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The determinants of historical property market risk premium in the London office market

Author

Listed:
  • Pau Blasi
  • Alain Cohen
  • Arnaud Simon

Abstract

The goal of this paper is to get a better understanding of what are the determinants of historical property market risk premium in the London office market, and how these historical risk factors vary through the cycle, therefore affecting market performances. For this purpose we assembled different data series covering the Q2 2001 to Q2 2014 period. Using the main drivers of the economy and both the financial and property market we demonstrate empirically that the risk premium (defined as the difference between the Office Total Return and the 10-year Gilt Yield) reacts positively with increases in the net absorption or prime rents. On the other hand, it reacts negatively with increases in net additions or average net initial yields.

Suggested Citation

  • Pau Blasi & Alain Cohen & Arnaud Simon, 2015. "The determinants of historical property market risk premium in the London office market," ERES eres2015_207, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2015_207
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2015-207
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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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