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The Relative Importance of Sector and Regional Factors in Real Estate Returns

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  • Stephen L. Lee

Abstract

This paper presents an elegant and simple approach to the decomposition of sector and regional influences on property returns, and thus provides a quantitative framework for analysing the relative impact of these two diversification categories to real estate portfolio selection. Using data on Retail, Office and Industrial properties spread across 326 real estate locations in the UK, over the period 1981 to 1995, the results show that the performance of real estate is largely sector-driven, a result in line with previous work. Which implies that the sector composition of the real estate fund should be the first level of analysis in constructing and managing the real estate portfolio. As a consequence real estate fund managers need to pay more attention to the sector allocation of their portfolios than the regional spread.

Suggested Citation

  • Stephen L. Lee, 2001. "The Relative Importance of Sector and Regional Factors in Real Estate Returns," ERES eres2001_206, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2001_206
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2001-206
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    Cited by:

    1. Mark Andrew & Steven Devaney & Stephen Lee, 2003. "Another Look at the Relative Importance of Sectors and Regions in Determining Property Returns," Real Estate & Planning Working Papers rep-wp2003-14, Henley Business School, University of Reading.
    2. Franz Fuerst & Gianluca Marcato, "undated". "Re-thinking Commercial Real Estate Market Segmentation," Real Estate & Planning Working Papers rep-wp2010-12, Henley Business School, University of Reading.

    More about this item

    JEL classification:

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

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