Preferences of Institutional Investors in Commercial Real Estate

57 Pages Posted: 31 Dec 2019 Last revised: 9 Feb 2021

See all articles by Dragana Cvijanovic

Dragana Cvijanovic

Cornell SC Johnson College of Business; Warwick Business School, University of Warwick

Stanimira Milcheva

University College London

Alex Van de Minne

University of Connecticut - Department of Finance

Date Written: December 10, 2020

Abstract

In this paper we analyze market segmentation by firm size in the commercial real estate transaction process. Using novel micro-level data, we look at the probability distribution of investors acquiring a specific bundle of real estate characteristics, distinguishing between investors based on the size of their real estate portfolio. We find evidence of market segmentation by investor size: institutional investors segment across property characteristics based on the size of their real estate portfolio. The probability that a large (small) seller will sell a property to a similar-sized buyer is higher, keeping all else equal. We explore potential drivers of this market segmentation and find that it is mainly driven by investor preferences. During the Global Financial Crisis (GFC), large investors were less likely to buy the ’average’ property, as compared to the period before or after the crisis, indicating time-varying investor preferences.

Keywords: hazard model, frailty, segmentation

JEL Classification: R30, C10, G11

Suggested Citation

Cvijanovic, Dragana and Milcheva, Stanimira and Van de Minne, Alex, Preferences of Institutional Investors in Commercial Real Estate (December 10, 2020). Available at SSRN: https://ssrn.com/abstract=3501698 or http://dx.doi.org/10.2139/ssrn.3501698

Dragana Cvijanovic

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Warwick Business School, University of Warwick ( email )

Coventry CV4 7AL
United Kingdom

Stanimira Milcheva (Contact Author)

University College London ( email )

1-19 Torrington Place
Department of Construction and Project Management
London, London WC1E 7HB
United Kingdom

Alex Van de Minne

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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