Surplus Leasehold Portfolio: A Consequence of Reshaping the Corporate Real Estate Portfolio

Howard Cooke, Rianne Appel-Meulenbroek and Theo Arentze

ERES from European Real Estate Society (ERES)

Abstract: The shift to an agile CRE portfolio has been stated as one of the major drivers of CRE over the last 25 years (Joroff & Becker, 2017). To achieve agility CRE needs to have capability for dynamic alignment (Cooke, Appel-Meulenbroek & Arentze, 2018). Without dynamic alignment change of the CRE portfolio will lead to the creation of a surplus leasehold portfolio. Models of alignment have a number of common components (Heywood, 2011), but exclude the process of re-alignment and its consequences, surplus property provision (SPP). To date research has been limited, such as focussing on the scale of the liability (e.g. Cooke & Foster, 2016). This paper seeks to understand the relationship between SPP and both business and CRE metrics. It does so by examining data from 203 companies over an eight-year period. The analysis uses a distributed time lag auto-regression, together with descriptive statistics and binary logistic regression. The research has found that SPP increases when business is in decline (declining profits), and when it is expanding (increasing turnover). This indicates that SPP functions to allow the business to adjust its CRE portfolio and re-align it. If dynamic alignment has been built in there will be agility and business will not need to use SPP as a temporary solution. The longevity of the provision appears to be linked to the size of the business. Short-term provisioning appears associated with smaller turnover companies, albeit more profitable than larger companies, which have smaller CRE commitment. SPP is an indicator of CRE agility.

Keywords: Business Strategy; CRE; Dynamic Alignment; Surplus Property (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2018-01-01
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