Risk of commercial real estate: A review of literature

Abstract

In recent years, there have been many theoretical and empirical researches on commercial real estate. Based on the contents and related theories, we review the research scope, main contents and methods about risk management of commercial real estate. Research scope includes macro study on risks of real estate industry and micro study on risks of enterprises and projects. Research contents mainly concentrate on issues of systematic and idiosyncratic systems, factors affecting risks of commercial real estates, the representative of REITs, diversifying and hedging commercial real estate. Four main methods are used widely, which are CAMP method and its evolution, Value at Risk, Real Options Approach and ARCH approach series. In conclusion, we bring about in-depth study focusing on the systemic risk, idiosyncratic and dynamic correlation of commercial real estate in special industries which may contribute to the theoretical study and the practice on risk management of commercial real estate in China's institutional environment in the future.