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Office Rent Determinants Utilising Factor Analysis—A Case Study for İstanbul

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Author Info

  • V. Öven

    ()

  • Dilek Pekdemir

    ()

Abstract

In recent studies, a wide range of variables has been suggested for modelling the variation in office rent. However, only a few of them are found to influence the explanatory power of the model significantly. Moreover, the significance of these variables varies from model to model, depending on the characteristics of the region or/and the model. It is well established that the regression model of complex phenomena do not perform well, unless the effects of all major determinants are adequately represented. It is also known that complex phenomena may involve a large number of variables, and linear regression models often becomes cumbersome as the number of variables increases. A practical solution to the problem may be to pre-select the significant variables, and leave the less influential ones out. An even better solution could be to include all or most variables, while incorporating the group effect of some variables into a reasonable number factor variables. This way, both the accuracy and practicality of the model can be sustained. Serving this purpose, ‘Factor Analysis’ has been employed in establishing the office rent model for the metropolitan area of İstanbul. The results of four different versions of the model, using linear and non-linear regressions are discussed. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s11146-006-8274-5
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Bibliographic Info

Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 33 (2006)
Issue (Month): 1 (August)
Pages: 51-73

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Handle: RePEc:kap:jrefec:v:33:y:2006:i:1:p:51-73

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Web page: http://www.springerlink.com/link.asp?id=102945

Related research

Keywords: Office rent; Prediction model; Factor analysis;

References

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  1. Webb, R. Brian & Fisher, Jeffrey D., 1996. "Development of an Effective Rent (Lease) Index for the Chicago CBD," Journal of Urban Economics, Elsevier, vol. 39(1), pages 1-19, January.
  2. John S. Hekman, 1985. "Rental Price Adjustment and Investment in the Office Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(1), pages 32-47.
  3. Thomas P. Brennan & Roger E. Cannaday & Peter F. Colwell, 1984. "Office Rent in the Chicago CBD," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 243-260.
  4. Shilling, James D. & Sirmans, C. F. & Corgel, John B., 1987. "Price adjustment process for rental office space," Journal of Urban Economics, Elsevier, vol. 22(1), pages 90-100, July.
  5. Patric H. Hendershott & Bryan D. MacGregor & Raymond Y.C. Tse, 2002. "Estimation of the Rental Adjustment Process," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(2), pages 165-183.
  6. William C. Wheaton & Raymond G. Torto, 1988. "Vacancy Rates and the Future of Office Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 430-436.
  7. James R. Frew & G. Donald Jud, 1988. "The Vacancy Rate and Rent Levels in the Commercial Office Market," Journal of Real Estate Research, American Real Estate Society, vol. 3(1), pages 1-8.
  8. 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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Cited by:
  1. Eichholtz, Piet & Kok, Nils & Quigley, John M., 2009. "Doing Well by Doing Good? Green Office Buildings," Berkeley Program on Housing and Urban Policy, Working Paper Series qt507394s4, Berkeley Program on Housing and Urban Policy.

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