A geography of the UK commercial property market

This paper revisits some ideas that were first raised seriously in the mid-90s; that it should be possible to establish linkages (in spatial terms) between local economic factors and sector performance in commercial real estate markets. There have been a number of developments in the quality and quantity of relevant data over the intervening period that make it appropriate to return to have another look at some of these ideas in a more ‘modern’ technological context. Using data from several sources this exploratory paper seeks therefore to look at some of the spatial patterns that can be derived from the data. It examines the extent to which it is possible to make linkages and visualise the geographical structure of those markets and their change over time. Naturally there remain strong limitations on the extent to which it is possible to achieve ‘good’ results in this kind of analysis, and one major intention of the paper is to encourage a debate about how data sets can be developed and improved to allow these methods to be taken further.

Are property agents to blame for upward only rent reviews?

In negotiating commercial leases, many landlords and tenants employ property agents (brokers) to act on their behalf; typically these people are chartered surveyors. The aim of this paper is to explore the role that these brokers play in the shaping of commercial leases in the context of the current debate in the UK on upward only rent reviews. This role can be described using agency theory and the theories of professionalism. These provide expectations of behaviour which show inherent tensions between the role of agent and professional, particularly regarding the use of knowledge, autonomy and the obligation to the public interest. The parties to eleven recent lease transactions were interviewed to see if the brokers conformed to the expectations of agency theory or professionalism. Brokers that acted for industrial and office tenants behaved as professionals in using their expertise to determine lease structures. However, those acting for landlords and retail tenants simply followed instructions and behaved as conduits for their clients, a role more usually associated with that of an agent within the principal-agent relationship. None of the landlords’ brokers saw themselves as having responsibilities beyond their clients and so they were not promoting the discussion of alternatives to the UORR. The evidence from these case studies suggests that agents are not professionals; to behave entirely as an agent is to contradict the essential characteristics of a professional. While brokers cannot be held entirely responsible for the lack of movement on the UORR, by adopting predominantly agent roles then they must take some of the blame. However, behind this may be a much larger issue that needs to be explored; the institutional pressures that lead to professionals behaving in this way.

Expert judgement in the processes of commercial property market forecasting

In this paper, we investigate the role of judgement in the formation of forecasts in commercial property markets. The investigation is based on interview surveys with the majority of UK forecast producers, who are using a range of inputs and data sets to form models to predict an array of variables for a range of locations. The findings suggest that forecasts need to be acceptable to their users (and purchasers) and consequently forecasters generally have incentives to avoid presenting contentious or conspicuous forecasts. Where extreme forecasts are generated by a model, forecasters often engage in ‘self‐censorship’ or are ‘censored’ following in‐house consultation. It is concluded that the forecasting process is significantly more complex than merely carrying out econometric modelling, forecasts are mediated and contested within organisations and that impacts can vary considerably across different organizational contexts.

Private property vehicles: the valuation of interests in limited partnerships

This paper examines the extent to which the valuation of partial interests in private property vehicles should be closely aligned to the valuation of the underlying assets. A sample of vehicle managers and investors replied to a questionnaire on the qualities of private property vehicles relative to direct property investment. Applying the Analytic Hierarchy Process (AHP) technique the relative importance of the various advantages and disadvantages of investment in private property vehicles relative to acquisition of the underlying assets are assessed. The results suggest that the main drivers of the growth of the this sector have been the ability for certain categories of investor to acquire interests in assets that are normally inaccessible due to the amount of specific risk. Additionally, investors have been attracted by the ability to ‘outsource’ asset management in a manner that minimises perceived agency problems. It is concluded that deviations from NAV should be expected given that investment in private property vehicles differs from investment in the underlying assets in terms of liquidity, management structures, lot size, financial structure inter alia. However, reliably appraising the pricing implications of these variations is likely to be extremely difficult due to the lack of secondary market trading and vehicle heterogeneity.