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Simulating Commercial Property Portfolios: an Application to French Portfolios

Author

Listed:
  • Mahdi Mokrane
  • Champigny Emmanuelle
  • Ternisien Laurent

Abstract

The aim of this article is to present a critical approach to simulating lease structures for property portfolios invested in France. Our concern is in the feasibility and usefulness of applying simulation methods, common in finance and engineering, to real estate investment management. We begin by briefly describing the tenant-landlord relationship in France (lease length, renewal options, break option, relative negotiation power depending on the type of property: residential, office, retail÷). We then move on to modelling a probabilistic approach of the dynamics of lease events (lease breaks, vacancy duration, tenant arrival time, .). This includes analysing tenant behaviour (decision to stay or break leases, renegotiation behaviour at lease expiry, etc÷). The estimated parameters are then used as inputs to a micro-simulation of tenant structures. The original contribution at this stage lies in the combined use of historically estimated lease events parameters and forecasted rents obtained in a companion paper Champigny, Mokrane & Ternisien (2003).

Suggested Citation

  • Mahdi Mokrane & Champigny Emmanuelle & Ternisien Laurent, 2003. "Simulating Commercial Property Portfolios: an Application to French Portfolios," ERES eres2003_221, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2003_221
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    JEL classification:

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

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