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Forecasting the Manhattan office market with a simultaneous equation model

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Author Info
Franz Fuerst (CUNY Graduate Center, Center for Urban Research)

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Abstract

In order to explore the predictability of the Manhattan office market, a three-stage simultaneous equation model is applied in this paper. The first stage incorporates the office space market in terms of occupied space and absorption of new space. The second stage captures the adjustment of office rents to changing market conditions and the third stage specifies the supply response to market signals in terms of construction of new office space. The standard simultaneous model is subsequently modified to account for the specific characteristics of the Manhattan office market. The results demonstrate that the Manhattan markets reacts efficiently and predictably to changes in market conditions, especially to the economic shock generated by the 9/11 attacks. The significance of the estimated parameters underscores the general validity and robustness of the simultaneous equation approach in modeling real estate markets. The modifications of the standard model, notably the inclusion of sublet space in the rent equation, contributed considerably to improving the explanatory power of the model. Eventually, the market implications of three exogenously defined employment forecasts are tested with the model.

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Publisher Info
Paper provided by EconWPA in its series Urban/Regional with number 0410006.

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Length: 35 pages
Date of creation: 22 Oct 2004
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Handle: RePEc:wpa:wuwpur:0410006

Note: Type of Document - pdf; pages: 35
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Related research
Keywords: Simultaneous equation model; real estate; forecasting; equilibrium rent and occupancy; construction activity;

Find related papers by JEL classification:
R - Urban, Rural, and Regional Economics

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Richard Arnott, 1997. "Rent Control," Boston College Working Papers in Economics 391., Boston College Department of Economics. [Downloadable!]
  2. John S. Hekman, 1985. "Rental Price Adjustment and Investment in the Office Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(1), pages 32-47. [Downloadable!] (restricted)
  3. Patric H. Hendershott & Colin M. Lizieri & George A. Matysiak, 1999. "The Workings of the London Office Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 365-387. [Downloadable!] (restricted)
  4. Chen, Nai-fu, 1983. " Some Empirical Tests of the Theory of Arbitrage Pricing," Journal of Finance, American Finance Association, vol. 38(5), pages 1393-1414, December. [Downloadable!] (restricted)
  5. Timothy W. Viezer, 1999. "Econometric Integration of Real Estate's Space and Capital Markets," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 503-519. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fuerst, Franz, 2006. "Predictable or Not? Forecasting Office Markets with a Simultaneous Equation Approach," MPRA Paper 5262, University Library of Munich, Germany. [Downloadable!]
  2. Arnab Bhattacharjee & Chris Jensen-Butler, 2005. "A Model of Regional Housing Markets in England and Wales," CRIEFF Discussion Papers 0508, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
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