Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Distance and diversification

Distance and diversification PurposeThe purpose of this paper is to examine whether geographical distance or economic distance offers greater diversification benefits in the UK office market.Design/methodology/approachThe real estate investment data for this study come from the Investment Property Databank (IPD) analysis “UK Quarterly Key Centres Q2 2015”. We measure the geographical distance between the City of London and 27 local authorities by road distance. We used the market size and employment structure of the local authorities relative to the City of London to calculate economic distance.FindingsThe results show that local authorities that are classified on their economic distance show significant negative office rental growth correlations with the City of London. In contrast, geographical distance shows no relationship. Results that are consistent for the overall sample period and for various sub-periods.Practical implicationsSpatial diversity is a fundamental tenet of real estate portfolio management and the results here show that it is better to diversify by across office markets in the UK using the economic attributes of local authorities rather than the physical distance between locations.Originality/valueThis is one of only two papers to explicitly examine whether economic distance or geographical distance leads to significantly lower rental growth coefficients between locations in office markets and the first in the UK. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

Distance and diversification

Download PDF
11 pages

Loading next page...
 
/lp/emerald-publishing/distance-and-diversification-IBi2POBNVi
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-9269
DOI
10.1108/JERER-02-2016-0010
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to examine whether geographical distance or economic distance offers greater diversification benefits in the UK office market.Design/methodology/approachThe real estate investment data for this study come from the Investment Property Databank (IPD) analysis “UK Quarterly Key Centres Q2 2015”. We measure the geographical distance between the City of London and 27 local authorities by road distance. We used the market size and employment structure of the local authorities relative to the City of London to calculate economic distance.FindingsThe results show that local authorities that are classified on their economic distance show significant negative office rental growth correlations with the City of London. In contrast, geographical distance shows no relationship. Results that are consistent for the overall sample period and for various sub-periods.Practical implicationsSpatial diversity is a fundamental tenet of real estate portfolio management and the results here show that it is better to diversify by across office markets in the UK using the economic attributes of local authorities rather than the physical distance between locations.Originality/valueThis is one of only two papers to explicitly examine whether economic distance or geographical distance leads to significantly lower rental growth coefficients between locations in office markets and the first in the UK.

Journal

Journal of European Real Estate Research – Emerald Publishing

Published: Aug 1, 2016

References

  • A theoretical foundation for the gravity equation