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Office Rent Determinants during Market Decline and Recovery

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    Abstract

    This article empirically examines office rent determinants in distinct periods of a market cycle. The study uses a dataset of office properties located in a large metropolitan area and spanning a six-year period. During this period, office rents experienced a significant decline and recovery. A time-varying parameter rent index identifies three distinct periods of the cycle: decline, trough and recovery. Tests of structural change conclude that market participants value the determinants of office rents differently during the periods. A microexamination of each rent determinant over the periods of the market cycle provides a greater understanding of how rents vary over time and the factors that influence them.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol20n03/05.357_380.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 20 (2000)
    Issue (Month): 3 ()
    Pages: 357-380

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    Handle: RePEc:jre:issued:v:20:n:3:2000:p:357-380

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Wolverton, Marvin L & Hardin, William G, III & Cheng, Ping, 1999. "Disaggregation of Local Apartment Markets by Unit Type," The Journal of Real Estate Finance and Economics, Springer, vol. 19(3), pages 243-57, November.
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    17. Petros S. Sivitanides, 1997. "The Rent Adjustment Process and the Structural Vacancy Rate in the Commercial Real Estate Market," Journal of Real Estate Research, American Real Estate Society, vol. 13(2), pages 195-210.
    18. Michaels, R. Gregory & Smith, V. Kerry, 1990. "Market segmentation and valuing amenities with hedonic models: The case of hazardous waste sites," Journal of Urban Economics, Elsevier, vol. 28(2), pages 223-242, September.
    19. Fisher, Jeffrey D & Geltner, David M & Webb, R Brian, 1994. "Value Indices of Commercial Real Estate: A Comparison of Index Construction Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 9(2), pages 137-64, September.
    20. Shilton, Leon & Zaccaria, Anthony, 1994. "The Avenue Effect, Landmark Externalities, and Cubic Transformation: Manhattan Office Valuation," The Journal of Real Estate Finance and Economics, Springer, vol. 8(2), pages 151-65, March.
    21. Edwin S. Mills, 1992. "Office Rent Determinants in the Chicago Area," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 273-287.
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    23. John Doiron & James D. Shilling & C.F. Sirmans, 1992. "Do Market Rents Reflect the Value of Special Building Features? The Case of Office Atriums," Journal of Real Estate Research, American Real Estate Society, vol. 7(2), pages 147-156.
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    Cited by:
    1. Fuerst, Franz, 2007. "Office Rent Determinants: A Hedonic Panel Analysis," MPRA Paper 11445, University Library of Munich, Germany.
    2. Franz Fuerst & Patrick McAllister & Claudia Murray, 2009. "Designer Buildings: An Evaluation of the Price Impacts of Signature Architects," Real Estate & Planning Working Papers rep-wp2009-10, Henley Business School, Reading University.
    3. Gary C. Cornia & Barrett A. Slade, 2005. "Property Taxation of Multifamily Housing: An Empirical Analysis of Vertical and Horizontal Equity and Assessment Methods," Journal of Real Estate Research, American Real Estate Society, vol. 27(1), pages 17-46.
    4. Fuerst, Franz & McAllister, Patrick, 2008. "Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings," MPRA Paper 11446, University Library of Munich, Germany, revised Sep 2008.
    5. Paul Cheshire & Gerard Dericks, 2013. "Regulation, Rents and ?Iconic Design?: rent acquisition by design in the tightly constrained London office market," ERSA conference papers ersa13p1071, European Regional Science Association.
    6. Peter Colwell & Henry Munneke, 2006. "Bargaining Strength and Property Class in Office Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 33(3), pages 197-213, November.
    7. Sofia Dermisi & John F. McDonald, 2010. "Selling Prices/sq.ft. of Office Buildings in Downtown Chicago – How Much Is It Worth to Be an Old But Class A Building?," Journal of Real Estate Research, American Real Estate Society, vol. 32(1), pages 1-22.
    8. Maria Ibanez & Anthony Pennington-Cross, 2013. "Commercial Property Rent Dynamics in U.S. Metropolitan Areas: An Examination of Office, Industrial, Flex and Retail Space," The Journal of Real Estate Finance and Economics, Springer, vol. 46(2), pages 232-259, February.
    9. Jonathan Wiley & Justin Benefield & Ken Johnson, 2010. "Green Design and the Market for Commercial Office Space," The Journal of Real Estate Finance and Economics, Springer, vol. 41(2), pages 228-243, August.
    10. Fang Fang & Lu Ruichang, 2009. "Is There a Term Structure? Empirical Evidence from Shanghai Office Rental Market," International Real Estate Review, Asian Real Estate Society, vol. 12(1), pages 23-38.

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