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Regional Studies
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The Financialization of Business Property and What

It Means for Cities and Regions
a b c
Ludovic Halbert , John Henneberry & Fotis Mouzakis
a
LATTS (Laboratoire Techniques, Territoires et Sociétés), Université Paris-Est, 6–8 Av.
Blaise Pascal, Cité Descartes, F-77455 Marne la Vallée Cedex 2, France. Email:
b
Department of Town and Regional Planning, University of Sheffield, Western Bank,
Sheffield S10 2TN, UK.
c
Frynon Consulting, 11 Frynonos Street, GR-1632 Athens, Greece. Email:
Published online: 06 Mar 2014.

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To cite this article: Ludovic Halbert, John Henneberry & Fotis Mouzakis (2014) The Financialization of Business Property
and What It Means for Cities and Regions, Regional Studies, 48:3, 547-550, DOI: 10.1080/00343404.2014.895317

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 Regional Studies, 2014
Vol. 48, No. 3, 547–550, http://dx.doi.org/10.1080/00343404.2014.895317

The Financialization of Business Property and

What It Means for Cities and Regions
LUDOVIC HALBERT*, JOHN HENNEBERRY† and FOTIS MOUZAKIS‡
*LATTS (Laboratoire Techniques, Territoires et Sociétés), Université Paris-Est, 6–8 Av. Blaise Pascal, Cité Descartes,
F-77455 Marne la Vallée Cedex 2, France. Email: ludovic.halbert@enpc.fr
†Department of Town and Regional Planning, University of Sheffield, Western Bank, Sheffield S10 2TN, UK.
Email: j.henneberry@sheffield.ac.uk
‡Frynon Consulting, 11 Frynonos Street, GR-1632 Athens, Greece. Email: f.mouzakis@ frynon.com

(Received December 2013: in revised form February 2014)

Downloaded by [University of Arizona] at 18:09 18 June 2014

H ALBERT L., H ENNEBERRY J. and M OUZAKIS F. The financialization of business property and what it means for cities and
regions, Regional Studies. The papers in the special issue examine the strategies and practices of investors and their relations with
other actors involved in the production of business property. Although the globalization of these activities has occurred largely
in the last 10–20 years, it has prompted marked changes in the geography of commercial property investment. International
capital has flowed to a limited number of favoured locations, but because of the spatial fixity of real property, local actors and
institutions remain an important influence on investment decisions. This poses challenges for urban development and regeneration
policies that depend on private investment capital.

Finance Business property Urban development Regional development

H ALBERT L., H ENNEBERRY J. and M OUZAKIS F. 商业资产的金融化，及其对城市与区域的意涵，区域研究。本期特刊的

文章，检视商业资产的生产中，投资者的策略与实践，及其与其他行动者之间的关联性。儘管上述活动的全球化，多
半发生在近十年至二十年内，但却已引发商用资产投资地理的显着变化。国际资本流向了少数几个受青睐的地点，但
不动产却因空间固着的关係，使得在地行动者及制度对于投资决策仍保有重要的影响，而这也对仰赖私部门投资资本
的城市发展和更新政策带来挑战。

金融 商业资产 城市发展 区域发展

H ALBERT L., H ENNEBERRY J. et M OUZAKIS F. La financiarisation de l’immobilier commercial: son importance pour les grandes
villes et les régions, Regional Studies. Les articles publiés dans le numéro spécial examinent les stratégies et les pratiques des
investisseurs et leurs rapports à d’autres agents impliqués dans la production de l’immobilier commercial. Bien que la mondialisation
de ces activités se soit produite dans une large mesure pendant les 10 ou 20 dernières années, elle a provoqué d’importants
changements de la géographie du marché de l’investissement en immobilier commercial. Les capitaux internationaux ont afflué
à destination d’un nombre limité de zones privilégiées, mais à cause de la fixité spatiale des biens immobiliers, les agents et les
institutions locales exercent toujours une influence importante sur les décisions d’investir. Cela constitue un défi pour les politiques
en faveur du développement et de la redynamisation des zones urbaines qui dépendent du capital d’investissement privé.

