Portfolio sales: price premium or price discount?

Farley Ishaak, Peng Liu, Egbert Hardeman and Hilde Remoy

ERES from European Real Estate Society (ERES)

Abstract: In commercial real estate, it is common to trade entire portfolios of real estate instead of single objects one by one. A portfolio refers to a set of real estate objects and, unlike the residential real estate market, the commercial real estate market is characterized by these constructions. Trading portfolios can be efficient as it requires one agreement instead of many. It is, however, unknown whether trading portfolios is also financially beneficial. A better understanding of this market behaviour enables better monitoring of financial stability as the share of portfolio sales fluctuates over time. The aim of this study is to determine whether trading real estate portfolios involves a premium or discount in the transaction price. We used Dutch Land Registry Office data to identify portfolio transactions and examine the relationship between real estate portfolios and transaction prices with a hedonic regression. We find that real estate portfolios are most often traded with a price discount. Many portfolio sales in a certain period, therefore, indicate a “buyer’s” market and a price-lowering effect.

Keywords: commercial real estate; Portfolio sales; Transaction price (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-ure
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