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Office Rent Determinants: a Hedonic Panel Analysis

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Author Info
Franz Fuerst () (Department of Real Estate & Planning, University of Reading Business School)

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Abstract

It has been frequently observed that office markets are subject to particularly high fluctuations in rents and vacancy levels, thus exposing real estate investors to considerable risk regarding expected future income streams. This paper analyzes the determinants of office rents and their variability over time and across sub-markets to gain insight into the rent price formation and its stability across space and over time. No support is found for the single-market hypothesis which states that arbitrage opportunities effectively align real estate pricing schemes in various parts of city. Instead, the results suggest that the importance of hedonic pricing factors varies both over time and across submarkets.

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File URL: http://www.henley.reading.ac.uk/rep/fulltxt/1208.pdf
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Publisher Info
Paper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2008-12.

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Length: 48 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:rdg:repxwp:rep-wp2008-12

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Web page: http://www.henley.reading.ac.uk/
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Related research
Keywords: Real estate; office market; hedonic analysis; panel analysis; market fragmentation; efficient markets; spatiotemporal models;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
R33 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

References listed on IDEAS
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  1. Daniel Gat, 1998. "Urban Focal Points and Design Quality Influence Rents: The Tel Aviv Office Market," Journal of Real Estate Research, American Real Estate Society, vol. 16(2), pages 229-247. [Downloadable!]
  2. John L. Glascock & Minbo Kim & C.F. Sirmans, 1993. "An Analysis of Office Market Rents: Parameter Constancy and Unobservable Variables," Journal of Real Estate Research, American Real Estate Society, vol. 8(4), pages 625-638. [Downloadable!]
  3. Leon Shilton & Craig Stanley, 1999. "Spatial Patterns of Headquarters," Journal of Real Estate Research, American Real Estate Society, vol. 17(3), pages 341-364. [Downloadable!]
  4. Charles R. Hulten, 2003. "Price hedonics: a critical review," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 5-15. [Downloadable!]
  5. Can, Ayse & Megbolugbe, Isaac, 1997. "Spatial Dependence and House Price Index Construction," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 203-22, Jan.-Marc. [Downloadable!] (restricted)
  6. G. Stacy Sirmans & C.F. Sirmans & John D. Benjamin, 1989. "Determining Apartment Rent: The Value of Amenities, Services, and External Factors," Journal of Real Estate Research, American Real Estate Society, vol. 4(2), pages 33-44. [Downloadable!]
  7. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
    Other versions:
  8. D M Hanink, 1997. "The integration of intrametropolitan office markets," Environment and Planning A, Pion Ltd, London, vol. 29(3), pages 391-404, March. [Downloadable!] (restricted)
  9. Alexandra Krystalogianni & George Matysiak & Sotiris Tsolacos, 2004. "Forecasting UK commercial real estate cycle phases with leading indicators: a probit approach," Applied Economics, Taylor and Francis Journals, vol. 36(20), pages 2347-2356, November. [Downloadable!] (restricted)
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  13. Sivitanidou, Rena, 1996. "Do Office-Commercial Firms Value Access to Service Employment Centers? A Hedonic Value Analysis within Polycentric Los Angeles," Journal of Urban Economics, Elsevier, vol. 40(2), pages 125-149, September. [Downloadable!] (restricted)
  14. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September. [Downloadable!] (restricted)
  15. Clapp, John M, 2003. "A Semiparametric Method for Valuing Residential Locations: Application to Automated Valuation," The Journal of Real Estate Finance and Economics, Springer, vol. 27(3), pages 303-20, November. [Downloadable!] (restricted)
  16. Barrett A. Slade, 2000. "Office Rent Determinants during Market Decline and Recovery," Journal of Real Estate Research, American Real Estate Society, vol. 20(3), pages 357-380. [Downloadable!]
  17. C.F. Sirmans & Krisandra A. Guidry, 1993. "The Determinants of Shopping Center Rents," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 107-116. [Downloadable!]
  18. Edwin S. Mills, 1992. "Office Rent Determinants in the Chicago Area," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 273-287. [Downloadable!] (restricted)
  19. Walter Dolde & Dogan Tirtiroglu, 1997. "Temporal and Spatial Information Diffusion in Real Estate Price Changes and Variances," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(4), pages 539-565. [Downloadable!] (restricted)
  20. Shilton, Leon & Zaccaria, Anthony, 1994. "The Avenue Effect, Landmark Externalities, and Cubic Transformation: Manhattan Office Valuation," The Journal of Real Estate Finance and Economics, Springer, vol. 8(2), pages 151-65, March.
  21. Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise R, 1997. "Business Cycles for G7 and European Countries," Journal of Business, University of Chicago Press, vol. 70(2), pages 249-79, April. [Downloadable!] (restricted)
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