An Analysis and Evaluation of the Effects of Lease Terms on Effective Commercial Rents in Frankfurt

"nvestigate the effects of variations in lease terms on the effective rents and effective rents per square metre of commercial properties in Frankfurt. A review of previous literature, largely based on cross-sectional hedonic price studies, will provide a framework for the discussion and evaluation of the application of cross-sectional hedonic rental analysis (the characteristics theory of value) to the analysis of the determinants of commercial rents in Frankfurt in 2007. ëAtisrealí, a major property company, provided data on transaction rents and other attributes for 555 commercial properties in and around Frankfurt in 2007. For a variety of reasons the data set to be analysed was reduced to 343 letting transactions. A model produced an adjusted coefficient of determination of 0.84 for the rents of properties and an adjusted coefficient of determination of 0.65 for the rents per metre squared of the same properties. The models tested conventional attributes of the properties including physical factors such as size, quality features such as the degree of modernisation and location in the CBD or peripheral districts. However, the models also sought to test for variations in qualitative characteristics such as variations in lease terms. Thus this paper seeks to analyse the size and significance of and to evaluate the consequences of variations in lease terms for effective transactional rents. The authors are aware of philosophical, methodological and practical issues associated with the application of the characteristics theory of value in commercial property markets ñ these issues will be discussed and evaluated. Recommendations will be made for the development and application of pluralist quantitative/qualitative approaches to analysing and evaluating rents in commercial property markets.""