Finances Immobilier commercial Développement urbain Développement régional

H ALBERT L., H ENNEBERRY J. und M OUZAKIS F. Die Finanzialisierung von Geschäftsimmobilien und ihre Auswirkung auf Städte
und Regionen, Regional Studies. In den Beiträgen der Sonderausgabe werden die Strategien und Praktiken von Investoren sowie ihre
Beziehungen zu den anderen an der Produktion von Geschäftsimmobilien beteiligten Akteuren untersucht. Obwohl sich die
Globalisierung dieser Aktivitäten größtenteils in den letzten 10–20 Jahren vollzogen hat, hat sie zu ausgeprägten Veränderungen
in der Geografie der Investitionen in Geschäftsimmobilien geführt. Das internationale Kapital ist zu einer begrenzten Anzahl von
bevorzugten Standorten geströmt, doch aufgrund der räumlichen Festigkeit von Immobilien üben lokale Akteure und Institutionen
weiterhin einen großen Einfluss auf die Investitionsentscheidungen aus. Dies stellt Politiken für urbane Entwicklung und Sanierung,
die auf privates Investitionskapital angewiesen sind, vor Herausforderungen.

Finanzen Geschäftsimmobilien Stadtentwicklung Regionalentwicklung

H ALBERT L., H ENNEBERRY J. y M OUZAKIS F. La financialización de la propiedad comercial y su efecto en las ciudades y
regiones, Regional Studies. En los trabajos del número especial se analizan las estrategias y prácticas de los inversores y sus relaciones
con otros protagonistas que participan en la producción de la propiedad comercial. Aunque la globalización de estas actividades ha

© 2014 Regional Studies Association

http://www.regionalstudies.org
 548 Ludovic Halbert et al.
ocurrido en gran parte en los últimos 10 a 20 años, ha propiciado cambios notables en la geografía de la inversión en propiedades
comerciales. El capital internacional se ha destinado a un número limitado de lugares más favorecidos, pero debido a la fijeza
espacial de la propiedad real, los protagonistas locales y las instituciones siguen influyendo significativamente en las decisiones
de inversión. Ello plantea retos para el desarrollo urbano y las políticas de regeneración que dependen del capital de inversión
privada.

Finanzas Propiedad comercial Desarrollo urbano Desarrollo regional

JEL classifications: R11, R12, R14, R51

This special issue brings together papers from urban
economics and urban geography to analyse how invest-
ment in business property may affect the economic,
physical, spatial and social development and form of
cities and regions. It challenges the notion of a free
market that achieves an optimal balance between the
demand (from end users) for accommodation and its
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geographies of business property investment and re-
fashioning cities and regions.
This special issue explores the multiple scales at
which the particular spatialities promoted by insti-
tutional investors take place. At the global level,
money flows like mercury (C LARK , 2005) and coagu-
lates in a limited number of metropolises (LIZIERI and

