IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01901703.html
   My bibliography  Save this paper

Revealing valuation in terms of quality behind the price veil: Insights from office markets within Europe

Author

Listed:
  • Fabrice Larceneux

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Arnaud Simon

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

Within a functioning market it is assumed that price should mirror the quality of a product: A high quality product gets a higher price than a low quality product. However, for real estate products one has to question this assumption.Real estate markets are nontransparent and properties are rather complex products. Thus the informational content of the price of a property will reflect rather scarcity then quality. Within a well-defined sub-segment of an office market similar properties are seen as substitutes for one another. Therefore the transaction price of one property is more influenced by the prices of the other properties than by detailed analyses of the quality of this specific property.For portfolio management a key task is to examine the value chain of each property and to determine potentials for improvements. Consequently, it is important to have a good assessment of the quality of a property in order to decide whether it will be worthwhile to invest in quality improvements. We developed a new approach and tested it for the French, German and UK real estate market. This methodology is directly based on the dimensions of the quality. We introduce a new approach where the levels of quality for each characteristic are judged by market participants themselves. More precisely, this approach consists in making explicit market quality judgments. In the first phase, a group of national market participants are asked to formulate overall quality judgements on buildings of the national office market. Then an econometric procedure is applied to identify what are the most valued characteristics.This approach allows different buildings to be positioned relatively to a benchmark and provide an alternative way to consider quality, i.e. the reference value of the building. Furthermore, a comparison between the three countries France, Germany and UK is possible. This approach also allows determining the impact of the "green" component of a property. Altogether, the paper highlights the need for a more comprehensive approach including all the dimensions of quality to define an valuation indicator of the "real value" of a building.

Suggested Citation

  • Fabrice Larceneux & Arnaud Simon, 2018. "Revealing valuation in terms of quality behind the price veil: Insights from office markets within Europe," Post-Print hal-01901703, HAL.
    • Handle: RePEc:hal:journl:hal-01901703
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01901703. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.