Transaction Costs In Commercial Real Estate: A European Comparison

The real estate market is characterized by high transaction costs compared to other markets caused by its relative intransparency and the involvement of many agencies. Transaction costs have been widely discussed in relation to the housing market with much attention to the role of public authorities.It is widely accepted that transaction costs prevent the optimal location of residences over households and thus have negative welfare consequences. Much less is known about the nature and impact of transaction costs in commercial real estate.With increasing globalization a better understanding becomes the more relevant Therefore this paper will start with an overview of the types of costs involved in transferring commercial real estate based on desk research. Attention will be paid to the nature of formal and informal, monetary and non monetary costs. In the second part the height and differentiation of usual transaction costs in the EU25 countries will be presented. The required data will be derived partly from public sources, partly from interviews with consultants. Both because of incomplete data and because of the variety of perspectives the presented overview will reflect only a part of reality. Most reliable information concerns formal monetary transfer costs. In the third part explanations for the revealed differences in cost and cost regulations will be presented.Institutional factors are assumed to be partly responsible Recommendations about further research will be formulated.