Of the top ten global commercial property markets, London’s has had the highest transaction turnover for the past decade according to Real Capital Analytics. Its prime real estate is part of every major European and US institutional investor’s portfolio and London’s market has the most developed commercial property derivatives market outside of the US. Yet, no transaction-based index exists for the London office market. The aim of this study is to fill that gap. Using a comprehensive dataset of transactions from Estates Gazette interactive and Real Capital Analytics, this paper analyzes different repeat-sales estimation strategies and noise filters to produce a quarterly index series from the first quarter of 1997 to the fourth quarter of 2011. In addition, the index series is measured against IPD’s London capital valuation series and the MIT Center for Real Estate New York office market repeat sales index series. Results show that the market turn of the first financial crisis is clearly visible in the transactions-based indices, and that this index leads the capital valuation series by about a year. London’s office market seems to have been affected by the crisis considerably earlier than New York’s market and correlations between the two markets are low.
The Journal of Real Estate Finance and Economics – Springer Journals
Published: Jun 7, 2013
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