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Real estate stock selection and attribute preferences

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  • Cath Jackson
  • Allison Orr

Abstract

The majority of studies that explore property portfolio construction and management strategies utilise highly aggregated ex-post data, but stock selection is known to be a significant determinant of portfolio performance. Thus, here we look at stock selection, focusing on the choices faced by investors, necessitating the collection and analysis of primary data, carried out utilising conjoint analysis. This represents a new step in property research, with the data collection undertaken using a simulation exercise. This enables fund managers to make hypothetical purchase decisions, viewing properties comprising a realistic bundle of attributes and making complex contemporaneous trade-offs between attributes, subject to their stated market and economic forecasts and sector specialism. In total 51 fund managers were surveyed, producing 918 purchase decisions for analysis, with additional data collected regarding fund and personal characteristics. The results reveal that ‘fixed’ property characteristics (location and obsolescence) are dominant in the decision-making process, over and above ‘manageable’ tenant and lease characteristics which can be explicitly included within models of probabilities of income variation. This reveals investors are making ex-ante risk judgements and are considering post acquisition risk management strategies. The study also reveals that behavioural factors affect acquisition decisions.

Suggested Citation

  • Cath Jackson & Allison Orr, 2011. "Real estate stock selection and attribute preferences," Journal of Property Research, Taylor & Francis Journals, vol. 28(4), pages 317-339, April.
    • Handle: RePEc:taf:jpropr:v:28:y:2011:i:4:p:317-339
    DOI: 10.1080/09599916.2011.586469
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    References listed on IDEAS

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    Cited by:

    1. Brett Robinson, 2012. "How many leases are enough to diversify a portfolio of multi-let industrial properties?," ERES eres2012_351, European Real Estate Society (ERES).
    2. Melanie Zhang & Steven Devaney & Anupam Nanda, 2018. "Strategic Alliance and Submarket Choices of Commercial Real Estate Investors – A Multinomial Approach," ERES eres2018_210, European Real Estate Society (ERES).
    3. Neil Crosby & John Henneberry, 2016. "Financialisation, the valuation of investment property and the urban built environment in the UK," Urban Studies, Urban Studies Journal Limited, vol. 53(7), pages 1424-1441, May.
    4. Wenjie Wu & Guanpeng Dong & Bing Wang, 2015. "Does Planning Matter? Effects on Land Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 50(2), pages 242-269, February.

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