Institutional real estate portfolio diversification in Ireland and the UK
| Date | 01 March 2006 |
| Pages | 136-149 |
| Published date | 01 March 2006 |
| DOI | https://doi.org/10.1108/14635780610655094 |
| Author | Stanley McGreal,Alastair Adair,James N. Berry,James R. Webb |
| Subject Matter | Property management & built environment |
Institutional real estate portfolio
diversification in Ireland
and the UK
Stanley McGreal, Alastair Adair and James N. Berry
Centre for Research on Property and Planning, School of the Built Environment,
University of Ulster at Jordanstown (Shore Road), Newtownabbey, UK, and
James R. Webb
Department of Finance, James J. Nance College of Business,
Cleveland State University, Cleveland, Ohio, USA
Abstract
Purpose – Few countries have sufficiently long and detailed returns data for real estate to permit
sophisticated analysis. This paper aims to examine the potential diversification of private real estate
investments using returns data for major regional centres in Ireland and the UK.
Design/methodology/approach – Optimal real estate-only portfolios are constructed using total
returns, income returns and appreciation returns for office and retail real estate in ten cities within
Ireland and the UK. The analysis uses IPD data for the period 1984 to 2002. Total return, income return
and appreciation returns are treated as separate asset streams in the modelling of portfolios.
Findings – The results show different risk levels; in particular the income stream carries low risk,
whereas the capital appreciation element is much more volatile and risky. Optimal portfolios, office or
retail, whether income, appreciation or total returns, indicate that provincial markets perform well and
are capable of pushing London out of the optimised portfolios.
Research limitations/implications – Limitations stem from the optimal portfolios being based on
return series without a consideration of market depth. Future research will seek to construct weighted
portfolios.
Originality/value – The paper constructs optimal portfolios for three scenarios: low return; medium
return; and high return across sectors, return streams and major regional centres in Ireland and the
UK. The results show that regional centres perform well and can exclude London real estate from
optimal portfolios.
Keywords Real estate, Diversification, Returns,Financial risk, Ireland, UnitedKingdom
Paper type Research paper
1. Introduction
International real estate investment opportunities are a goal of many institutional
investors. However, only a few areas throughout the world have sufficiently long and
detailed returns data to permit sophisticated analysis, and therefore, consideration for
inclusion in institutional investment portfolios. The situation is exacerbated for private
real estate investments, where such data may exist for fewer than ten countries. In this
respect, Great Britain (England, Scotland, and Wales) and Ireland (Northern Ireland
and the Republic of Ireland) may have some of the most comprehensive real estate
returns information available in the world, after the USA. This study first examines the
potential diversification of private real estate investments in the major regional centres
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
JPIF
24,2
136
Received August 2004
Accepted February 2005
Journal of Property Investment &
Finance
Vol. 24 No. 2, 2006
pp. 136-149
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780610655094
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