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A Priori Spatial Segmentation of Commercial Property Market using Hedonic Price Modelling

Author

Listed:
  • Usman Hamza

    (Universiti Tun Hussein OnnMalaysia; Abubakar Tafawa Balewa University Bauchi, Nigeria)

  • Lizam Mohd

    (Faculty of Technology Management and Business, Universiti Tun Hussein OnnMalaysia)

  • Burhan Burhaida

    (Faculty of Technology Management and Business, Universiti Tun Hussein OnnMalaysia)

Abstract

The improvement of property price modelling accuracy using property market segmentation approaches is well documented in the housing market. However, that cannot be said of the commercial property market which is adjudged to be volatile, heterogeneous and thinly traded. This study, therefore, determines if the commercial property market in Malaysia is spatially segmented into submarkets and whether accounting for the submarkets improves the accuracy of price modelling. Using a 11,460 shop-offices transaction dataset, the commercial property submarkets are delineated by using submarket binary dummies in the market-wide model and estimating a separate hedonic model for each submarket. The former method improves the model fit and reduces error by 5.6% and 6.5% respectively. The commercial property submarkets are better delineated by estimating a separate hedonic model for each submarket as it improves the model fit by about 7% and reduces models’ error by more than 10%. This study concludes that the Malaysian commercial property market is spatially segmented into submarkets. Modelling the submarkets improves the accuracy and correctness of price modelling.

Suggested Citation

  • Usman Hamza & Lizam Mohd & Burhan Burhaida, 2021. "A Priori Spatial Segmentation of Commercial Property Market using Hedonic Price Modelling," Real Estate Management and Valuation, Sciendo, vol. 29(2), pages 16-28, June.
    • Handle: RePEc:vrs:remava:v:29:y:2021:i:2:p:16-28:n:1
    DOI: 10.2478/remav-2021-0010
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    References listed on IDEAS

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    More about this item

    Keywords

    market segmentation; hedonic price modelling; submarket; commercial property;
    All these keywords.

    JEL classification:

    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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