Time to completion liquidity in UK commercial real estate investment: 2000-2008

David Scofield

    Research output: Contribution to journalArticle

    11 Citations (Scopus)

    Abstract

    Purpose – The purpose of this paper is to provide new insights into asset liquidity in direct commercial real estate investment in the UK. Transaction data provided by four institutional investors of commercial real estate are used to test for changes in asset liquidity as manifest in recorded times from price agreement to deal completion. Median times to completion by stage of the transaction are presented alongside industry estimates.

    Design/methodology/approach – Stages of the transaction process are modeled and median times per stage calculated to track changes in asset liquidity over, and between, the two periods of the study (2000-2002 and 2005-2008). Real times to completion are considered in conjunction with estimated times compiled through interviews with senior level investment professionals. This paper applies the Wilcoxon rank-sum test to determine the significance of variation in median times across the two study periods.

    Findings – This paper provides empirical evidence that liquidity increased from 2000 to 2008. Median times from price agreement to completion decreased significantly (p=0.015) from 2000-2002 to 2005-2008, indicating an increase in asset liquidity in step with an overall increase in transaction volume. Furthermore, senior investment actors were found to persistently over-estimate transaction efficiency and underestimate liquidity risk when acquiring and disposing of commercial properties.

    Research limitations/implications – This work offers new insights into the changing nature of asset liquidity over the last decade based on a limited number of transactions. Additional studies involving larger samples of transactions would provide still greater insight into commercial real estate liquidity dimensions.

    Practical implications – The paper presents evidence of pro-cyclicality; asset liquidity varies positively with overall transaction volumes, and investment actors were found to overestimate asset liquidity suggesting a persistent underestimation of liquidity risk.

    Originality/value – This paper addresses a gap in the extant literature offering real time on market-time to completion observations alongside investor estimates. Median times to completion have been modeled and presented, together with time estimates provided by industry experts. Also, for first time in real estate research, median times to completion are shown to shorten significantly in-line with increasing transaction volumes.
    Original languageEnglish
    Pages (from-to)34-47
    Number of pages14
    JournalJournal of European Real Estate Research
    Volume6
    Issue number1
    DOIs
    Publication statusPublished - 2013

    Fingerprint

    Liquidity
    Commercial real estate
    Real estate investment
    Assets
    Median
    Industry
    Liquidity risk
    Investors
    Institutional investors
    Empirical evidence
    Design methodology
    Time on market
    Real estate
    Transaction data
    Procyclicality

    Keywords

    • assets
    • commercial property
    • commercial real estate
    • investments
    • liquidity
    • portfolio investment
    • United Kingdom

    Cite this

    Time to completion liquidity in UK commercial real estate investment : 2000-2008. / Scofield, David .

    In: Journal of European Real Estate Research, Vol. 6, No. 1, 2013, p. 34-47.

    Research output: Contribution to journalArticle

    @article{27a225f07ba34598b80e6a300791ae70,
    title = "Time to completion liquidity in UK commercial real estate investment: 2000-2008",
    abstract = "Purpose – The purpose of this paper is to provide new insights into asset liquidity in direct commercial real estate investment in the UK. Transaction data provided by four institutional investors of commercial real estate are used to test for changes in asset liquidity as manifest in recorded times from price agreement to deal completion. Median times to completion by stage of the transaction are presented alongside industry estimates.Design/methodology/approach – Stages of the transaction process are modeled and median times per stage calculated to track changes in asset liquidity over, and between, the two periods of the study (2000-2002 and 2005-2008). Real times to completion are considered in conjunction with estimated times compiled through interviews with senior level investment professionals. This paper applies the Wilcoxon rank-sum test to determine the significance of variation in median times across the two study periods.Findings – This paper provides empirical evidence that liquidity increased from 2000 to 2008. Median times from price agreement to completion decreased significantly (p=0.015) from 2000-2002 to 2005-2008, indicating an increase in asset liquidity in step with an overall increase in transaction volume. Furthermore, senior investment actors were found to persistently over-estimate transaction efficiency and underestimate liquidity risk when acquiring and disposing of commercial properties.Research limitations/implications – This work offers new insights into the changing nature of asset liquidity over the last decade based on a limited number of transactions. Additional studies involving larger samples of transactions would provide still greater insight into commercial real estate liquidity dimensions.Practical implications – The paper presents evidence of pro-cyclicality; asset liquidity varies positively with overall transaction volumes, and investment actors were found to overestimate asset liquidity suggesting a persistent underestimation of liquidity risk.Originality/value – This paper addresses a gap in the extant literature offering real time on market-time to completion observations alongside investor estimates. Median times to completion have been modeled and presented, together with time estimates provided by industry experts. Also, for first time in real estate research, median times to completion are shown to shorten significantly in-line with increasing transaction volumes.",
    keywords = "assets, commercial property, commercial real estate , investments , liquidity , portfolio investment, United Kingdom",
    author = "David Scofield",
    year = "2013",
    doi = "10.1108/17539261311313004",
    language = "English",
    volume = "6",
    pages = "34--47",
    journal = "Journal of European Real Estate Research",
    issn = "1753-9269",
    publisher = "Emerald Group Publishing Ltd.",
    number = "1",

