Determinants of Foreign versus Domestic Real Estate Investment: Property Level Evidence from Listed Real Estate Investment Firms
52 Pages Posted: 29 Jun 2014 Last revised: 10 Jan 2017
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Determinants of Foreign versus Domestic Real Estate Investment: Property Level Evidence from Listed Real Estate Investment Firms
Determinants of Foreign Versus Domestic Real Estate Investment: Property Level Evidence from Listed Real Estate Investment Firms
Date Written: August 25, 2015
Abstract
We examine the determinants of foreign real estate investment relative to the domestic case using the portfolios of a large sample of publicly traded real estate investment companies; where foreign investment is defined as the property owner headquarters being located in a different country than a given asset. The cross-sectional results provide strong evidence that real estate firms are more likely to take a smaller stake in larger assets when investing abroad. The penchant for large assets holds when controlling for economic activity, real estate investment opportunities, depth and sophistication of the capital markets, investor protection and the legal framework, administrative burdens and regulatory limitations, and the socio-cultural and political environment at both the property nation and headquarter nation levels. In general, foreign ownership is less likely with industrial, office, retail, and self-storage properties. Capital market development is consistently negatively related to foreign investment.
Keywords: Real Estate Investment; International Real Estate; International Finance; Foreign Investment
JEL Classification: F21; G11; G23; O16; O18; P52
Suggested Citation: Suggested Citation