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Office Building Investment and the Macroeconomy: Empirical Evidence, 1973–1985

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  • John L. Kling
  • Thomas E. McCue

Abstract

Given the recent concern about overbuilding in the office sector, this paper considers the influence that macroeconomic factors have upon office construction. Because office construction is volatile and because the “time to build” problem requires construction to change with a lag, the paper employs a different methodology, vector autoregressions, to model the office building sector. The findings indicate that anticipated output has a large and direct effect. This effect depends on the predictive content of nominal interest rates, suggesting that the declines in nominal rates over the past five years explains the recent overbuilding.

Suggested Citation

  • John L. Kling & Thomas E. McCue, 1987. "Office Building Investment and the Macroeconomy: Empirical Evidence, 1973–1985," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(3), pages 234-255, September.
    • Handle: RePEc:bla:reesec:v:15:y:1987:i:3:p:234-255
    DOI: 10.1111/1540-6229.00430
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    Cited by:

    1. Jason Barr, 2010. "Skyscrapers and the Skyline: Manhattan, 1895–2004," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(3), pages 567-597, September.
    2. Lee, Gabriel S., 1999. "Housing Investment Dynamics, Period of Production, and Adjustment Costs," Journal of Housing Economics, Elsevier, vol. 8(1), pages 1-25, March.
    3. Mark Gallagher & Asieh Mansour, 2000. "An Analysis of Hotel Real Estate Market Dynamics," Journal of Real Estate Research, American Real Estate Society, vol. 19(2), pages 133-164.
    4. Rena Sivitanidou, 1999. "Does the Theory of Irreversible Investments Help Explain Movements in Office-Commerical Construction?," Working Paper 8659, USC Lusk Center for Real Estate.
    5. Kamhon Kan & Sunny Kai‐Sun Kwong & Charles Ka‐Yui Leung, 2004. "The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence," Journal of Regional Science, Wiley Blackwell, vol. 44(1), pages 95-123, February.
    6. Raymond Y. C. Tse & James R. Webb, 2003. "Models of Office Market Dynamics," Urban Studies, Urban Studies Journal Limited, vol. 40(1), pages 71-89, January.
    7. Chris Brooks & Sotiris Tsolacos, 2000. "Forecasting Models of Retail Rents," Environment and Planning A, , vol. 32(10), pages 1825-1839, October.
    8. Jung Yong-Gook, 2015. "Investment lags and macroeconomic dynamics," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(1), pages 1-43, January.
    9. Jung, Yong-Gook, 2013. "An inference about the length of the time-to-build period," Economic Modelling, Elsevier, vol. 33(C), pages 42-54.
    10. Winky K O Ho, 2005. "Modeling the Dynamics of the Hong Kong Office Market under Economic Structural Change," Environment and Planning B, , vol. 32(1), pages 111-125, February.
    11. Sotiris Tsolacos, 1998. "Econometric modelling and forecasting of new retail development," Journal of Property Research, Taylor & Francis Journals, vol. 15(4), pages 265-283, January.
    12. Sotiris Tsolacos & Tony McGough, 1999. "Rational Expectations, Uncertainty and Cyclical Activity in the British Office Market," Urban Studies, Urban Studies Journal Limited, vol. 36(7), pages 1137-1149, June.
    13. Marcel Arsenault & Jim Clayton & Liang Peng, 2013. "Mortgage Fund Flows, Capital Appreciation, and Real Estate Cycles," The Journal of Real Estate Finance and Economics, Springer, vol. 47(2), pages 243-265, August.
    14. Kim Hiang Liow, 2000. "The dynamics of the Singapore commercial property market," Journal of Property Research, Taylor & Francis Journals, vol. 17(4), pages 279-291.

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