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Timing and the holding periods of institutional real estate

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Collett, D., Lizieri, C. and Ward, C., (2000) Timing and the holding periods of institutional real estate. Working Papers in Land Management & Development. 03/00. Working Paper. University of Reading, Reading. pp16.

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Abstract/Summary

The literature on investors’ holding periods for equities and bonds suggest that high transaction costs are associated with longer holding periods. Return volatility, by contrast, is associated with short-term trading and hence shorter holding periods. High transaction costs and the perceived illiquidity of the real estate market leads to an expectation of longer holding periods. Further, work on depreciation and obsolescence might suggest that there is an optimal holding period. However, there is little empirical work in the area. In this paper, data from the Investment Property Databank are used to investigate sales rate and holding period for UK institutional real estate between 1981 and 1994. Sales rates are investigated using the Cox proportional hazards framework. The results show longer holding periods than those claimed by investors. There are marked differences by type of property and sales rates vary over time. Contemporaneous returns are positively associated with an increase in the rate of sale. The results shed light on investor behaviour.

Item Type:Report (Working Paper)
Divisions:Henley Business School > Real Estate and Planning
ID Code:27215
Uncontrolled Keywords:real estate investment; holding periods; sales rate; proportional hazards
Publisher:University of Reading
Publisher Statement:The copyright of each working paper remains with the author. If you wish to quote from or cite any paper please contact the appropriate author; in some cases a more recent version of the paper may have been published elsewhere.

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