Determinants of Energy Consumption and Exposure to Energy Price Risk : A UK Study

In this study, we examine the drivers of household energy consumption with a view towards gauging which households are particularly vulnerable to energy price risk. We specifically investigate the relative importance of household socio-economic characteristics versus dwelling characteristics in explaining per capita gas consumption for space heating. The study draws upon a large random sample of households from the English Housing Survey (EHS) to understand the importance of, and interaction between, household and building characteristics. A multivariate OLS regression is used to identify the relative effects of various consumption drivers on gas used for space heating. The use of standardised coefficients allows for a discussion of the marginal contributions of each factor to energy consumption. The results show that variation in gas usage is largely determined by household socio-economic characteristics rather than physical dwelling characteristics. This includes the significant influence of household characteristics such as composition (or type), size, employment status, and income. The main contribution of the study is to underline the relative importance of household socio-economic characteristics over dwelling characteristics in explaining per capita energy consumption. The reported findings challenge the prevailing policy practice, which focusses mostly on dwelling characteristics. Die vorliegende Studie untersucht, welche Faktoren den Energieverbrauch von Haushalten beeinflussen um zu beurteilen, welche Haushalte besonders anfällig für Energiepreisrisiken sind. Insbesondere geht die Analyse der Frage nach, ob sozioökonomische Eigenschaften von Haushalten wichtigere Treiber des Energieverbrauchs sind als Gebäudeeigenschaften. Die Studie stützt sich auf eine große Zufallsstichprobe von Haushalten aus der English Housing Survey (EHS), um die Bedeutung und Wechselwirkung zwischen Haushalts- und Gebäudeeigenschaften zu verstehen. Eine multivariate Regression wird verwendet, um die relativen Auswirkungen verschiedener Verbrauchstreiber für Heizenergie zu identifizieren. Die Verwendung standardisierter Koeffizienten ermöglicht eine Diskussion des marginalen Beitrags jedes Faktors zum Gesamtenergieverbrauch. Die Ergebnisse zeigen, dass die Variation des Gasverbrauchs in hohem Maße von den sozioökonomischen Merkmalen der Haushalte und nicht primär von den physischen Merkmalen der Wohnung bestimmt wird. Ein signifikanter Einfluss geht vor allem von Haushaltsmerkmalen wie Zusammensetzung, Art, Größe, Beschäftigungsstatus und Einkommen aus. Somit stellen die vorliegenden Ergebnisse die vorherrschende Politikpraxis in Frage, die sich hauptsächlich auf physische Wohnungseigenschaften und technische Energieeffizienz konzentriert und die ökonomischen und sozialen Faktoren eines erhöhten Energiepreisrisikos von Haushalten weitgehend vernachlässigt.


Introduction
Size effects and economies of scale in European real estate companies Brent Ambrose, Franz Fuerst, Nick Mansley, Zilong Wang Published in Global Finance Journal in April 2019, as well as by EPRA, this study investigated scale economies in European real estate companies and was supported by an EPRA research grant. It examined the effects of size on revenue, expenses, profitability ratios and cost of capital using a panel regression approach. It found that larger real estate companies in Europe are able to generate higher revenue per unit of company size, incur lower costs and produce higher returns. Net Operating Income ratios and return ratios increase while Selling, General and Administrative expense ratios decrease with the size of a company. However, it did not find evidence that larger companies have lower cost of debt or lower weighted average cost of capital. From the analysis, it is evident that particularly small firms can reap substantial economies of scale as they grow. However, the benefits of further growth tend to be much more modest for larger companies. Given REITS (Real Estate Investment Trusts) are on average larger than comparable non-REITs this may explain why REITs have lower economies of scale in expenses and revenues than Non-REIT real estate companies. https://www.sciencedirect.com/science/article/pii/S1044028317304349

Machine Learning, Architectural Styles and Property Values Thies Lindenthal, Erik B Johnson
This research project first introduces an algorithm that collects pictures of individual buildings from Google Street View. Second, it trains a deep convolutional neural network (CNN) to classify residential buildings into architectural styles, taking into account spatial dependencies of these styles. Third, it investigates whether architectural styles influence house prices. For re-sales, the architectural style is a significant determinant of transaction prices while no such effect is found for new buildings. Additionally, we are able to provide guidance on how to detect and overcome some of the limitations of machine learning methods through a large-scale comparison of predictions and expert classifications. https://github.com/thies/paper-uk-vintages/blob/master/text/manuscript_assa.pdf 500 Years of Housing Rents, Quality and Affordability Thies Lindenthal, Piet Eichholtz, Matthijs Korevaar How do housing rents, quality and affordability evolve when cities grow over time? This paper studies urban housing markets for half a millennium (1500-2017) for Amsterdam, Antwerp, Bruges, Brussels, Ghent, London, and Paris. Based on a dataset of 436,000 rent observations, we build new indices of housing rents, quality and inequality, and relate these to changes in wages and population. Long-term growth in real rent prices has been limited. Before 1900, markets were unregulated and rent prices and wages rose in tandem when cities grew, while housing quality and inequality increased. After 1900, housing affordability started improving substantially, and we show that short-term improvements in this period were partially attributable to rent controls. Most of the surge in housing expenditure that did occur over time is due to increasing housing quality rather than rising real rents.

