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Do Commercial Real Estate Prices Have Predictive Content for GDP

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  • de Groot, E.A.
  • Franses, Ph.H.B.F.

Abstract

Using a uniquely compiled database concerning rental prices of commercial real estates, which are property of the largest broker in the Netherlands, we examine if these prices have predictive value for quarterly economic growth. In contrast to related studies, we document that the mean price contains no relevant information, whereas other properties of the price distributions have. We show that these distributions can be described by mixtures of two distributions, reflecting low-end and high-end price segments. Our main findings are that higher economic growth is predictable from more new buildings being rented, more variation in the price levels and a larger size of the low-price segment, while lower economic growth emerges when the differences in prices between high-end and low-end segments increase and when the average price level in the low-price segment increases.

Suggested Citation

  • de Groot, E.A. & Franses, Ph.H.B.F., 2012. "Do Commercial Real Estate Prices Have Predictive Content for GDP," Econometric Institute Research Papers EI 2012-12, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    • Handle: RePEc:ems:eureir:37612
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    1. Martin Lettau & Sydney C. Ludvigson, 2004. "Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption," American Economic Review, American Economic Association, vol. 94(1), pages 276-299, March.
    2. N. Kundan Kishor, 2007. "Does Consumption Respond More to Housing Wealth Than to Financial Market Wealth? If So, Why?," The Journal of Real Estate Finance and Economics, Springer, vol. 35(4), pages 427-448, November.
    3. Norman Miller & Liang Peng & Michael Sklarz, 2011. "House Prices and Economic Growth," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 522-541, May.
    4. John D. Benjamin & Peter Chinloy & G. Donald Jud, 2004. "Real Estate Versus Financial Wealth in Consumption," The Journal of Real Estate Finance and Economics, Springer, vol. 29(3), pages 341-354, November.
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    Cited by:

    1. Sidong Zhao & Kaixu Zhao & Ping Zhang, 2021. "Spatial Inequality in China’s Housing Market and the Driving Mechanism," Land, MDPI, vol. 10(8), pages 1-33, August.
    2. Sidong Zhao & Weiwei Li & Kaixu Zhao & Ping Zhang, 2021. "Change Characteristics and Multilevel Influencing Factors of Real Estate Inventory—Case Studies from 35 Key Cities in China," Land, MDPI, vol. 10(9), pages 1-29, September.

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