supply (by developers and investors). The growth in
rent relations, government(s’) deregulation, and inno-
vations in finance and funding have markedly increased
the scale and reach of property investors. By examining
their strategies, practices and instruments, and their
relations with other actors involved in the production
of business property (such as developers and policy
makers), the papers provide new insights into the con-
tested process of urban and regional change. The contri-
butions achieve this by adopting a wide range of
theoretical frameworks, including portfolio manage-
ment theory, neo-institutional economics, old insti-
tutional and territorial economics, and actor-network
theory. They combine an equally varied array of meth-
odological approaches, ranging from econometric mod-
elling to thick case studies. In this conclusion three
major results are put forward.
THE NEW GEOGRAPHIES OF BUSINESS
PROPERTY INVESTMENT
Like other components of the urban environment such
as infrastructure, housing or land, business property has
been a well-established class of investment for a long
time (S COTT , 1996). Similarly, the techniques used to
inform property investment decisions – such as invest-
ment valuation and appraisal, and modern portfolio
analysis and management – have evolved over a long
period (S COTT , 1996; H ENNEBERRY and C ROSBY ,
2012). However, what is remarkable is the rapid
growth in the globalization of these activities, in their
technical evolution and application, and in the linkage
of the (commercial) real estate and financial sectors of
the market. As L IZIERI and P AIN (2013) and S TEVEN-
SON et al. (2013) note, this has largely occurred in the
last two decades. Investors’ drive to minimize risk and
maximize returns to property has resulted in both diver-
sification (across sectors and locations) and selectivity (of
particular types of properties and places), creating new
PAIN ; STEVENSON et al.). The same process happens
within national urban systems, such as that of India
(H ALBERT and R OUANET , 2013). There, property
investment tends to be overrepresented in certain
major business property markets (Delhi, Mumbai, Ban-
galore, Chennai). Echoes of this pattern are also seen in a
federal state like California (H EBB and S HARMA , 2013).
Lastly, a geography of hotspots and blind spots is evident
within city-regions themselves, such as the Mexico City
Metropolitan Region, where foreign investors have
concentrated their ownership in some peripheral
locations (D AVID and H ALBERT , 2013). The special
issue thus confirms that the marked spatial selectivity
adopted by institutional investors contributes to the
dynamics of contemporary economic concentration
observed in cities and regions (H ALBERT , 2010).
The papers discuss these discriminating spatial pat-
terns. B ALL and N ANDA (2013), in their aggregate
analysis, find that investment in physical and social infra-
structure (transport, health, education) in a developed
economy such as the UK does not have a significant
impact on the geographies of business property pro-
vision at the regional level. Apart from planning con-
straints, this may point to the influence of institutional
factors in regional property markets. In examining the
institutional make-up of a particular type of city-
region – global financial centres – L IZIERI and P AIN
(2013) argue that the complex interdependencies
between the occupational market and the supply of
capital result from the economic specialization of such
cities. Because the geography of financial investment
favours certain cities and regions, most contributions
in this issue recognize the importance as explanatory
factors of the logics adopted by the investment industry.
For example, H ENNEBERRY and M OUZAKIS (2013)
demonstrate that the ‘naïve familiarity’ affecting
London-based institutional investors results in the differ-
entiated treatments of ‘core’ and ‘non-core’ UK
regional property markets.
 The Financialization of Business Property and What It Means for Cities and Regions
This issue thus demonstrates how the supply of
capital for business property depends on the socially
constructed appreciation of risk-adjusted returns by pro-
fessionals from the financial and real estate industries,
and by their interactions with a wider system of urban
production that involves policy-makers, business associ-
ations and others. Analyses from the perspective of insti-
tutional and territorial economics provide new insights
into the geographies of finance capital investment in
business property. While being cognizant of institutional
investors’ relative autonomy, the papers also acknowl-
edge the importance of place-specific institutions and
actors in framing the former’s investment decisions.
The following sections discuss these points.
THE TERRITORIALITIES OF FINANCE
CAPITAL FLOWS
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Investment selectivity, exercised at multiple scales,
should not be considered synonymous with the de-
territorialization of the investment industry. The com-
parison of places and buildings is central to investment
decisions and requires the mobility of capital (T HEURIL-
LAT and C REVOISIER , 2013). But once such a decision
is made and an asset is acquired, the capital is spatially
fixed – so, as this issue illustrates, there remains an una-
voidable place-specific dimension to investment in
business property.
Firstly, investors are themselves embedded in specific
locations (that is, financial districts) that display the attri-
butes of ‘neo-Marshallian nodes’ (A MIN and T HRIFT ,
1992). While each investment decision is taken by the
investment committee of an individual financial organ-
ization, these decisions are largely influenced by a col-
lective appreciation, within the broader investment
industry, of what are ‘good’ locations, assets and end
users. In this sense, investment decisions are dependent,
from the perspective of territorial economy, on the
workings of milieus.
Secondly, while most contributions emphasize the
extent to which capital flows in business property have
now become global, some refine this observation by
stressing how land, buildings and construction rights
