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Modeling the Dynamics of the Hong Kong Office Market under Economic Structural Change

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  • Winky K O Ho

    (Department of Real Estate and Construction, School of Economics and Finance, University of Hong Kong, Pokfulam Road, Hong Kong SAR, China)

Abstract

The author adopts reduced-form equilibrium models to investigate the relations among vacancy, employment, space consumption, and rent in the Hong Kong office market under economic structural change. The models are estimated with the aid of data from Hong Kong during the period 1980–2002—a total of twenty-three yearly observations. It is hoped that empirical results will shed light on the adjustment mechanism of the local office market. In line with the existing literature, the author shows that, on the one hand, office rent is positively related to office employment, but inversely related to office stock. On the other hand, the demand for office space is inversely related to rent, but positively related to office employment. Moreover, the elasticity of space consumption with respect to rent is estimated to be inelastic. Historical simulations of the model are performed, and it is suggested that the equations simulate reasonably well as indicated by Theil's inequality.

Suggested Citation

  • Winky K O Ho, 2005. "Modeling the Dynamics of the Hong Kong Office Market under Economic Structural Change," Environment and Planning B, , vol. 32(1), pages 111-125, February.
    • Handle: RePEc:sae:envirb:v:32:y:2005:i:1:p:111-125
    DOI: 10.1068/b3198
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    References listed on IDEAS

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    1. Hendershott, Patric & MacGregor, Bryan & White, Michael, 2002. "Explaining Real Commercial Rents Using an Error Correction Model with Panel Data," The Journal of Real Estate Finance and Economics, Springer, vol. 24(1-2), pages 59-87, Jan.-Marc.
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    3. John L. Kling & Thomas E. McCue, 1987. "Office Building Investment and the Macroeconomy: Empirical Evidence, 1973–1985," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(3), pages 234-255, September.
    4. Mauricio Rodriguez & C.F. Sirmans & Allen P. Marks, 1995. "Using Geographic Information Systems to Improve Real Estate Analysis," Journal of Real Estate Research, American Real Estate Society, vol. 10(2), pages 163-174.
    5. 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.
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