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Means, Motive and Opportunity? Disentangling Client Influence on Performance Measurement Appraisals

Author

Listed:
  • Neil Crosby

    (School of Real Estate & Planning, University of Reading Business School)

  • Colin Lizieri

    (School of Real Estate & Planning, University of Reading Business School)

  • Patrick McAllister

    (School of Real Estate & Planning, University of Reading)

Abstract

This paper investigates the extent to which clients were able to influence performance measurement appraisals during the downturn in commercial property markets that began in the UK during the second half of 2007. The sharp change in market sentiment produced speculation that different client categories were attempting to influence their appraisers in different ways. In particular, it was recognised that the requirement for open-ended funds to meet redemptions gave them strong incentives to ensure that their asset values were marked down to market. Using data supplied by Investment Property Databank, we demonstrate that, indeed, unlisted open ended funds experienced sharper drops in capital values than other fund types in the second half of 2007, after the market turning point. These differences are statistically significant and cannot simply be explained by differences in portfolio composition. Client influence on appraisal forms one possible explanation of the results observed: the different pressures on fund managers resulting in different appraisal outcomes.

Suggested Citation

  • Neil Crosby & Colin Lizieri & Patrick McAllister, 2009. "Means, Motive and Opportunity? Disentangling Client Influence on Performance Measurement Appraisals," Real Estate & Planning Working Papers rep-wp2009-09, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:repxwp:rep-wp2009-09
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    File URL: http://www.henley.reading.ac.uk/rep/fulltxt/0909.pdf
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    References listed on IDEAS

    as
    1. Neil Crosby & Cathy Hughes & John Murdoch, 2004. "Influences on secured lending property valuations in the UK," ERES eres2004_116, European Real Estate Society (ERES).
    2. Neil Crosby & Cathy Hughes & John Murdoch, 2004. "Influences on Secured Lending Property Valuations in the UK," Real Estate & Planning Working Papers rep-wp2004-14, Henley Business School, University of Reading.
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    Cited by:

    1. Chihiro Shimizu & W. Erwin Diewert & Kiyohiko G. Nishimura & Tsutomu Watanabe, 2015. "Estimating quality adjusted commercial property price indexes using Japanese REIT data," Journal of Property Research, Taylor & Francis Journals, vol. 32(3), pages 217-239, September.
    2. Erwin Diewert & Chihiro Shimizu, 2020. "Alternative Land‐Price Indexes for Commercial Properties in Tokyo," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(4), pages 784-824, December.
    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. Agnieszka Małkowska & Małgorzata Uhruska & Mateusz Tomal, 2019. "Age and Experience versus Susceptibility to Client Pressure among Property Valuation Professionals—Implications for Rethinking Institutional Framework," Sustainability, MDPI, vol. 11(23), pages 1-23, November.
    5. Neil Crosby & Steven Devaney & Colin Lizieri & Patrick McAllister, 2018. "Can Institutional Investors Bias Real Estate Portfolio Appraisals? Evidence from the Market Downturn," Journal of Business Ethics, Springer, vol. 147(3), pages 651-667, February.
    6. Hsueh-Fei Liao & Nan-Yu Chu & Chien-Wen Peng, 2018. "Awareness of Independence of Real Estate Appraisers: An Empirical Analysis," International Real Estate Review, Global Social Science Institute, vol. 21(3), pages 295-316.
    7. Alexandru Tugui & Daniela Tatiana Agheorghiesei & Laura Asandului, 2020. "An Informal Ethics Auditing in Authorized Valuation for Business Sustainability in Romania," Sustainability, MDPI, vol. 12(20), pages 1-26, October.
    8. Steven Devaney & David Scofield, 2015. "Liquidity and the drivers of search, due diligence and transaction times for UK commercial real estate investments," Journal of Property Research, Taylor & Francis Journals, vol. 32(4), pages 362-383, December.
    9. W. Erwin Diewert & Kiyohiko G. Nishimura & Chihiro Shimizu & Tsutomu Watanabe, 2020. "The System of National Accounts and Alternative Approaches to the Construction of Commercial Property Price Indexes," Advances in Japanese Business and Economics, in: Property Price Index, chapter 0, pages 181-219, Springer.
    10. Irene Cheloti & Manya Mooya, 2021. "Valuation Problems in Developing Countries: A New Perspective," Land, MDPI, vol. 10(12), pages 1-20, December.
    11. Patrick McAllister & Emma Street & Peter Wyatt, 2016. "Governing calculative practices: An investigation of development viability modelling in the English planning system," Urban Studies, Urban Studies Journal Limited, vol. 53(11), pages 2363-2379, August.

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    More about this item

    Keywords

    Property valuation; client influence; UK;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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