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Neil Dunse, Colin Jones, Nicola Livingstone Institute for Housing, Urban and Real Estate Research

The Changing Nature of Liquidity and Transactions Activity in UK Commercial Property: Cyclical and Trend Effects. Neil Dunse, Colin Jones, Nicola Livingstone Institute for Housing, Urban and Real Estate Research. Introduction.

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Neil Dunse, Colin Jones, Nicola Livingstone Institute for Housing, Urban and Real Estate Research

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  1. The Changing Nature of Liquidity and Transactions Activity in UK Commercial Property: Cyclical and Trend Effects Neil Dunse, Colin Jones, Nicola Livingstone Institute for Housing, Urban and Real Estate Research

  2. Introduction • Paper seeks to take a market view on impact of investment trends so far • Still work in progress • Wider view of how property cycles are changing • Eventually look try to see how impacts on cycle

  3. Changing View of property • Long term investment • Investment Property Databank (IPD) in mid-1980s with standardised financial data collection and variables • Closer financial monitoring of property performance • Property transformed from a long term investment to a short term

  4. Active Management • Advent of external fund management • Fund managers have to deliver target returns for clients over short periods • Myriad of stand alone property funds investment funds. • Increasing churn in portfolios • No longer passively hold an office block Av holding period fell to around 5 years

  5. Property Cycles • Characterised in term of changes in capital or rental values • Or in terms of development boom and busts • But contribution to boom and bust is buying and selling of properties

  6. Liquidity and Property Markets • So far studies only looking at holding periods not impact on the market • Long term trends suggest upward move for liquidity/transactions activity • Cycles implicitly suggest a cycle to liquidity and transactions • Research here seeks to quantify

  7. Data and Analysis • IPD data • 1981 • Not cover the whole market • Simple statistics looking at sales and purchases as %s of total capital value • Indices of sales and purchases

  8. Property Capital Value Cycles

  9. Retail Sales as % Retail Capital Value

  10. Office Sales % Office Capital Value

  11. Industrial Sales % Ind. Capital Value

  12. Sales as % All Capital Values

  13. Purchases as % of Capital Value

  14. Purchases as % of Capital Value

  15. All Purchases as % of Capital Value

  16. Net Purchases (%) as All Property

  17. Conclusions • Expected cyclical activity and trends in sales and purchases to increase • From 1981 % of transactions per year has risen from less than 1 to 8 • Cyclical elements have become more dominant • Credit crunch dramatic change

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