The Analysis Of Tenant Risk In The Italian Real Estate Market

The volatility of tenant periodical cash flows produced by investment property can dramatically affect the expected return as estimated ex-ante, especially in recession times. Therefore tenant risk is a crucial factor for real estate investorsí strategies and asset allocation choices. The paper anal...

Full description

Saved in:
Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Martelli, Duccio, Giannotti, Claudio, Pischedda, Luigi
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2010
Online AccessGet full text

Cover

More Information
Summary:The volatility of tenant periodical cash flows produced by investment property can dramatically affect the expected return as estimated ex-ante, especially in recession times. Therefore tenant risk is a crucial factor for real estate investorsí strategies and asset allocation choices. The paper analyses the Italian institutional real estate market and aims at assessing tenant risk on the basis of lease events and market movements. The paper starts with a literature review of the major contributions in the field, produced by both academics (Ambrose B.W., Hendershott P.H., Klosek M.M., 2002; Crosby et al., 2000; McAllister, OíRoarty, 1999) and real estate institutions. Thanks to Investment Property Databank (IPD), who provides aggregate data of the Italian real estate market, the research offers an empirical analysis on actual leases signed in Italy in the years 2006 through 2008. The Italian lease market is further investigated in its features, in order to highlight different risk profiles across sectors and locations, with particular emphasis on break clauses. The results are compared with other IPD studies on other European markets, namely UK and France.