Nonlocal Office Investors: Anchored by their Markets and Impaired by their Distance

Nonlocal Office Investors: Anchored by their Markets and Impaired by their Distance Nonlocal investors purchase and sell investment property in a distant metropolitan area. In this study, we identify capital value underperformance for nonlocal investors on both sides of the transaction, when they purchase and when they sell. The commercial real estate transactions data include a national sample of office property occurring in more than 100 U.S. markets. Using propensity-score matched sample to control for selection bias, we find that nonlocal investors overpay on the purchase by an estimated 13.8 % and sell at an estimated 7 % discount. These disadvantages relative to local investors expand with the geographic distance separating investor and asset. Nonlocal investors fundamentally overvalue similar assets sold to each other relative to assets transacted between locals, and are less patient as sellers. The positive bias in overpayment is directly tied to office rent differentials between the asset and investor markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Nonlocal Office Investors: Anchored by their Markets and Impaired by their Distance

Loading next page...
 
/lp/springer_journal/nonlocal-office-investors-anchored-by-their-markets-and-impaired-by-zUU0lkW7lH
Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-013-9446-8
Publisher site
See Article on Publisher Site

Abstract

Nonlocal investors purchase and sell investment property in a distant metropolitan area. In this study, we identify capital value underperformance for nonlocal investors on both sides of the transaction, when they purchase and when they sell. The commercial real estate transactions data include a national sample of office property occurring in more than 100 U.S. markets. Using propensity-score matched sample to control for selection bias, we find that nonlocal investors overpay on the purchase by an estimated 13.8 % and sell at an estimated 7 % discount. These disadvantages relative to local investors expand with the geographic distance separating investor and asset. Nonlocal investors fundamentally overvalue similar assets sold to each other relative to assets transacted between locals, and are less patient as sellers. The positive bias in overpayment is directly tied to office rent differentials between the asset and investor markets.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Oct 6, 2013

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve Freelancer

DeepDyve Pro

Price
FREE
$49/month

$360/year
Save searches from Google Scholar, PubMed
Create lists to organize your research
Export lists, citations
Read DeepDyve articles
Abstract access only
Unlimited access to over
18 million full-text articles
Print
20 pages/month
PDF Discount
20% off