“A storm is threat’ning….Gimme, gimme shelter.”
The words of Mick Jagger were probably on the minds of many at the 2018 UNC Real Estate Research Symposium on October 11-12. As the remnants of Hurricane Michael came crashing through the Raleigh-Durham area, participants battled flight delays, cancellations and power outages to get to the Rizzo Center in Chapel Hill.
But in spite of the complications, more than 80 participants braved the storm to discuss the most recent research in commercial real estate. Below are some high-level highlights of the conference.
Luncheon keynote: Commerical rents and rental yields in central business districts around the world
Sheridan Titman, University of Texas-Austin, on the intersection of urban economics and finance, sharing empirical work on how agglomeration effects can lead to high rents in certain geographical areas. Titman showed how the working preferences of financial services professionals (namely, a need for face-to-face contact with peers in other firms) faciliated the development of concentrated financial districts in large cities such as New York, London and Hong Kong, and the subsequent raising of rents within those districts.
Speed-round updates on projects sponsored by the Department of Energy’s green building initiative
Jim Clayton, York University, on the impact of small incentives and interventions for building managers and tenants on improving green performance
Sophia Dermisi, University of Washington, on how disclosing and benchmarking energy use affects the marketability of properties
Jacob Sagi, University of North Carolina at Chapel Hill, on the impact of third party energy audits on positive net present values (NPV) for selected green improvements
Gianluca Marcato, Reading University, on the relationship between environmental, social and governance (ESG) ratings and the performance of public real estate companies
Spenser Robinson, Central Michigan University, on the increasing importance of walkability as a real estate characteristic, and standardization of the data used to measure walkability to improve the accuracy of findings.
New approaches to house price indexing
Nancy Wallace, University of California, Berkeley, on why repeat sales price indices are fundamentaly inapproriate for many important applications such as stress-testing and investment risk modeling, and the proposal of a new hedonic model based on dynamic property characteristics and macroeconomic fundamentals
Index and benchmarking issues
Andreas Christopoulos, Yeshiva University and Dapeng Hu, BlackRock, on various index and benchmarking applications, including using price estimates as an input to a model for commercial property cap rates, and how the model provides a useful approach to forecasting and risk for MBS pricing, but macroeconomic conditioning is more difficult
Tom Fink, Trepp, LLC; Andrea Chegut, Massachusetts Institute of Technology; and Jeff Fisher, NCREIF, on how technology can assist commercial real estate, including increasing the amount of data available for analysis, augmenting and changing the workflow of forecasting and insights and disrupting the uses or needs for certain types of commercial real estate. Also the impact of blockchain applications on commercial real estate, such as the elimination of intermediaries, and the development of blockchain-based “smart contracts” for title tracking, property data, rental contracts and the like
New ideas and works in progress
Eva Steiner, Cornell University, on the correlation between regulatory arbitrage and bank capital requirements since the global financial crisis and the rise and size of MREITs and their asset growth relative to equity REITs
Jack Liebersohn, Ohio State University, on the ex ante and ex post incentives of risky debt, with emphasis on the effects of cash flow shocks such as anchor tenant closings and foreclosures
Arpit Gupta, New York University, on using property level returns to understand how to break down real estate private equity investments
Andrea Chegut, Massachusetts Institute of Technology, on co-working space in Manhattan and how to accurately price such spaces relative to more traditional office layouts