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Homogeneous Commercial Property Market Groupings and Portfolio Construction in the United Kingdom

Author

Listed:
  • Foort Hamelink

    (Department of Finance, Tilburg University, PO Box 90153, 5000 LE Tilburg, The Netherlands)

  • Martin Hoesli

    (HEC, Université de Genève, Uni-Mail, 102 boulevard Carl-Vogt, CH-1211 Geneva 4, Switzerland; Department of Accountancy, University of Aberdeen, Edward Wright Building, Dunbar Street, Aberdeen AB24 3QY, Scotland)

  • Colin Lizieri

    (Department of Land Management and Development, University of Reading, Whiteknights, Reading RG6 6AW, England)

  • Bryan D MacGregor

    (Centre for Property Research, Department of Land Economy, University of Aberdeen, St Mary's, King's College, Old Aberdeen AB24 3UF, Scotland)

Abstract

Property portfolios are traditionally constructed by diversifying across geographical areas, property types, or a combination of both. In the United Kingdom it is normal practice to use regions rather than towns or local market areas as the geographical divisions. The authors use cluster analysis to construct homogeneous groups from 157 UK local markets, by means of commercial property returns. The results show strong property-type dimensions and only very broad geographical dimensions in the clusters. These clusters are found, in general, to have temporal stability with changes in cluster membership being explained by the changing economic geography of the United Kingdom. The cluster-derived groupings are used to derive efficient investment frontiers and are compared with frontiers based on conventional heuristic groupings. It is shown that strategies based on parsimonious cluster-based groupings, appropriate for smaller investors, generate results that are comparable with those of conventional groupings and capture the main drivers of property performance.

Suggested Citation

  • Foort Hamelink & Martin Hoesli & Colin Lizieri & Bryan D MacGregor, 2000. "Homogeneous Commercial Property Market Groupings and Portfolio Construction in the United Kingdom," Environment and Planning A, , vol. 32(2), pages 323-344, February.
    • Handle: RePEc:sae:envira:v:32:y:2000:i:2:p:323-344
    DOI: 10.1068/a31146
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    References listed on IDEAS

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    Cited by:

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    2. Renigier-Biłozor, Małgorzata & Janowski, Artur & Walacik, Marek & Chmielewska, Aneta, 2022. "Modern challenges of property market analysis- homogeneous areas determination," Land Use Policy, Elsevier, vol. 119(C).
    3. Ludovic Halbert & John Henneberry & Fotis Mouzakis, 2014. "Finance, Business Property and Urban and Regional Development," Regional Studies, Taylor & Francis Journals, vol. 48(3), pages 421-424, March.
    4. Marisa Gigante, 2012. "The incidence of real estate portfolio composition choices on funds performance: Evicence from the Italian market," ERES eres2012_186, European Real Estate Society (ERES).
    5. Martina Fuchs & André Scharmanski, 2009. "Counteracting Path Dependencies: ‘Rational’ Investment Decisions in the Globalising Commercial Property Market," Environment and Planning A, , vol. 41(11), pages 2724-2740, November.
    6. Xiaojie Xu & Yun Zhang, 2022. "Contemporaneous causality among one hundred Chinese cities," Empirical Economics, Springer, vol. 63(4), pages 2315-2329, October.
    7. William Suley Menges & Kevin Getii Moranga, 2019. "Indirect investment and financial performance of the real estate sector in Nairobi county Kenya," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 1(4), pages 09-18, October.
    8. Catherine Jackson & Craig Watkins, 2005. "Planning Policy and Retail Property Markets: Measuring the Dimensions of Planning Intervention," Urban Studies, Urban Studies Journal Limited, vol. 42(8), pages 1453-1469, July.
    9. Nafeesa Yunus, 2013. "Dynamic interactions among property types," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 31(2), pages 135-159, March.
    10. Catherine Jackson, 2002. "Classifying Local Retail Property Markets on the Basis of Rental Growth Rates," Urban Studies, Urban Studies Journal Limited, vol. 39(8), pages 1417-1438, July.

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