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The Real Estate Conundrum in the CEE Office Markets: Thinking Too Big?

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Author Info

  • Frederic Laurin

    ()
    (Universite du Quebec a Trois-Rivieres)

  • John-John D'Argensio

    ()
    (SITQ - Caisse de depot et placement du Quebec)

  • Thea Goginashvili

    ()
    (International School of Economics at Tbilisi State University)

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    Abstract

    In this paper, we investigate the evolution of office market risks and property prices in Central and Eastern European (CEE) cities. We developed a methodology assessing if office property markets have been accurately valuated in CEE cities, using as a benchmark the past evolution of office markets in Western European cities. Using regression methods applied on Western European data, we are able to estimate a predicted property price and capitalization rate for each CEE cites, given their respective actual real estate and economic conditions. Results show that investors' valuations are in fact not too far apart from the predicted value based only on real estate and economic fundamentals. We also find that the macroeconomic environment and the general risk assessment seem to have a stronger effect on property prices in CEE than in Western European cities.

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    Bibliographic Info

    Paper provided by International School of Economics at TSU, Tbilisi, Republic of Georgia in its series Working Papers with number 10-001.

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    Length: 37 pages
    Date of creation: Jun 2010
    Date of revision:
    Handle: RePEc:tbs:wpaper:10-001

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    1. Chan, Hing Lin & Lee, Shu Kam & Woo, Kai Yin, 2001. "Detecting rational bubbles in the residential housing markets of Hong Kong," Economic Modelling, Elsevier, vol. 18(1), pages 61-73, January.
    2. Roche, Maurice J., 2001. "The rise in house prices in Dublin: bubble, fad or just fundamentals," Economic Modelling, Elsevier, vol. 18(2), pages 281-295, April.
    3. William C. Wheaton & Raymond G. Torto, 1988. "Vacancy Rates and the Future of Office Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 430-436.
    4. Glenn R. Mueller, 1999. "Real Estate Rental Growth Rates at Different Points in the Physical Market Cycle," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 131-150.
    5. Christian Hott & Pierre Monnin, 2008. "Fundamental Real Estate Prices: An Empirical Estimation with International Data," The Journal of Real Estate Finance and Economics, Springer, vol. 36(4), pages 427-450, May.
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