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European value added investing: leveraging structural and cyclical real estate opportunities

European value added investing: leveraging structural and cyclical real estate opportunities 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

European value added investing: leveraging structural and cyclical real estate opportunities

Brenna O'Roarty
Journal of European Real Estate Research , Volume 2 (1): 26 – May 8, 2009
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26 pages

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Publisher
Emerald Publishing
Copyright
none
ISSN
1753-9269
DOI
10.1108/17539260910959572
Publisher site
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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.

Journal

Journal of European Real Estate Research – Emerald Publishing

Published: May 8, 2009

Keywords: Investment; Real estate; Value added; Europe

References

  • Real Estate Investment: A Capital Market Approach
    Brown, G.; Matysiak, G.
  • Investor Intention's Survey
    INREV
  • Manager styles in real estate: a model approach on non‐listed european real estate vehicles
    Investors in Non‐listed Real Estate Vehicles
  • 10 Forces for Retail Change
    JLL