The introduction of more flexible lease terms within the structure of commercial leases in the UK generates a number of challenging issues for investors, occupiers and their…
Abstract
The introduction of more flexible lease terms within the structure of commercial leases in the UK generates a number of challenging issues for investors, occupiers and their advisers. This emerging structural change requires a new approach to the management and pricing of commercial real estate. This paper examines the factors underpinning the desire for greater corporate agility, including business planning and risk management; globalisation; and existing and proposed changes to accountancy standards. In addition, the paper considers innovation in the supply of space and the substance of space contracts. It is the contention of this research that it is possible for all parties to derive equal utility from greater flexibility by matching occupier and investor requirements. However, any attempt to price the risk reallocation rationally must encapsulate the likelihood of experiencing greater income volatility as well as the probability of a break clause being exercised or, more specifically, the risk of experiencing costs associated with voids and re‐letting.
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Brenna O’Roarty, Stanley McGreal and Alastair Adair
This paper utilises cluster analytical techniques to examine the relationship between store space requirements, micro‐style property selection and retail function. Analysis of…
Abstract
This paper utilises cluster analytical techniques to examine the relationship between store space requirements, micro‐style property selection and retail function. Analysis of survey data infers that retail function is the most important dimension in determining retailers’ behaviour with respect to store space requirements. Suggests that variation across a range of factors pertinent to the valuation of shop premises cannot be explained by store space requirements. Concludes that application of unit area values derived from the comparison of properties of different size and layout in any assessment of retail rental values is potentially flawed.
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Brenna O’Roarty, Stanley McGreal and Alastair Adair
Examines retailers’ evaluation of micro‐scale property selection criteria with particular attention to the impact of locational, physical and lease term factors. Highlights the…
Abstract
Examines retailers’ evaluation of micro‐scale property selection criteria with particular attention to the impact of locational, physical and lease term factors. Highlights the relationship between retail function, store selection and rental value. Survey analysis identifies significant variation by retailing function across a range of factors pertinent to the valuation of shop premises. Concludes that retail function ought to be considered in any assessment of retail rental values using the comparative method.
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The demand for value added investment in the European real estate market emerged in the mid to late 1990s and over the past decade has grown rapidly as a preferred investment…
Abstract
Purpose
The demand for value added investment in the European real estate market emerged in the mid to late 1990s and over the past decade has grown rapidly as a preferred investment style. Recent evidence suggests that investor appetite for value added products is set to intensify further. The purpose of this paper is to consider value added investment in the context of the wider market and in particular considers the rationale underpinning the current surge in demand. The paper explores the core components of its risk return profile and puts forward a strategic investment framework for European value added investment.
Design/methodology/approach
This paper develops a three tier filter to enable the classification of investment style. First, the risk parameters of the key investment characteristics are considered; second, the degree of risk exposure experienced on any one dimension and finally, the combination of such risks taken at any one time.
Findings
The key findings of this paper are: the shift in capital towards real estate at the beginning of the decade brought a new investor audience to the sector. Alongside the existing investor base, their growing experience in the sector, together with steep pricing competition for core has increased their risk appetite within the sector.
Originality/value
The paper emphasizes that investment strategies focussed on delivering true risk adjusted value added returns must be capable of identifying structural change, evaluating its implications for the real estate market and analysing its impact on current and future value.
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Michael Evans, Nick French and Brenna O’Roarty
Discusses the role of property within corporate organisations and, in particular, discusses the impact of real estate on the balance sheet of UK‐based corporate businesses. Also…
Abstract
Discusses the role of property within corporate organisations and, in particular, discusses the impact of real estate on the balance sheet of UK‐based corporate businesses. Also explains how new and proposed provisions from the Accounting Standards Board (ASB) may affect the way in which property is held and managed in the future. Considers the proposed changes from the viewpoint of the property professional and from an accountancy perspective. Concludes that, in the future, management will be required to apply a greater focus on their property portfolio in order to meet the relevant accounting standards.
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Purpose – This paper intends to respond the question that comes up to CRE managers when they consider the outsourcing technique for their CRE management and portfolio. The…
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Purpose – This paper intends to respond the question that comes up to CRE managers when they consider the outsourcing technique for their CRE management and portfolio. The question, if it is possible to capture in the outsourcing contract sufficient flexibility to meet the changing needs of the business and add value, addresses the existing debate on flexibility arguing the suitability of the outsourcing structures for corporates portfolio. Design/methodology/approach – The paper undertakes a methodological analysis, considering the main outsourcing deals in the UK and continental Europe and discussing the main theories on management outsourcing. Theories of flexibility of CRE portfolios are considered and the main characteristics of the new REPs discussed. Findings – The paper finds that it is possible to capture in the outsourcing contract sufficient flexibility to meet the changing needs of the business and add value because a contract can capture all the flexibility desired and iit would add value as the properties would be used efficiently. Two outsourcing contracts in the UK are explained in two case studies, which support this. Originality/value – The paper suggests methods to outsource CRE portfolios and obtain adequate flexibility to add value to shareholders.