Research Projects -Other Collaborations and International Research Projects
Helen Bao "Nudging Towards a Better Financial Future: Applying Behavioural Insights in the Development of Financial Systems in Rural China". A two-year joint research project funded by ESRC and NSFC in partnership with Nantong Rural Commercial Bank. https://gtr.ukri.org/projects?ref=ES%2FP004296%2F1 "Formal Rules in the Rural Land Institutional Change in China: Development, Implementation and Evolution -Based on Behavioural Economics Theory and Empirical Study". Running from Jan 2017 -Dec 2020 this project is being conducted in association with National Natural Science Foundation of China, Renmin University of China. Publication and dissemination due 2020-2021.

Franz Fuerst
"Liveability at Height: Consumers' Willingness to Pay" was presented at the 25th Pacific Rim Real Estate Society Conference in Melbourne, Australia in January 2019. A collaboration with Matthew Palm and Georgia Warren-Myers from the University of Melbourne, the project provides insights into the main liveability elements consumers desire and are willing to pay for in the context of a city in transition to higher density living. http://www.prres.net/index.htm?http://www.prres.net/Proceedings/2019proceedings.asp "Estimating the Potential Risks of Sea Level Rise for Public and Private Property Ownership, Occupation and Management" is another collaboration with colleagues at the University of Melbourne. The interim article is available here: https://www.mdpi.com/2227-9091/6/2/37

Nick Mansley and Zilong Wang
In 2018, in memory of the late Erwin Stouthamer, ANREV (Asian Association for Investors in Non-listed Real Estate Vehicles) fund a research project on currency risk. This Cambridge research "Currency Risk Management for Investors in Asia Pacific Non-Listed Real Estate Funds" explores how investors in Asia Pacific non-listed real estate vehicles approach these issues and the impact of different hedging strategies. The full report can be found here: https://anrev.org/en/publications/details/121/653

Colin Lizieri
Working with Nestor Garza from Universidad del Norte, Colombia this study focused on the role and economic effect of land ownership and land monopoly in emerging urban environments. Land monopoly in conventional economics is a theoretical 'impossibility' which, nonetheless, allows for a spatial empirical approach. They designed a spatial land monopoly test of their own, understood as a pricing strategy where land prices could be 'over and above' those determined by city-wide location, urban regulation and externalities. They used the city of Barranquilla (Colombia) as a case study. This city offered ideal conditions for investigation of theories of land monopoly, given extreme land concentration in its highly regulated elite northern fringe. The study found no evidence of land monopoly pricing using different specifications of the spatial tests, which conformed to standard urban economic expectations: the pattern of development pointing to different, political channels influencing development. The full article can be found here: https://journals.sagepub.com/doi/full/10.1177/0042098018781306 Colin Lizieri is Grosvenor Professor of Real Estate Finance and was Head of the Department (Jan 2016-Dec 2019). Over 30-years he has advised international bodies, governments, professional bodies and private organisations on real estate investment, and has published widely on real estate finance, investment risk management and office market dynamics. Nick Mansley draws on extensive experience in investment management including as head of the global multi-manager business at Aviva Investors responsible for c.$20 billion of investments across all asset classes as well as a long track record of applied economics and real estate research.
Dr Helen Bao is University Senior Lecturer in Real Estate Finance, and Fellow in Land Economy at Newnham College. Helen is a real estate economist with a research focus on behavioural finance and real estate/housing markets, urbanization in China and has strong links with Chinese state and private organisations, research institutes and real estate investors.
Franz Fuerst is Professor of Real Estate and Urban Economics, and has an extensive portfolio of research on sustainable/green buildings and the impact on rent and value, on the drivers of property company and real estate market performance and on the relationships between knowledge industries and real estate values.
Dr Thies Lindenthal, University Lecturer in Real Estate Finance works on very long-run real estate performance and on the impact of technology on the analysis and behaviour of property markets.
Dr Zilong Wang is Senior Research Associate and his specialism is Finance and Risk. He also teaches quantitative methods on the MSt programme. Prior to his PhD, Zilong worked in investment banking as a financial analyst.
Natalie Bayfield is Senior Associate at the Centre and is a real estate financial analyst and urban economist. She is also CEO of Bayfield Training, and has taught and provided consultation worldwide. Natalie is also credited with inventing 'Real Estate Financial Modelling' as a subject in its own right over 20 years ago.

