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Bargaining Strength and Property Class in Office Markets

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  • Peter Colwell

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  • Henry Munneke

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    Abstract

    This paper examines the influence of bargaining power and property class on the prices of heterogeneous goods. Specifically, it explores the impact of buyer and seller characteristics on the transaction prices of office properties. The empirical model is based on the work of Harding, Rosenthal, and Sirmans ( 2003 ), which developed a method to distinguish between the impact of buyer and seller attributes on bargaining power and the choice of otherwise unidentified price effects (i.e., property class) in the context of hedonic price models. The data set contains information on transaction prices of office properties in Cook, DuPage, and Lake Counties, Illinois from 1995 to 1997. The results reveal systematic differences in bargaining power and property class for certain groups of buyers and sellers contained within the sample. Copyright Springer Science + Business Media, LLC 2006

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    File URL: http://hdl.handle.net/10.1007/s11146-006-9982-6
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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): 3 (November)
    Pages: 197-213

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    Handle: RePEc:kap:jrefec:v:33:y:2006:i:3:p:197-213

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

    Related research

    Keywords: Bargaining power; Property class; Office markets; Transaction based hedonic;

    References

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    1. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 253-273.
    2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    3. John F. Kain & John M. Quigley, 1975. "Housing Markets and Racial Discrimination: A Microeconomic Analysis," NBER Books, National Bureau of Economic Research, Inc, number kain75-1, May.
    4. Denise DiPasquale & William C. Wheaton, 1992. "The Markets for Real Estate Assets and Space: A Conceptual Framework," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 181-198.
    5. 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.
    6. 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.
    7. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
    8. Jeffrey Fisher & Dean Gatzlaff & David Geltner & Donald Haurin, 2003. "Controlling for the Impact of Variable Liquidity in Commercial Real Estate Price Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(2), pages 269-303, 06.
    9. Sivitanidou Rena, 1995. "Urban Spatial Variations in Office-Commercial Rents: The Role of Spatial Amenities and Commercial Zoning," Journal of Urban Economics, Elsevier, vol. 38(1), pages 23-49, July.
    10. Henry J. Munneke & Barrett A. Slade, 2001. "A Metropolitan Transaction-Based Commercial Price Index: A Time-Varying Parameter Approach," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(1), pages 55-84.
    11. Val E. Lambson & Grant R. McQueen & Barrett A. Slade, 2004. "Do Out-of-State Buyers Pay More for Real Estate? An Examination of Anchoring-Induced Bias and Search Costs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 85-126, 03.
    12. John P. Harding & Stuart S. Rosenthal & C. F. Sirmans, 2003. "Estimating Bargaining Power in the Market for Existing Homes," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 178-188, February.
    13. Chambers, Daniel N., 1992. "The racial housing price differential and racially transitional neighborhoods," Journal of Urban Economics, Elsevier, vol. 32(2), pages 214-232, September.
    14. Barrett A. Slade, 2000. "Office Rent Determinants during Market Decline and Recovery," Journal of Real Estate Research, American Real Estate Society, vol. 20(3), pages 357-380.
    15. John P. Harding & John R. Knight & C.F. Sirmans, 2003. "Estimating Bargaining Effects in Hedonic Models: Evidence from the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(4), pages 601-622, December.
    16. 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.
    17. Gunnelin, Ake & Soderberg, Bo, 2003. "Term Structures in the Office Rental Market in Stockholm," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 241-65, March-May.
    18. Munneke, Henry J & Slade, Barrett A, 2000. "An Empirical Study of Sample-Selection Bias in Indices of Commercial Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 21(1), pages 45-64, July.
    19. Sirmans, G. Stacy & Smith, Stanley D. & Sirmans, C. F., 1983. "Assumption Financing and Selling Price of Single-Family Homes," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(03), pages 307-317, September.
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    Cited by:
    1. Franco, Sofia & Cutter, Bowman & DeWoody, Autumn, 2010. "Do Parking Requirements Significantly Increase The Area Dedicated To Parking? A Test Of The Effect Of Parking Requirements Values In Los Angeles County," MPRA Paper 20403, University Library of Munich, Germany.
    2. David Ling & Milena Petrova, 2008. "Avoiding Taxes at Any Cost: The Economics of Tax-Deferred Real Estate Exchanges," The Journal of Real Estate Finance and Economics, Springer, vol. 36(4), pages 367-404, May.

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