Common features in UK commercial real estate returns

Abstract

This paper examines the degree of short run co-movement in UK commercial real estate returns. The hypothesis is that a large fraction of the fluctuations may result from a small number of core disturbances that are transmitted from one region to another and from one property type to another. It adopts an approach from the business cycle literature which uses common features, and their complement, common cycles. The empirical modelling follows the work by Tiao and Tsay (1985), Engle and Kozicki (1993), Vahid and Engle (1993, 1994) and Engle and Issler (1995). Thirty-nine regional rates of return series are used, covering retail, office and industrial real estate for the economic planning regi..