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Do Foreign Buyers Compress Office Real Estate Cap Rates?

Pat McAllister () and Anupam Nanda ()
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Pat McAllister: University of Reading
Anupam Nanda: University of Reading

Journal of Real Estate Research, 2016, vol. 38, issue 4, 569_594

Abstract: We investigate the relationship between the activity of foreign investors and capitalization rates in major European office markets. In the process, the paper provides a comprehensive analysis of the determinants of European office market capitalization rates. Using DTZ's Investment Transaction Database and data on a range of local sector-specific and macroeconomic variables across 28 key European cities over 1999-2013, we test several empirical hypotheses including potential endogenous determination of office capitalization rates and the level of foreign investment. A two-stage modelling exercise reveals that there is significant negative effect of foreign investment on office market cap rates. The results are robust across several model specifications and samples.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2016
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