Spatial Concentration in Institutional Investment in the UK: Some comparisons between the Retail and Office Sectors

Geographic diversity is a fundamental tenet in portfolio management.  Yet there is evidence from the US that institutional investors prefer to concentrate their real estate investments in favoured and specific areas as primary locations for the properties that occupy their portfolios.  The little work done in the UK draws similar conclusions, but has so far focused only on the office sector; no work has examined this issue for the retail sector.  This paper therefore examines the extent of real estate investment concentration in institutional Retail portfolios in the UK at two points in time; 1998 and 2003, and presents some comparisons with equivalent concentrations in the office sector.  The findings indicate that retail investment correlates more closely with the UK urban hierarchy than that for offices when measured against employment, and is focused on urban areas with high populations and large population densities which have larger numbers of retail units in which to invest.