Corporate real estate holdings and the stock market performance

Abstract

PurposeThe purpose of this paper is to examine the influence of corporate real estate (CRE) holdings on firm performance. Unlike previous studies, the paper does not only consider the firms’ primary business segment but also their activities in different business fields. This is of particular interest because additional segments often have different requirements for the provision of space and thus for the ownership strategy, which could have led to a possible bias in previous studies. Furthermore, additional business areas are becoming more relevant through integrated solutions.Design/methodology/approachThe study uses a balance sheet data set of companies in the six largest European economies for the period from 2000 to 2016. Germany serves as a suitable laboratory for deeper analyses. Holdings of 490 firms are regressed to the stock market performance using a two-stage approach. This procedure is repeated by considering additional business segments.FindingsThe analyses reveal that ownership reduces stock market performance. Additional business activities also appear to influence the relevance of ownership for firm performance.Practical implicationsThe research shows that ownership is priced depending on its primary and additional business activities. First, this insight helps capital market players to choose the right investment strategy. Second, it provides CRE decision-makers with information on the optimal provision of real estate.Originality/valueThis is the first paper to examine the contribution of real estate ownership on firm performance in light of the fact that companies operate in more than one sector.