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Flight to Quality? An Investigation of the Attributes of Sold Properties in Hot and Cold Markets

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Author Info

  • Franz Fuerst

    ()
    (School of Real Estate & Planning, Henley Business School, University of Reading)

  • Pat McAllister

    ()
    (School of Real Estate & Planning, Henley Business School, University of Reading)

  • Petros Sivitanides

    ()
    (Neapolis University)

Abstract

This paper uses sales transaction data in order to examine whether flight from risk phenomena took place in the US office property investment market during the financial crisis of 2007-2009. The effect of the crisis on the pricing of property quality attributes, mainly summarized by the class category of each building, is investigated. In addition, the paper examines how turnover levels were affected by the market downturn and whether there were significant variations between different real estate quality types. The results of the hedonic regression models suggest that the price spread between property classes A, B and C grew significantly during the downturn. We also find that property attributes such as size, height and age are priced significantly different in ‘hot’ and ‘cold’ markets.

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Bibliographic Info

Paper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2011-04.

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Length: 37 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:rdg:repxwp:rep-wp2011-04

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Web page: http://www.henley.reading.ac.uk/
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Related research

Keywords: Real estate cycles; risk-return relationship; investment;

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References

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  1. David Guilkey & Mike Miles & Rebel Cole, 1989. "The Motivation for Institutional Real Estate Sales and Implications for Asset Class Returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 70-86.
  2. Jan Piplack & Stefan Straetmans, 2009. "Comovements of different asset classes during market stress," Working Papers 09-09, Utrecht School of Economics.
  3. David Collett & Colin Lizieri & Charles Ward, 2003. "Timing and the Holding Periods of Institutional Real Estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(2), pages 205-222, 06.
  4. Salvador Barrios & Per Iversen & Magdalena Lewandowska & Ralph Setzer, 2009. "Determinants of intra-euro area government bond spreads during the financial crisis," European Economy - Economic Papers 388, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  5. Jeffrey Fisher & Dean Gatzlaff & David Geltner & Donald Haurin, 2004. "An Analysis of the Determinants of Transaction Frequency of Institutional Commercial Real Estate Investment Property," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(2), pages 239-264, 06.
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Cited by:
  1. Mariya Gubareva & Maria Rosa Borges, 2013. "Typological Classification, Diagnostics, and Measurement of Flights-to-Quality," Working Papers Department of Economics 2013/15, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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