Our People
The Centre is led by Prof Colin Lizieri (Centre Director) and Nick Mansley (Executive Director) who both have over 30-years of real estate research experience. The Centre also has a number of key Departmental staff with the expertise and proven capability of delivering the highest calibre of applied research and a breadth of research interests.

The Centre has also made some new appointments, increasing our research resources:
Dr Ozge Oner is University Lecturer in Real Estate and Spatial Economics and Fellow in Economics and Land Economy at Sidney Sussex College. Her research includes: Placemaking, Inclusivity and Town Centre/Retail in the Future. Ozge was also recently given the prestigious "Unga forskapriset" award for outstanding research in her home country, Sweden.
Dr Johan Larsson is University Lecturer in Economics and Public Policy and Fellow in Land Economy at Robinson College. His research interests are: Economic geography, regional science, urban economics and entrepreneurship

PhD Successes
In line with our aim to foster researchers, there are a number of PhD students currently associated with the Centre: Yana Akhytrs'Ka: How can energy data analytics platforms affect small firms? A study of a reduction in energy use in the service sector and its spillover effects Thuqan AlHindawi: Can BD/ML techniques enhance RE markets' transparency by providing a more efficient/robust way to examine the risk/return profile of real estate as an asset class? There has also been a change in the administration staff at the Centre as we said thank you and goodbye to Centre and MSt Coordinator Gillian Barclay, who moved to the Institute of Continuing Education as Head of Academic Centre Administration for Professional Studies, and welcomed to the team Barbora Sajfrtova and Lynda Haines as Centre and MSt Coordinator and Centre and MSt Assistant respectively. . The latter is invitation-only and he was honoured to be selected to participate.

Industry and Public Bodies
His paper "The Odd One Out: Predicting Price Coarseness" has been accepted for presentation at the 2020 ASSA Annual Conference (it was previously presented at the Weimer School Session in 2019); and he will also chair a session on Real Estate and Machine Learning at the same event in San Diago in January 2020.

Cambridge Real Estate Research Club
This annual event continues to go from strength to strength. Hosted by the Centre and held at a local College, this invite-only one-day conference held each spring is a chance for Heads of Research/CIOs across the industry to share and discuss investment issues and research ideas in a relaxed environment .
In 2018 the sessions covered: Structural change and online impact in retail; Energy efficiency and barriers to investment; International capital flows, pricing etc.; Managing currency risk and Data analytics and research issues.

Centre Industry Events
Future Cities

Centre Academic Events Cambridge International Behavioural Sciences and Urban Studies Symposium
The Symposium hosted by the Centre but led by Helen Bao took place at Newnham College in May 2019.
The Cambridge International Behavioural Sciences and Urban Studies Symposium provides a platform for discussions of cutting-edge research at the intersection of behavioural sciences and urban studies. Seventeen papers were presented and discussed extensively during the recent three-day symposium at Newnham College.
A wide range of behavioural topics were covered including: loss aversion, endowment effect, framing, mental accounting, herding, and social preferences. These behavioural tools are applied in land use policy, development and planning problems, urban regeneration, neighbourhood conservation and urban design, immigration and internal labour migration, liability and quality of life, greening, sustainable cities, among others.
Colin Lizieri gave the opening speech. The symposium also featured two keynote speeches by Prof Guy Robinson (Emeritus Editor of Land Use Policy) and Prof Pengjun Zhao (Edit-in-Chief of Cities).
In total 38 speakers, presenters and discussants attended from the UK, the USA, Australia, China, Singapore, and Hong Kong. The symposium is a true testimony that behavioural studies is an important research stream in urban studies, as researchers in top universities across the world are using behavioural tools to address key issues in urban studies.

Cambridge Real Estate Finance and Investment Symposium
The third Real Estate Finance and Investment Symposium was held at St John's College, Cambridge in September 2019 The event was hosted by the Centre (led by Thies Lindenthal) but is organised in partnership with colleagues at the University of Florida and the National University of Singapore.
The Symposium featured longer, more in-depth paper presentations and ample time was given for discussion among presenters, assigned discussants, and other participants.
It was a relaxed yet focussed event aiming to inspire a critical mass of leading academics in the field to create new thoughts and insights on general finance, real estate finance and investments topics. With over 30 internationally renowned scholars from universities in the US, Germany, Spain, Switzerland, Macau and the UK, it really strengthens Cambridge's visibility in the real estate finance and investment research community.

