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Preferences of Institutional Investors in Commercial Real Estate

Author

Listed:
  • Dragana Cvijanović

    (Cornell University
    University of Warwick)

  • Stanimira Milcheva

    (University College London)

  • Alex Minne

    (University of Connecticut)

Abstract

In this paper we analyze market segmentation by firm size in the commercial real estate transaction process. Using novel micro-level data, we look at the probability distribution of investors acquiring a specific bundle of real estate characteristics, distinguishing between investors based on the size of their real estate portfolio. We find evidence of market segmentation by investor size: institutional investors segment across property characteristics based on the size of their real estate portfolio. The probability that a large (small) seller will sell a property to a similar-sized buyer is higher, keeping all else equal. We explore potential drivers of this market segmentation and find that it is mainly driven by investor preferences. During the Global Financial Crisis (GFC), large investors were less likely to buy the ‘average’ property, as compared to the period before or after the crisis, indicating time-varying investor preferences.

Suggested Citation

  • Dragana Cvijanović & Stanimira Milcheva & Alex Minne, 2022. "Preferences of Institutional Investors in Commercial Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 65(2), pages 321-359, August.
    • Handle: RePEc:kap:jrefec:v:65:y:2022:i:2:d:10.1007_s11146-020-09816-y
    DOI: 10.1007/s11146-020-09816-y
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    Cited by:

    1. Alan Sage & Mike Langen & Alex van de Minne, 2023. "Where is the opportunity in opportunity zones?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(2), pages 338-371, March.

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