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Portfolio sales: price premium or price discount?

Author

Listed:
  • Farley Ishaak
  • Peng Liu
  • Egbert Hardeman
  • Hilde Remoy

Abstract

In commercial real estate, it is common to trade entire portfolios of real estate instead of single objects one by one. A portfolio refers to a set of real estate objects and, unlike the residential real estate market, the commercial real estate market is characterized by these constructions. Trading portfolios can be efficient as it requires one agreement instead of many. It is, however, unknown whether trading portfolios is also financially beneficial. A better understanding of this market behaviour enables better monitoring of financial stability as the share of portfolio sales fluctuates over time. The aim of this study is to determine whether trading real estate portfolios involves a premium or discount in the transaction price. We used Dutch Land Registry Office data to identify portfolio transactions and examine the relationship between real estate portfolios and transaction prices with a hedonic regression. We find that real estate portfolios are most often traded with a price discount. Many portfolio sales in a certain period, therefore, indicate a “buyer’s” market and a price-lowering effect.

Suggested Citation

  • Farley Ishaak & Peng Liu & Egbert Hardeman & Hilde Remoy, 2024. "Portfolio sales: price premium or price discount?," ERES eres2024-206, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2024-206
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    More about this item

    Keywords

    commercial real estate; Portfolio sales; Transaction price;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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