Steven Laposa and Andrew Mueller
The purpose of this paper is twofold: the authors initially survey a sample of literature published after the Great Recession that address macroeconomic and commercial real estate…
Abstract
Purpose
The purpose of this paper is twofold: the authors initially survey a sample of literature published after the Great Recession that address macroeconomic and commercial real estate forecasting methods related to the Great Recession and compare significant lessons learned, or lack thereof. The authors then seek to identify new models to improve the predictability of commercial real estate early warning signals regarding cyclical turning points which result in negative appreciation rates.
Design/methodology/approach
The authors develop a probit model to estimate quarterly probabilities of negative office appreciation returns using an alternative methodology to Tsolaco et al. (2014). The authors’ alternative method incorporates generally publicly available macroeconomic and real estate variables such as gross domestic product, office-related employment sectors, cap rate spreads, and commercial mortgage flow of funds into a probit model in order to estimate the probability of future quarterly negative office appreciation rates.
Findings
The authors’ models demonstrate the predictive power of macroeconomic variables typically associated with office demand. The probit model specification shows probabilities of negative office appreciations rates greater than 50 percent either as the quarterly office returns become negative, or in some cases several quarters before office returns become negative, for both the Great Recession and the recession occurring in the early 1990s. The models fail to show probabilities greater than 50 percent of negative office returns until after they occur for the recession in 2001. While this indicates need for further improvement in early warning models, the models do predict the more severe periods of negative office returns in advance, indicating the findings useful to real estate investors to monitor the changes in economic and real estate data identified as statistically significant in the results.
Practical implications
The Great Recession is a unique laboratory of significant contractions, recessions, and recoveries that challenge pre-recessionary real estate cycle models. The models provide guidance on which historical economic indicators are important to track, and gives a framework with which to calculate the probability that office prices are likely to decline. Because the models use macroeconomic indicators that are publicly available from at least one quarter in the past, the models or variations of them may provide real estate professionals with some indication of an impending decrease in office prices, even if that indication comes only one quarter in advance. Armed with this information, property owners, investors, and brokers can make more informed decisions on whether to buy or sell, and how sensitive their real estate transactions may be to timing.
Originality/value
The authors introduce several new models that examine the ability of historical macroeconomic indicators to provide early warning signals and identify turning points in real estate valuations, specifically negative office appreciation rates caused by the Great Recession. Using data from at least one quarter in the past, all the data in the models are publicly available (excluding National Council of Real Estate Investment Fiduciaries data) at the observed return quarter being predicted, which gives practitioners rational insights that can provide at least one source of guidance about the likelihood of an impending decrease in office prices.
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Steven Laposa and Mark Charlton
This paper compares the corporate property holdings of European and US corporations. The authors initially calculate standard benchmarks based on accounting and balance‐sheet…
Abstract
This paper compares the corporate property holdings of European and US corporations. The authors initially calculate standard benchmarks based on accounting and balance‐sheet information as of 1999, and then test for significant differences by two‐digit standard industrial classification levels between European and US firms. They follow the methodology of Johnson and Keasler (1993) and compare property, plant and equipment book values to a variety of non‐property balance sheet and market value figures. However, this paper extends previous research through a comparative analysis of 1,573 US firms to 2,182 European firms. The findings suggest there are significant differences between Europe and the USA, dependent on the specific benchmark and industrial sector. The conclusions postulate a variety of explanations of the corporate property differences and provide ideas for further research.
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Steven E. Moss and Howard C. Schneider
Tests for correlation between the NCREIF (NC) Index and EREIT Index. A multiple time series methodology is used to control for spurious correlation, allow for leading and lagging…
Abstract
Tests for correlation between the NCREIF (NC) Index and EREIT Index. A multiple time series methodology is used to control for spurious correlation, allow for leading and lagging relationships, and to control for autoregressive moving average processes found in the time series. The underlying variables generating returns for the investor, current cash flow and capital appreciation, are analysed separately. Significant correlation is found between the NC cash flows and EREIT dividends. Significant correlation is not observed between the NC portfolio and EREIT when capital values are analysed. Suggests that one or both series are not a good measure of real estate returns.
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– The purpose of this paper is to demonstrate the value of computable general equilibrium (CGE) modeling for impact analysis of real estate developments and redevelopments.
Abstract
Purpose
The purpose of this paper is to demonstrate the value of computable general equilibrium (CGE) modeling for impact analysis of real estate developments and redevelopments.
Design/methodology/approach
Uses a model constructed for Colorado to compare estimates of economic impact of a hypothetical mixed-use development from a CGE model with an input-output (IO) model similar to those commonly used in applied economic impact analysis.
Findings
Economic impact estimates of construction activity are demonstrated to be lower when using a CGE approach as compared to an IO approach while impact estimates of continuing operations of a property are demonstrated to be more accurate and potentially higher using a CGE approach.
Practical implications
A CGE approach as opposed to an IO approach will be particularly useful for practitioners in particular cases where IO models are ill suited to provide meaningful estimates concerning impact of continuing operations. This is especially likely where commercial tenants are unknown or when the development includes a residential component.
Social implications
More complete and accurate assessments of economic impact may positively affect views on property development and redevelopment by the public and government.
Originality/value
This paper adds to the existing literature concerning economic impact analysis of real estate and is the first paper in the field, to the authors’ knowledge; to compare estimates from the standard IO approach to those derived using more sophisticated modeling techniques.
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This paper investigates the evolving landscape of architectural criticism in the digital era, leveraging the enduring interplay between architecture and media. It specifically…
Abstract
Purpose
This paper investigates the evolving landscape of architectural criticism in the digital era, leveraging the enduring interplay between architecture and media. It specifically examines the role of social media and public awards in improving user engagement with architectural discourse.
Design/methodology/approach
A mixed-method approach, incorporating both qualitative and quantitative analyses, is used to discuss three architecture awards. These are chosen for their different evaluation processes and their capacity to offer diverse opportunities for public interaction and engagement.
Findings
The study emphasises the potential of social media to democratise architectural criticism, while also addressing challenges such as the prominence of non-critical visual material and the presence of algorithmic biases. The findings underline the importance of providing adequate materials for public evaluation and integrating expert juries to support the assessment process. These elements are essential to fostering informed public participation, bridging the gap between professional expertise and popular engagement, and enabling meaningful architectural discourse on social media.
Originality/value
This paper fills a gap in the academic literature by connecting public architectural awards – a relatively unexplored aspect of architectural culture – with the potential of social media as a platform for architectural criticism.