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Retention Rates, Re-investment and Depreciation in European Office Markets

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  • Andrew Baum

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

  • Neil Turner

Abstract

The retention rate of a company has an impact on its earnings and dividend growth. Lease structures and performance measurement practice force real estate investment managers to adopt full distribution policies. Does this lead to lower income growth in real estate? This paper examines several European office markets across which the effective retention rates vary. It then compares depreciation rates across these markets. It is concluded that there is evidence of a relationship between retention and depreciation. Those markets with particularly inflexible lease structures exhibit low retention rates and higher levels of rental value depreciation. This poses interesting questions concerning the appropriate way to measure property performance across markets exhibiting significantly different retention rates and also raises important issues for global investors.

Suggested Citation

  • Andrew Baum & Neil Turner, 2003. "Retention Rates, Re-investment and Depreciation in European Office Markets," Real Estate & Planning Working Papers rep-wp2003-02, Henley Business School, Reading University.
  • Handle: RePEc:rdg:repxwp:rep-wp2003-02
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    File URL: http://www.reading.ac.uk/LM/LM/fulltxt/0203.pdf
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    References listed on IDEAS

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    1. Foort Hamelink & Martin Hoesli, 2004. "Maximum drawdown and the allocation to real estate," Journal of Property Research, Taylor & Francis Journals, vol. 21(1), pages 5-29, January.
    2. Hulten, Charles R & Wykoff, Frank C, 1996. "Issues in the Measurement of Economic Depreciation: Introductory Remarks," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 10-23, January.
    3. Hulten, Charles R. & Wykoff, Frank C., 1981. "The estimation of economic depreciation using vintage asset prices : An application of the Box-Cox power transformation," Journal of Econometrics, Elsevier, vol. 15(3), pages 367-396, April.
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