    }

    TY - JOUR

    T1 - Time to completion liquidity in UK commercial real estate investment

    T2 - 2000-2008

    AU - Scofield, David

    PY - 2013

    Y1 - 2013

    N2 - Purpose – The purpose of this paper is to provide new insights into asset liquidity in direct commercial real estate investment in the UK. Transaction data provided by four institutional investors of commercial real estate are used to test for changes in asset liquidity as manifest in recorded times from price agreement to deal completion. Median times to completion by stage of the transaction are presented alongside industry estimates.Design/methodology/approach – Stages of the transaction process are modeled and median times per stage calculated to track changes in asset liquidity over, and between, the two periods of the study (2000-2002 and 2005-2008). Real times to completion are considered in conjunction with estimated times compiled through interviews with senior level investment professionals. This paper applies the Wilcoxon rank-sum test to determine the significance of variation in median times across the two study periods.Findings – This paper provides empirical evidence that liquidity increased from 2000 to 2008. Median times from price agreement to completion decreased significantly (p=0.015) from 2000-2002 to 2005-2008, indicating an increase in asset liquidity in step with an overall increase in transaction volume. Furthermore, senior investment actors were found to persistently over-estimate transaction efficiency and underestimate liquidity risk when acquiring and disposing of commercial properties.Research limitations/implications – This work offers new insights into the changing nature of asset liquidity over the last decade based on a limited number of transactions. Additional studies involving larger samples of transactions would provide still greater insight into commercial real estate liquidity dimensions.Practical implications – The paper presents evidence of pro-cyclicality; asset liquidity varies positively with overall transaction volumes, and investment actors were found to overestimate asset liquidity suggesting a persistent underestimation of liquidity risk.Originality/value – This paper addresses a gap in the extant literature offering real time on market-time to completion observations alongside investor estimates. Median times to completion have been modeled and presented, together with time estimates provided by industry experts. Also, for first time in real estate research, median times to completion are shown to shorten significantly in-line with increasing transaction volumes.

    AB - Purpose – The purpose of this paper is to provide new insights into asset liquidity in direct commercial real estate investment in the UK. Transaction data provided by four institutional investors of commercial real estate are used to test for changes in asset liquidity as manifest in recorded times from price agreement to deal completion. Median times to completion by stage of the transaction are presented alongside industry estimates.Design/methodology/approach – Stages of the transaction process are modeled and median times per stage calculated to track changes in asset liquidity over, and between, the two periods of the study (2000-2002 and 2005-2008). Real times to completion are considered in conjunction with estimated times compiled through interviews with senior level investment professionals. This paper applies the Wilcoxon rank-sum test to determine the significance of variation in median times across the two study periods.Findings – This paper provides empirical evidence that liquidity increased from 2000 to 2008. Median times from price agreement to completion decreased significantly (p=0.015) from 2000-2002 to 2005-2008, indicating an increase in asset liquidity in step with an overall increase in transaction volume. Furthermore, senior investment actors were found to persistently over-estimate transaction efficiency and underestimate liquidity risk when acquiring and disposing of commercial properties.Research limitations/implications – This work offers new insights into the changing nature of asset liquidity over the last decade based on a limited number of transactions. Additional studies involving larger samples of transactions would provide still greater insight into commercial real estate liquidity dimensions.Practical implications – The paper presents evidence of pro-cyclicality; asset liquidity varies positively with overall transaction volumes, and investment actors were found to overestimate asset liquidity suggesting a persistent underestimation of liquidity risk.Originality/value – This paper addresses a gap in the extant literature offering real time on market-time to completion observations alongside investor estimates. Median times to completion have been modeled and presented, together with time estimates provided by industry experts. Also, for first time in real estate research, median times to completion are shown to shorten significantly in-line with increasing transaction volumes.

    KW - assets

    KW - commercial property

    KW - commercial real estate

    KW - investments

    KW - liquidity

    KW - portfolio investment

    KW - United Kingdom

    U2 - 10.1108/17539261311313004

    DO - 10.1108/17539261311313004

    M3 - Article

    VL - 6

    SP - 34

    EP - 47

    JO - Journal of European Real Estate Research

    JF - Journal of European Real Estate Research

    SN - 1753-9269

    IS - 1

    ER -