STYLE ANALYSIS IN REAL ESTATE MARKETS: BEYOND THE SECTORS AND REGIONS DICHOTOMY

If in equity markets style analysis has been studied extensively, in real estate ones it is only now emerging as a valuable tool for measuring and benchmarking performance and risk. So far studies in the property market have identified three investment categories (rather than styles): sectors (offices, retail and industrial), ëadministrative regionsí (as defined by IPD) and economic regions. However, the low explanatory power reveals the need to extend this analysis to other investment styles. In fact real estate investors set their strategies considering other factors which may be found relevant as for other assets. Building on finance literature, we identify four main real estate investment styles and test their significance in explaining portfolio returns. We apply a cross-sectional multivariate model to a dataset of more than 1,000 properties containing qualitative information to define the different styles. We find that ëequity-likeí styles increase the explanatory power and should then be used by fund managers to set benchmarks and to analyze portfolio returns.