Transaction based indices for the UK commercial property market

exploration and evaluation using IPD data

Steven Devaney, Roberto Martinez Diaz

    Research output: Working paper

    8 Downloads (Pure)

    Abstract

    The nature of private commercial real estate markets presents difficulties for monitoring market performance. Assets are heterogeneous and spatially dispersed, trading is infrequent and there is no central market place in which prices and cash flows of properties can be easily observed. Appraisal based indices represent one response to these issues. However, these have been criticised on a number of grounds; that they may understate volatility, lag turning points and be affected by client influence issues in relation to the underlying inputs. Thus, this paper presents an econometrically derived transaction based index of the UK commercial property market using IPD data and compares it with published IPD valuation indices for this market. The method is similar to that presented by Fisher et al. (2007) and used by the MIT Centre for Real Estate on NCREIF portfolio records, although it employs value rather than equal weighting. The results show stronger growth from the transaction based index in the run up to the peak in the UK market in 2007 as well as larger falls thereafter. They also show that the transaction index is more volatile than the valuation series, but, surprisingly, differences in the timing of turning points are not found. Hence, the paper concludes by debating why this might be so, as well as the applications and limitations that this transaction based series has as a practical market performance measure.
    Original languageEnglish
    Place of PublicationAberdeen
    PublisherUniversity of Aberdeen Business School
    Pages1-18
    Number of pages18
    Publication statusPublished - 2010

    Publication series

    NameUniversity of Aberdeen Business School Working Paper Series
    PublisherUniversity of Aberdeen Business School
    Volume02
    ISSN (Print)0143-4543

    Fingerprint

    Property market
    Evaluation
    Turning point
    Market performance
    Real estate market
    Lag
    Performance measures
    Weighting
    Assets
    Real estate
    Commercial real estate
    Monitoring
    Cash flow

    Keywords

    • transaction-based indices
    • property performance measurement

    Cite this

    Devaney, S., & Martinez Diaz, R. (2010). Transaction based indices for the UK commercial property market: exploration and evaluation using IPD data. (pp. 1-18). (University of Aberdeen Business School Working Paper Series; Vol. 02). Aberdeen: University of Aberdeen Business School.

    Transaction based indices for the UK commercial property market : exploration and evaluation using IPD data. / Devaney, Steven; Martinez Diaz, Roberto.

    Aberdeen : University of Aberdeen Business School, 2010. p. 1-18 (University of Aberdeen Business School Working Paper Series; Vol. 02).

    Research output: Working paper

    Devaney, S & Martinez Diaz, R 2010 'Transaction based indices for the UK commercial property market: exploration and evaluation using IPD data' University of Aberdeen Business School Working Paper Series, vol. 02, University of Aberdeen Business School, Aberdeen, pp. 1-18.
    Devaney S, Martinez Diaz R. Transaction based indices for the UK commercial property market: exploration and evaluation using IPD data. Aberdeen: University of Aberdeen Business School. 2010, p. 1-18. (University of Aberdeen Business School Working Paper Series).
    Devaney, Steven ; Martinez Diaz, Roberto. / Transaction based indices for the UK commercial property market : exploration and evaluation using IPD data. Aberdeen : University of Aberdeen Business School, 2010. pp. 1-18 (University of Aberdeen Business School Working Paper Series).
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