Models of the City of London office market are extended by considering a longer time series of data, covering two cycles, and by explicit modeling of asymmetric rental response to supply and demand model. A long run structural model linking demand for office space, real rental levels and office-based employment is estimated and then rental adjustment processes are modeled using an error correction model framework. Adjustment processes are seen to be asymmetric, dependent both on the direction of the supply and demand shock and on the state of the rental market at the time of the shock. A complete system of equations is estimated: unit shocks produce oscillations but there is a return to a steady equilibrium state in the long run.
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Find related papers by JEL classification: O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses R15 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods R33 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
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