The inclusion of portfolio sales in real estate price indices

Farley Ishaak

ERES from European Real Estate Society (ERES)

Abstract: Data on commercial real estate (CRE) transactions differs in many ways from owner occupied housing transactions. CRE has low transaction numbers, is more heterogeneous and can also be traded as a company share deal. There is one more aspect in which CRE differs: it is often sold in portfolios. In this setup, multiple real estate properties are sold in one transaction. This is also called a portfolio sale. In the construction of real estate price indices, a portfolio sale is problematic, because it includes properties of various types in various locations. In the construction of price indices, portfolio sales, therefore, must be broken down into separate properties. This study examines the price index construction problems, caused by portfolio sales, provides possible solutions for handling them and assesses the usability of these options by discussing the advantages and disadvantages. This study uses official data on commercial real estate transactions from the Land Registry Office, official valuations and official information on buildings in the Netherlands. The assessment involves simulations in which one on one sales are constructed as if they were sold in portfolio sales. This allows us to assess which breakdown estimation methods deliver solid approximations for the original transaction prices. The provided solutions will provide compilers of CRE price indices handles on how to cope with portfolio sales and the simulation technique will provide them a way to assess the results.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2023-01-01
New Economics Papers: this item is included in nep-ure
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