Corporate Real Estate Ownership Implications: International Performance Evidence
- Published in Journal of Real Estate Finance and Economics
In this paper we explore corporate real estate ownership internationally. Based on a sample of 4,636 companies from 18 industries and 9 countries we document distinct patterns and trends in the corporate ownership level of real estate. Real estate ownership appears to be driven by industrial rather than national differences, with corporate real estate ratios ranging between 0.13 for Business Services and 0.63 for the Mining sector. Overall, real estate ownership appears to be decreasing over time, which may be due to the gaining popularity of lease alternatives. When analyzing the stock performance of the companies in our sample, we discover a significantly negative relationship between real estate ownership and a firm’s systematic risk. Idiosyncratic risk bears no significant relationship with real estate ownership. With respect to stock returns our results show that returns are lowest among firms with the highest real estate ownership levels in each industry. After controlling for the variation in risks, the remaining return patterns differ strongly across industries, with a significantly negative relationship between stock outperformance and real estate ownership for Communications and Business Services and a positive but not significant relationship for Transportation.