Previously published as: Journal of Property Valuation and Investment
Online from: 1999
Subject Area: Built Environment
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|Title:||Spatial concentration in industrial real estate: Institutional investment in England and Wales|
|Author(s):||Peter Byrne, (School of Real Estate & Planning, Henley Business School, University of Reading, Reading, UK), Stephen Lee, (Real Estate Investment and Finance Group, Faculty of Finance, Cass Business School, City University, London, UK)|
|Citation:||Peter Byrne, Stephen Lee, (2010) "Spatial concentration in industrial real estate: Institutional investment in England and Wales", Journal of Property Investment & Finance, Vol. 28 Iss: 1, pp.6 - 23|
|Keywords:||Industrial property, Investments, Real estate, Retail parks, United Kingdom|
|Article type:||Research paper|
|DOI:||10.1108/14635781011020001 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Acknowledgements:||Parts of this work are based on data provided through EDINA UKBORDERS with the support of the ESRC and JISC and uses boundary material which is copyright of the Crown. Census output is Crown copyright and is reproduced with the permission of the Controller of HMSO.The authors would like to thank IPD, and Steven Devaney in particular, for providing the “full” data sets on all three sectors for the two years studied. The usual disclaimers apply.|
Purpose – This paper seeks to examine the extent of real estate investment concentration in institutional industrial portfolios at these same two points in time.
Design/methodology/approach – To examine this issue two datasets are used at two dates, 1998 and 2003. The analysis is confined to England and Wales because of data considerations relating to the availability of comparable data for the rest of the UK. The first dataset relates to floor space and rateable value statistics for the so-called “bulk classes” of commercial property at Unitary Authority and District (local authority area, LA) level. The more specific institutional real estate investment data for the study come from the IPD analysis “UK Local Markets”. This provides a detailed view of the performance of institutional real estate investment, by sector, in a number of localities across the UK. For the purposes of this study, IPD made data available showing (but with much less detail) other LAs where the number of properties held was greater than zero, but fewer than the four required normally for disclosure. The approach taken is to map the basic data and the results from a standardising measure of spatial concentration – the Location Quotient.
Findings – The findings show that industrial investment concentration is between that of retail and offices and is focused on LAs with high levels of manual workers in areas with smaller industrial units. It also shows that during the period studied the structure of the sector changed, with greater emphasis on the distributional (logistic) element, for which location is a principal consideration. Historically, the sector has provided consistently good total returns with low risk, and was the only sector to expand in terms of numbers of institutionally invested units over the study period. While industrial real estate assets generally do not attract as much capital growth as other sectors, especially in boom periods, rents continued to grow in the period under study. Taken together with the relative resilience in the sector's performance seen over successive cycles, it is not surprising that significant institutional enthusiasm was evidenced.
Originality/value – Using data sets that account for the entire “population” of observations at these two dates the paper demonstrates the relationships between economic theory and the market performance of the sector. The comparisons with the other main sectors also show the differences that would be expected between the sectors, emphasising the point that these markets are dynamic and that their structure, form and content can change dramatically even over quite short periods.
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