Simulating Commercial Property Portfolios: an Application to French Portfolios

Mahdi Mokrane, Champigny Emmanuelle and Ternisien Laurent

ERES from European Real Estate Society (ERES)

Abstract: The aim of this article is to present a critical approach to simulating lease structures for property portfolios invested in France. Our concern is in the feasibility and usefulness of applying simulation methods, common in finance and engineering, to real estate investment management. We begin by briefly describing the tenant-landlord relationship in France (lease length, renewal options, break option, relative negotiation power depending on the type of property: residential, office, retail÷). We then move on to modelling a probabilistic approach of the dynamics of lease events (lease breaks, vacancy duration, tenant arrival time, .). This includes analysing tenant behaviour (decision to stay or break leases, renegotiation behaviour at lease expiry, etc÷). The estimated parameters are then used as inputs to a micro-simulation of tenant structures. The original contribution at this stage lies in the combined use of historically estimated lease events parameters and forecasted rents obtained in a companion paper Champigny, Mokrane & Ternisien (2003).

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2003-06-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2003_221

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