Risk and Diversification for Regeneration/Urban Renewal Properties: Evidence from the U.K.

Executive Summary. This study addresses the issue of investment returns and risk within urban renewal locations in major metropolitan areas in the United Kingdom. The research indicates that investment performance in regeneration areas has matched, and in the retail sector, exceeded national and local city benchmarks. Returns for regeneration property are analyzed at aggregate and disaggregated levels over a 22-year time period. Separation of the returns highlights the highly risky nature of the appreciating capital return and the low risk bond-like income returns. Optimal mean-variance portfolios are also constructed and analyzed. The results indicate that properties within urban renewal areas can potentially increase portfolio diversification in all but one instance.