A Network Analysis of the Transaction Liquidity of UK Commercial Property Market

The study discusses the market network structure evolutions of selected commercial real estate market in the United Kingdom. While previous studies discuss investors’ behaviours in an aggregate level but assume investor make decisions independently, this study investigates into the transaction counterparts, using Social Network Analysis (SNA) to explain the role changes of foreign investors, as well as the change of transaction network structure. Results of 14 metro markets in London, Midland and Northern England from 2001 to 2015 show that, foreign investors become more active throughout the 15 years, with some foreign investors being “hubs” in the transaction network in some metro markets. However, given the comparatively higher centralities, the UK investors are still the dominant counterparts who facilitate the circulation of the assets. Further, connectivity structure of markets varies among metros, with transactions in some markets becoming more integrated while in other markets certain key investors domain (“star-structure”). Moreover, the transaction tendency among investors that share the same features (based on one’s connections in the market and nationality) has impacts to the commercial market liquidity. This study applies SNA as an innovative method to real estate studies in order to provide insights to market structure discussions. The results are expected to provide strong implications on transaction market evolution and market stability.