Factors most influencing United Kingdom retail property investment yields: a theoretical perspective
Retail is treated in the United Kingdom as one of the three primary types of commercial property. It is subject to some influences that are different from those affecting the other types. Some investors in retail property will seek to focus on maximizing the All Risk Yield, in which case it is necessary to identify those factors having the greatest influence on it. This paper seeks to identify the factors having the greatest influence upon retail property yields. A review of extant literature is undertaken in order to identify those factors likely to have the most influence. Earlier studies based upon the markets in the United States are compared with the findings of subsequent studies and reports focused on the United Kingdom. A theoretical framework is then developed for those factors most likely to influence the investment yields of retail property in the United Kingdom. Geographic location is shown to have a significant effect on yields, not only at the local level, but also at the sub-national level. Although the regions normally used in the United Kingdom were not found to be individually significant, regions grouped together as super-regions were found to be significant for retail property. The specific risk posed by the strength of respective tenants' covenants is shown to be significant. Lot size and fluctuations in the economic cycle are also found to be influential. Those factors identified as having the greatest influence on retail yields should be built into yield prediction models. Such prediction models can play an important role in efficient portfolio-building in property investment. However, since retail property comprises sub-types, additional factors more specific to those sub-types need to be considered. Further research is needed to build these additional factors into the baseline model.
RICS Construction and Building Research Conference COBRA 2010, Sep 2-3, Paris
Tipping, M.,& Lam, Y. (2010). Factors most influencing United Kingdom retail property investment yields: a theoretical perspective. RICS Construction and Building Research Conference COBRA 2010, Sep 2-3, Paris. Retrieved from http://repository.vtc.edu.hk/thei-fac-sci-tech-sp/217