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| A Fundamental Comparison of
International Real Estate Returns Author: Joseph L. Pagliari, Jr., James R. Webb, Todd A. Canter, and Frederich Lieblich Start Page: 317 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. |
