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A Fundamental Comparison of International Real Estate Returns

Joseph L. Pagliari, Jr., James R. Webb (), Todd A. Canter and Frederich Lieblich
Additional contact information
Joseph L. Pagliari, Jr.: Citadel Realty, Inc. 2700 River Road Suite 106 Des Plaines, Illinois 60018
James R. Webb: Real Estate Research Center College of Business Cleveland State University 1860 E. 18th Street Cleveland, Ohio 44114, http://www.csuohio.edu/finance_department/index.htm
Todd A. Canter: LaSalle Partners Limited 200 East Randolph Drive Chicago, Illinois 60601
Frederich Lieblich: SSR Realty Advisors One North Broadway White Plains, New York 10601, http://www.ssrrealty.com/

Journal of Real Estate Research, 1997, vol. 13, issue 3, 317-348

Abstract: This study analyzes commercial real estate returns in Australia, Canada, the United Kingdom, and the United States over the period 1985-95, from the perspective of a U.S. investor. Because national indices can consist of differing property mixes, this study separately analyzes the office, retail, and warehouse sectors. Moreover, these analyses also convert total returns into their fundamental components: initial yield, growth in income, and shifts in capitalization rates. The paths of currency-adjusted income and asset values and, therefore, capitalization rates are also presented. Generally speaking, the fundamental components of retail returns across the four countries exhibit greater divergence than the office and warehouse sectors. It is interesting that the U.S. property sectors showed the worst performance, while the Australian retail and the British office and warehouse sectors were the best performers (both before and after currency adjustments). Additionally, the currency-adjusted Australian returns were adversely effected by exchange rate movements, while the British returns were positively effected. Lastly, the correlation of the quarterly percentage change in income was generally lower and less statistically significant that the correlation patterns observed among the other components of return. This might suggest that more idiosyncratic risk can be found in the real estate space markets (as proxied by income changes) than in the real estate capital markets (as proxied by the pricing of the income--that is, capitalization rates), which appear to be more globally influenced.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (3)

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Journal of Real Estate Research is currently edited by Dr. Ko Wang

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