IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Re-thinking Commercial Real Estate Market Segmentation

  • Franz Fuerst

    ()

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

  • Gianluca Marcato

    ()

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

Investments in direct real estate are inherently difficult to segment compared to other asset classes due to the complex and heterogeneous nature of the asset. The most common segmentation in real estate investment analysis relies on property sector and geographical region. In this paper, we compare the predictive power of existing industry classifications with a new type of segmentation using cluster analysis on a number of relevant property attributes including the equivalent yield and size of the property as well as information on lease terms, number of tenants and tenant concentration. The new segments are shown to be distinct and relatively stable over time. In a second stage of the analysis, we test whether the newly generated segments are able to better predict the resulting financial performance of the assets than the old dichotomous segments. Applying both discriminant and neural network analysis we find mixed evidence for this hypothesis. Overall, we conclude from our analysis that each of the two approaches to segmenting the market has its strengths and weaknesses so that both might be applied gainfully in real estate investment analysis and fund management.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.reading.ac.uk/rep/fulltxt/1210.pdf
Download Restriction: no

Paper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2010-12.

as
in new window

Length:
Date of creation:
Date of revision:
Handle: RePEc:rdg:repxwp:rep-wp2010-12
Contact details of provider: Postal: PO Box 218, Whiteknights, Reading, Berks, RG6 6AA
Phone: +44 (0) 118 378 8226
Fax: +44 (0) 118 975 0236
Web page: http://www.henley.reading.ac.uk/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Hoesli, M. & Lizieri, C. & Macgregor, B., 1996. "The Spatial Dimensions of the Investment preformance of UK Commercial Property," Papers 96.14, Ecole des Hautes Etudes Commerciales, Universite de Geneve-.
  2. Steven Devaney & Colin Lizieri, 2005. "Individual Assets, Market Structure And The Drivers Of Return," Real Estate & Planning Working Papers rep-wp2005-18, Henley Business School, Reading University.
  3. Lee, Stephen L., 2001. "The Relative Importance of Sector and Regional Factors in Real Estate Returns," ERES eres2001_206, European Real Estate Society (ERES).
  4. Steven Devaney & Colin Lizieri, 2005. "Individual Assets, Market Structure and the Drivers of Return1," Journal of Property Research, Taylor & Francis Journals, vol. 22(4), pages 287-307, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rdg:repxwp:rep-wp2010-12. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ed Quick)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.