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The pricing of corporate real estate holdings on the UK capital market

The pricing of corporate real estate holdings on the UK capital market The purpose of this study is to find out if corporate real estate ownership is priced into the capital market performance of non-property companies in the UK. This is of particular interest because ownership still represents a significant weight on the balance sheets and is predominantly considered unfavourable due to its bulkiness and difficult revisability in the event of changes in space demand. This draws attention to the UK as one of the most important European economies that have been exposed to strong uncertainties and dynamics, for example, due to the withdrawal voting of the United Kingdom from the European Union (BREXIT).Design/methodology/approachA first look at the real estate assets reported in balance sheets provides insight into possible changes in ownership strategy. This serves as a basis for subdividing companies based on their real estate assets using a portfolio-based approach and that are then analysed using the Fama and French multi-factor model with regard to their influence on capital market returns.FindingsIn general, the share of real estate assets has fallen over the past 10 years, although coinciding with BREXIT voting, some industries such as manufacturing show a turnaround. At the same time, ownership is priced in as a factor on the capital market, which applies to a sample across industries, as well as to separately considered sectors in the manufacturing and service industries. The pricing also shows a counter-cyclical pattern.Practical implicationsCorporate real estate management should be aware of the negative influence of ownership, especially against the background of economic fluctuations. The reduction of ownership can reduce the associated cost of capital and increase company success.Originality/valuePrevious UK-related studies mostly refer to a period before the global economic crisis in 2008, and therefore, are too old to reflect a changed view on corporate real estate ownership because of new corporate environmental conditions, based on inaccurate proxies or mainly refer to the retail segment. This research gap is closed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Corporate Real Estate Emerald Publishing

The pricing of corporate real estate holdings on the UK capital market

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References (43)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1463-001X
eISSN
1463-001X
DOI
10.1108/jcre-11-2020-0059
Publisher site
See Article on Publisher Site

Abstract

The purpose of this study is to find out if corporate real estate ownership is priced into the capital market performance of non-property companies in the UK. This is of particular interest because ownership still represents a significant weight on the balance sheets and is predominantly considered unfavourable due to its bulkiness and difficult revisability in the event of changes in space demand. This draws attention to the UK as one of the most important European economies that have been exposed to strong uncertainties and dynamics, for example, due to the withdrawal voting of the United Kingdom from the European Union (BREXIT).Design/methodology/approachA first look at the real estate assets reported in balance sheets provides insight into possible changes in ownership strategy. This serves as a basis for subdividing companies based on their real estate assets using a portfolio-based approach and that are then analysed using the Fama and French multi-factor model with regard to their influence on capital market returns.FindingsIn general, the share of real estate assets has fallen over the past 10 years, although coinciding with BREXIT voting, some industries such as manufacturing show a turnaround. At the same time, ownership is priced in as a factor on the capital market, which applies to a sample across industries, as well as to separately considered sectors in the manufacturing and service industries. The pricing also shows a counter-cyclical pattern.Practical implicationsCorporate real estate management should be aware of the negative influence of ownership, especially against the background of economic fluctuations. The reduction of ownership can reduce the associated cost of capital and increase company success.Originality/valuePrevious UK-related studies mostly refer to a period before the global economic crisis in 2008, and therefore, are too old to reflect a changed view on corporate real estate ownership because of new corporate environmental conditions, based on inaccurate proxies or mainly refer to the retail segment. This research gap is closed.

Journal

Journal of Corporate Real EstateEmerald Publishing

Published: Apr 5, 2022

Keywords: UK; Asset pricing; Capital market; Corporate real estate ownership; Fama and French multi-factor model; Ownership strategy; Stock market performance

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