green features was indicated. The interviews uncovered barriers to progress as well as initiatives to reduce both energy consumption and the environmental impact of office space. Practical implications ��� The paper identifies progress and issues which could form obstacles to improving the environmental performance of office buildings. It is argued that there is a need to focus on energy efficiency. Originality/value ��� This paper explores the linkage between the perception and use of office space by occupants and how this affects the environmental performance of this space.

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.

Policy making without legislating: the self-regulation of commercial property leasing

The terms of a commercial property lease covers aspects such as rent, alterations to premises and the ability to leave; consequently they have a significant impact on cash flow and the ability of a business to develop. In contrast to the heavily-legislated residential sector, commercial landlords and tenants in the UK are largely free to negotiate the terms of their contract. Yet, since the property crash of 1989/90, successive governments have taken an interest in commercial leasing; in particular there is a desire to see landlords being more flexible. UK Government policy in this area has been pursued through industry self-regulation rather than legislation; since 1995 there have been three industry codes of practice on leasing. These codes are sanctioned by government and monitored by them. Yet, 15 years after the first code was launched, many in the industry see the whole code concept as ineffective and unlikely to ever achieve changes to certain aspects of landlord behaviour. This paper is the first step in considering the lease codes in the wider context of industry self-regulation. The aim of the paper is twofold: First a framework is created using the literature on industry self-regulation from various countries and industries which suggests key criteria to explain the effectiveness (or ineffectiveness) of self-regulation. This is then applied to the UK lease codes based on research carried out by the authors for the UK Government to monitor the success of all three codes. The outcome is a clearer understanding of the possibilities and limitations of using a voluntary solution to achieve policy aims within the property industry.

Green noise or green value? Measuring the price effects of environmental certification in commercial buildings

This paper investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and non-certified buildings. First, certified buildings offer a bundle of benefits to occupiers relating to business productivity, image and occupancy costs. Second, due to these occupier benefits, certified buildings can result in higher rents and lower holding costs for investors. Third, certified buildings may require a lower risk premium. Drawing upon the CoStar database of US commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. We first estimate the rental regression for a sample of 110 LEED and 433 Energy Star as well as several thousand benchmark buildings to compare the sample to. The results suggest that, compared to buildings in the same metropolitan region, certified buildings have a rental premium and that the more highly rated that buildings are in terms of their environmental impact, the greater the rental premium. Furthermore, based on a sample of transaction prices for 292 Energy Star and 30 LEED-certified buildings, we find price premia of 10% and 31% respectively compared to non-certified buildings in the same metropolitan area

Influences on secured lending property valuations in the UK

A significant part of bank lending in the UK is secured on commercial property and valuations play an important part in this process. They are an integral part of risk management within the banking sector. It is therefore important that valuations are independent and objective and are used properly to ensure that secured lending is soundly based from the perspective of both lender and borrower. The purpose of this research is to examine objectivity and transparency in the valuation process for bank lending and to identify any influences which may undermine the process. A detailed analysis of 31 valuation negligence cases has been followed by two focus groups of lenders and valuers and also questionnaire surveys of commercial lenders and valuers. Many stakeholders exist, for example lenders, borrowers and brokers, who are able to influence the process in various ways. The strongest evidence of overt influence in the process comes from the method of valuer selection with borrowers and brokers seen to be heavily involved. There is some also some evidence of influence during the draft valuation process. A significant minority of valuers feel that inappropriate pressure is applied by borrowers and brokers yet there is no apparent part of the process that leads to this. The panel system employed by lenders is found to be a significant part of the system and merits further examination. The pressure felt by valuers needs more investigation along with the question of if and how the process could dispel such feelings. This is seen as particularly important in the context of bank regulation.

Attribution analysis of property portfolios

This paper aims to clarify the potential confusion about the application of attribution analysis to real estate portfolios. Its three primary objectives are: �� To review, and as far as possible reconcile, the varying approaches to attribution analysis evident in the literature. �� To give a clear statement of the purposes of attribution analysis, and its meaning for real-world property managers. �� To show, using real portfolio data from IPD's UK performance measurement service, the practical implications of applying different attribution methods.

Are property prices non-linear? An investigation of the behaviour of US REITs and UK property company shares

Linear models of market performance may be misspecified if the market is subdivided into distinct regimes exhibiting different behaviour. Price movements in the US Real Estate Investment Trusts and UK Property Companies Markets are explored using a Threshold Autoregressive (TAR) model with regimes defined by the real rate of interest. In both US and UK markets, distinctive behaviour emerges, with the TAR model offering better predictive power than a more conventional linear autoregressive model. The research points to the possibility of developing trading rules to exploit the systematically different behaviour across regimes.