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Integrating Regional Economic Indicators with the Real Estate Cycle

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Abstract

Previous literature has followed an evolutionary path in the examination of office market volatility. Where initial models were designed to show the close relationship between economic fundamentals and volatility at the national level, more recent models have focused on metro-level volatility. This study quantifies the volatility associated with metropolitan markets in terms of vacancy rates and identifies those economic factors that underlie this risk. The analysis suggests that movements in vacancy rates are likely to be affected by different factors at different stages of the cycle. In the long run, this analysis shows that the availability of capital had the strongest effect on the volatility of office vacancy rates. In periods that follow excess construction, market-specific, demand-side factors appear to be the dominant influence.

Suggested Citation

  • Jacques Gordon & Paige MosbaughTodd Canter & Todd Canter, 1996. "Integrating Regional Economic Indicators with the Real Estate Cycle," Journal of Real Estate Research, American Real Estate Society, vol. 12(3), pages 469-501.
  • Handle: RePEc:jre:issued:v:12:n:3:1996:p:469-501
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    References listed on IDEAS

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    1. Waldo L. Born & Stephen A. Pyhrr, 1994. "Real Estate Valuation: The Effect of Market and Property Cycles," Journal of Real Estate Research, American Real Estate Society, vol. 9(4), pages 455-486.
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    3. William N. Goetzmann & Susan M. Wachter, 1995. "Clustering Methods for Real Estate Portfolios," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(3), pages 271-310.
    4. Jos Janssen & Bert Kruijt & Barrie Needham, 1994. "The Honeycomb Cycle in Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 9(2), pages 237-252.
    5. John Clapp & Henry O. Pollakowski & Lloyd Lynford, 1992. "Intrametropolitan Location and Office Market Dynamics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 229-258.
    6. Stuart A. Gabriel & Frank E. Nothaft, 1988. "Rental Housing Markets and the Natural Vacancy Rate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 419-429.
    7. 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.
    8. Richard Voith & Theodore Crone, 1988. "National Vacancy Rates and the Persistence of Shocks in U.S. Office Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 437-458.
    9. Marie Howland & David S. Wessel, 1994. "Projecting Suburban Office Space Demand: Alternative Estimates of Employment in Offices," Journal of Real Estate Research, American Real Estate Society, vol. 9(3), pages 369-390.
    10. Ira G. Kawaller, 1979. "Macroeconomic Determinants of Multifamily Housing Starts: A Descriptive Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 7(1), pages 45-62.
    11. Clayton P. Pritchett, 1977. "The Effect of Regional Growth Characteristics on Regional Housing Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 5(2), pages 189-208.
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    Cited by:

    1. Maier, Gunther & Herath, Shanaka, 2009. "Real Estate Market Efficiency. A Survey of Literature," SRE-Discussion Papers 402, WU Vienna University of Economics and Business.
    2. Robert Edelstein & Desmond Tsang, 2007. "Dynamic Residential Housing Cycles Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 295-313, October.
    3. Dirk Brounen & Maarten Jennen, 2009. "Local Office Rent Dynamics," The Journal of Real Estate Finance and Economics, Springer, vol. 39(4), pages 385-402, November.
    4. Stephen A. Pyhrr & Stephen E. Roulac & Waldo L. Born, 1999. "Real Estate Cycles and Their Strategic Implications for Investors and Portfolio Managers in the Global Economy," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 7-68.
    5. Kicki Björklund & Bo Söderberg, 1999. "Property Cycles, Speculative Bubbles and the Gross Income Multiplier," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 151-174.
    6. Marvin L. Wolverton & Donald Epley, 1999. "Structural Analysis of U.S. Appraiser Income," Journal of Real Estate Research, American Real Estate Society, vol. 18(2), pages 377-393.
    7. N. B. Udoekanem & J. I. Ighalo, 2016. "An assessment of the relationship between office rent and vacancy rate in Abuja, Nigeria," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 6(3), pages 77-83, March.
    8. Yun-Ling Wu & Cheng-Huang Tung & Chun-Chang Lee, 2017. "The Power of a Leading Indicators Fluctuation Trend for Forecasting Taiwans Real Estate Business Cycle: An Application of a Hidden Markov Model," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(1), pages 81-98, January.
    9. Mark Gallagher & Antony P. Wood, 1999. "Fear of Overbuilding in the Office Sector: How Real is the Risk and Can We Predict It?," Journal of Real Estate Research, American Real Estate Society, vol. 17(1), pages 3-32.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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