Masters in Real Estate (MSt)
Now with it's fourth cohort, the Centre has led the development and delivery of this part-time Masters course since 2016. The inaugural cohort finished the course with a field trip to Copenhagen and celebrated their successful graduation in December 2018.
The second cohort  have completed their residential sessions (including a trip to Madrid) and successfully submitted their dissertations and graduated at the end of 2019.
The third cohort (2018-20) have just started their second year and after their fourth residential block in December 2019, will be looking to complete their dissertations by July 2020.
The latest cohort (2019-21) completed their first Cambridge residential in September and are working on assignments before the next session in March 2020.
Students have a range of professional experience such as Analyst, CEO, CIO, Asset Manager, Development Manager, Building Surveyor, Student Housing Partner and Strategic Director. They are also internationally diverse, from countries as far as Hong Kong, Singapore, Australia, New Zealand, Japan and Taiwan, Canada and the US to Russia, Luxembourg, Switzerland and the UK.
We still want to make further progress in achieving balance between male and female applicants but are please that a third of the 2019 cohort are women in real estate, up on the previous year.
The MSt is delighted to be able to draw on leading industry experts to deliver lectures and host field trip visits alongside the core academic content.
The ultimate goal is to educate the up and coming leaders in the industry, to equip them with the very latest knowledge and skills to lead and innovate within their organisations, improving the performance, efficiency and sustainability of the Real Estate sector.

Looking Forward
The Centre intends to continue build on its strengths and successes as outlined in this report in order to enhance its position as a leading centre of rigorous and relevant research into real estate markets. We will seek further funding and partnerships to pursue work in the key research themes and priorities detailed below. We will bring together researchers and practitioners to explore emerging issues in the market that merit analysis and to share best practice in research and we will work to ensure that real estate research is central to our educational and executive programmes at Cambridge.
As a hub for international research, we will bring researchers (both academic and professional) to Cambridge as visitors and as associate members of the Centre and through meetings, seminars and symposia.
The Centre will continue to benefit from its new additional academic members of staff with research interests in Spatial Economics, Urban Economics and Behavioural Economics in relation to real estate.
We will actively seek doctoral students interested in undertaking research in our research priority areas: these are the next generation of professional and academic researchers and a key source of new ideas in the market. The critical constraint they face is funding and we will look to find ways of providing financial support -we would welcome partners in this effort.
The Centre's research agenda has a number of strands and some of the research activity planned for each theme is listed here:

Research Themes and Priorities for the Future
Risk Characteristics of Real Estate: It is increasingly recognised that the risk and return of real estate depends not only on the income and capital appreciation of the underlying assets, but also on the vehicle in which the properties are held: its institutional and capital structure. Meanwhile, investors increasingly are looking beyond traditional asset class boundaries to classify assets into groupings that reflect their sensitivity to particular types of risk factors. The Centre is continuing to extend its work on capital structure and real estate, and drivers of risk for real estate vehicles.
Real Assets and Non-Traditional Real Estate Investments: Linked to the previous theme and developing prior research work, we will continue to investigate the performance and risk characteristics of nontraditional real estate investment areas and to explore the relationship between real estate and other real assets.
Sustainability, Resilience and Performance: The Centre researches sustainability and real estate markets at different scales -energy performance and environmental sustainability at building level and its link to value and return, complemented by a broader perspective on sustainability and urban resilience, promoted by, for example, the Urban Land Institute and by the World Economic Forum's Agenda Council on the future of cities and real estate.
Ownership, Globalisation and Yield Structures: Prompted by the growing dominance of non-domestic purchasers in London (and other world gateway cities), the focus of this research includes attempting to understand the implications of global capital flows on market performance and values. For example, what is the basis of investment yields when, global investors with lower costs of capital are not tied into the local market, become significant in a particular city sub-market?
Technology, Risks and Opportunities: An emerging theme is the impact of technology on all real estate markets and the performance of real estate portfolios. This encompasses the risk to traditional real estate formats and cashflows from technology, for example, new working practices and new patterns of consumption, but also includes opportunities, such as the potential benefits of smart building technologies in driving greater efficiency of usage and more focused management to maximise returns, and the use of machine learning in assessing real estate.
Real Estate Risks in a Multi-Asset Class Portfolio Context: This work explores a number of approaches to identifying both known risk factors and uncertainties in investment and how to integrate real estate into multi-asset class frameworks.
Long Run Values, Capital Growth and Depreciation: This research theme explores very long run performance across property segments and examines the factors that have led to that performance. It aims to support decision making by investors, regulators and lenders.
Behavioural Economics, Perceptions and Preferences: This research seeks to explore issues around preferences, sentiment and the impact of nudges.