used by investors rest on multiple levels of regulation.
Confirming what has been observed with other com-
ponents of the urban fabric, this issue highlights the
importance of national, regional and local regulations
in supporting or limiting the ability of institutional
investors – especially of non-domestic financial organiz-
ations – to gain access to business property.
Thirdly, a number of papers analyse how the task
division adopted in the real estate industry to suit inves-
tors produces specific territorialities. Service providers,
such as third-party financial managers, international
property consultants or lawyers, as well as developers,
have become key intermediaries that contribute to the
commutation between the financial expectations of
549
distant investors and the messy spatial and social materi-
alities of cities and regions (H ALBERT and R UTHER-
FORD , 2010). Several papers in this issue highlight
how investors’ spatial strategies are translated, nego-
tiated, adjusted and sometimes resisted by a series of
private and public actors involved in the production of
business property and urban development. For instance,
H ALBERT and R OUANET (2013) suggest that transca-
lar territorial networks contribute to the inclusion in
investors’ portfolios of irrevocably local business proper-
ties, while D AVID and H ALBERT (2013) observe how
the calculative practices of institutional investors are
dynamically adjusted to – and contested by – the cul-
tural and institutional make-up of a given market.
THE IMPACT OF INSTITUTIONAL INVES-
TORS’ STRATEGIES ON CITIES AND
REGIONS
This issue develops a critical assessment of the impacts of
institutional investors’ increasing role in financing
business property and infrastructure.
H EBB and S HARMA (2013) hypothesize that, despite
their implication in the global financial collapse, pension
funds may adopt long-term investment strategies that
could, under certain circumstances, support the redeve-
lopment of neighbourhoods facing financial, social and
urban difficulties. T HEURILLAT and C REVOISIER
(2013) argue that more sustainable practices may be
included in large-scale urban complexes, as long as the
affected local communities negotiate with the develop-
ment industry that indirectly represents investors’
interests.
However, contributors to the issue more often ident-
ify potentially harmful consequences of the financializa-
tion of business property investment. They make three
arguments. Firstly, that the spatial selectivities pursued
by institutional investors may paradoxically be detri-
mental to the financial performance of their invest-
ments. S TEVENSON et al. (2013) show that the
synchronization of office market cycles allied with the
concentration of investments in a limited number of
world cities largely counters the diversification benefits
that justify such investments. L IZIERI and P AIN
(2013) complement this by highlighting the higher
level of risk to which investors are exposed due to the
heightened boom–bust nature of international financial
centres’ (IFCs) office markets. H ENNEBERRY and
M OUZAKIS (2013) also point out that investment man-
agers’ bias towards assets in London prevents them from
allocating more capital to non-core markets, depriving
investors of better risk-adjusted returns in the long run.
Secondly, the papers discuss the consequences for
both the financial stability and the economic develop-
ment of cities and regions. L IZIERI and P AIN (2013)
argue that the nexus between finance and business prop-
erty observed in IFCs constitutes a major source of
 550 Ludovic Halbert et al.
systemic risk for the overall financial system and
economy. At a more local level, there is a risk that the
provision of business property of the quantity, quality
and price that supports the evolution of local productive
systems may be limited by investors’ own decisions.
H ENNEBERRY and M OUZAKIS (2013) observe that
firms in non-core localities, cities and regions pay rela-
tively higher prices for business property than firms in
core localities. Simultaneously, core regions may experi-
ence a higher degree of volatility in the provision of
capital for business property. Furthermore, H ALBERT
and R OUANET (2013) and D AVID and H ALBERT
(2013) observe that institutional investors try to neutral-
ize a source of risk by selecting the types of property
sectors, buildings and end users in which they invest.
This might prove detrimental to those activities that
investors perceive to be more financially risky.
Thirdly, some papers discuss the impact of insti-
tutional investors’ spatial selectivity on the wider
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investment strategies. This leads several papers to ques-
tion the roles of institutional investors in the contested
production and reproduction of places. On the one
hand, there is a risk of an apparent de-politicization
of urban development when investment decisions are
removed from the public realm to be subject instead
to the logic of financial decision-makers. On the
other hand, investment in business property always
happens in situated places. Consequently, it may be
the object of fierce negotiations, or even contestations,
as observed respectively by T HEURILLAT and C RE-
VOISIER (2013) in Switzerland and by D AVID and
H ALBERT (2013) in the Mexico City Metropolitan
Region.
It is also clear that both the mobility and the cyclical
nature of finance capital constitute a challenge to
business property-led policies. There is a danger that
cash-starved local authorities, dependent on investors’
willingness to support a given property market, might

urban and regional fabric. H ALBERT and R OUANET
(2013) highlight the processes that reinforce social
and spatial polarization and eviction in Bangalore,
India, while H EBB and S HARMA (2013) criticize the
risk of increasingly uneven development between
and within US cities resulting from pension funds’
adopt strategies that follow and even anticipate the
latter’s changing preferences ever more closely.
However, this issue shows that policy-makers and
other local stakeholders may exploit the spatial fixity
of property assets to exert leverage over property
investors.

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