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The relative importance of sectors v's regions in determining property returns

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Lee, S., (1998) The relative importance of sectors v's regions in determining property returns. Working Papers in Land Management & Development. 01/98. Working Paper. University of Reading, Reading. pp17.

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Abstract/Summary

A number of studies have investigated the benefits of sector versus regional diversification within a real estate portfolio without explicitly quantify the relative benefits of one against the other. This paper corrects this omission by adopting the approach of Heston and Rouwenhorst (1994) and Beckers, Connor and Curds (1996) on a sample of 187 property data points using annual data over the period 1981-1995. The general conclusion of which is the sector diversification explains on average 22% of the variability of property returns compared with 8% for administratively defined regions. A result in line with previous work. Implying that sector diversification should be the first level of analysis in constructing and managing the real estate portfolio. However, unlike previous work functionally defined regions provide less of an explanation of regional diversification than administrative regions. Which may be down to the weak definition of economic regions employed in this study.

Item Type:Report (Working Paper)
Divisions:Henley Business School > Real Estate and Planning
ID Code:27226
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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