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Modelling Urban Commercial Property Yields: Exogenous and Endogenous Influences

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  • Neil Dunse
  • Colin Jones
  • Michael White
  • Ed Trevillion
  • Lulu Wang

Abstract

The starting point for this paper is the argument that increased weight of money into commercial property in this decade has led to a convergence of UK provincial city office yields. The paper begins by reviewing the concept of a property yield cycle and the notion of a city risk premium, and then considers exogenous and endogenous influences on the determination of urban office yields. This provides the framework for the empirical analysis. The study examines the trends in office yields in the major provincial office centres of the UK over a period of more than 20 years. It reviews the changing city risk premiums relative to the City of London, including their spread, over this period and relates this to the weight of money invested in different provincial cities. This descriptive analysis provides the context for the development of a formal model of local office yields that is tested with a panel regression. The findings suggest that there are some local or fixed effects on yields in different cities and that exogenous investment funds are a significant influence in the short term but not the long term.

Suggested Citation

  • Neil Dunse & Colin Jones & Michael White & Ed Trevillion & Lulu Wang, 2007. "Modelling Urban Commercial Property Yields: Exogenous and Endogenous Influences," Journal of Property Research, Taylor & Francis Journals, vol. 24(4), pages 335-354, January.
    • Handle: RePEc:taf:jpropr:v:24:y:2007:i:4:p:335-354
    DOI: 10.1080/09599910801916261
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    References listed on IDEAS

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    1. Norman E. Hutchison & Alastair Adair, 2007. "Covenant Strength and the Initial Yield: An Explicit and Calibrated Risk?," ERES eres2007_146, European Real Estate Society (ERES).
    2. repec:arz:wpaper:eres2007-146 is not listed on IDEAS
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    Cited by:

    1. Kwabena Mintah & Woon-Weng Wong & Peng Yew Wong, 2020. "Cross Border Real Estate Investments and Commercial Office Property Market Performance: Evidence from Australia," International Real Estate Review, Asian Real Estate Society, vol. 23(2), pages 837-860.
    2. Norman Hutchison & Patricia Fraser & Alastair Adair & Rahul Srivatsa, 2012. "Regime shifts in ex post UK commercial property risk premiums," Journal of Property Research, Taylor & Francis Journals, vol. 29(3), pages 247-269, April.
    3. Kwabena Mintah & Woon-Weng Wong & Peng Yew Wong, 2020. "Cross Border Real Estate Investments and Commercial Office Property Market Performance: Evidence from Australia," International Real Estate Review, Global Social Science Institute, vol. 23(2), pages 211-234.
    4. Simeon Coleman & Vitor Leone, 2015. "An investigation of regime shifts in UK commercial property returns: a time series analysis," Applied Economics, Taylor & Francis Journals, vol. 47(60), pages 6479-6492, December.
    5. Colin A. Jones, 2009. "Remaking the Monopoly Board: Urban Economic Change and Property Investment," Urban Studies, Urban Studies Journal Limited, vol. 46(11), pages 2363-2380, October.

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    1. Colin A. Jones, 2009. "Remaking the Monopoly Board: Urban Economic Change and Property Investment," Urban Studies, Urban Studies Journal Limited, vol. 46(11), pages 2363-2380, October.

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