Buy, Sell or Hold? The Information in Institutional Real Estate Investor Consensus

We investigate whether the consensus of institutional investors to buy, sell, or hold a particular property type in a particular quarter can improve the information environment in commercial real estate markets. In particular, we analyze the drivers of investor consensus as well as the informative value of buy and sell consensus for future returns. For the period of 1996 to 2018 and for eight sub-property types, we find that private leasing (space market) information predominantly drives the buy and hold consensus, while private asset market information is more important for the sell consensus. Publicly available equity and debt capital market information has the highest explanatory power for the sell and hold consensus. Furthermore, buy and sell consensus has informative value for future returns. The component of buy consensus that is explained by private information has the highest informative value for future returns, particularly in periods of financial crisis and poorly performing real estate markets. On the other hand, the component of sell consensus that is explained by public information has the highest informative value for future returns. Our findings have implications for institutional investors and portfolio managers as they suggest that the survey-based consensus of institutional investors contains valuable information to formulate return expectations, identify trends, and make investment decisions.