Forecasting the Manhattan office market with a simultaneous equation model
AbstractIn 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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Bibliographic InfoPaper provided by EconWPA in its series Urban/Regional with number 0410006.
Length: 35 pages
Date of creation: 22 Oct 2004
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Note: Type of Document - pdf; pages: 35
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Simultaneous equation model; real estate; forecasting; equilibrium rent and occupancy; construction activity;
Find related papers by JEL classification:
- R - Urban, Rural, Regional, Real Estate, and Transportation Economics
This paper has been announced in the following NEP Reports:
- NEP-GEO-2004-11-07 (Economic Geography)
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