Mastering the metropolis through research and thought leadership.
Working Papers

Real Estate Ownership by Non-Real Estate Firms: An Estimate of the Impact on Firm Returns

Working paper #321
Yongheng Deng and Joseph Gyourko

• This paper examines non-real estate firms’ returns to see if they are correlated with their degree of real estate ownership/investment. More specifically, a capital asset pricing model (CAPM) is estimated for 358 firms across 51 non-real-estate industries, many of them relatively capital-intensive.
• The results show a consistent negative relation between the idiosyncratic component of firm return and the degree of real estate ownership. That is, within an industry it is the case that a firm’s return is lower if it has a relatively high fraction of its total assets (measured by book value) in real estate (also book value).
• The impact varies across industries, being greatest in the electronics industry. A pooled regression across industries finds a statistically and economically significant negative impact of relatively high real estate ownership on return.
• While there are no meaningful differences in returns for firms with very similar real estate concentration measures, for firms with concentration measures ten percentage points above average, implied excess annual returns are about one percentage point lower. This amounts to just under 10 percent of cumulative compound excess return over a ten year holding period.

Download full paper · 1MB PDF

In This Section
Explore Topics

1010 Affordable Housing Amazon Amenitization Architecture Artificial Intelligence Asia Australia automation Autonomous Vehicles bonds Borrowing Constraints Brexit California Canada Capital Business China Co-Working Environment coastal markets cold storage Colombia Commercial Brokerage Commercial Real Estate commissions Congestion consumer bias covid-19 CRE credit card market Credit Default Swaps Credit Insurance Credit Risk Transfers Culture Data Analytics data centers Data Collection Technology Debt Market Demand Demographics Density Development Discrete Choice disruption Diversity drones e-Commerce Economic Corridors economic policy economics education election studies Equity Funds Equity Market Ethnic Factors Europe Fannie Mae financial asset management Foreclosures Foreign Policy France Freddie Mac general equilibrium Global global economy Global Financial Crisis Globalization great depression Great Recession healthy buildings Hedonic hospitality Housing & Residential housing boom Housing Disease housing prices Housing Supply Identity Income Inequality India inflation Inter-generational mobility interest rates Investing jobs labor market Lagging Regions land use regulation Language life sciences Macroeconomics malls Market Pricing megacities Microeconomics Migration Minimum Payments Mixed-Use Mobility moral hazard mortgage insurance mortgage market Mortgage Rates Mortgages Multi-family Nation Building Non-Traditional Mortgages Office Market office sector pension funds Placed Based Policies Political Risk Price Discovery Private Equity Business public health public policy Public Schools real estate brokerage Real Estate Investment Real Estate Investment Trusts Recession Rental Retail Retirement reverse mortgages Risk Adjustment risk management risk-shifting robotics single family housing Slums Sorting South America Spatial Regions spillover effect stimulus package Sub-Prime Mortgages Supply Chains Sustainability Technology telecommunications trade transportation unemployment United States Urban Urbanization Warehouse welfare work from home