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The Rent Adjustment Process and the Structural Vacancy Rate in the Commercial Real Estate Market

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Existing studies of the office-rent adjustment process employ empirical model specifications that assume an intertemporally constant structural vacancy rate. Such specifications, however, contradict prevailing theoretical definitions of the latter which point towards its intertemporal variability. Against this background, this study extends the traditional rent adjustment specifications to account for an intertemporal variable structural vacancy rate. The empirical results suggest that the extended model may be more appropriate than the traditional one in explaining office rent changes during the period 1980-1988. They also suggest that the structural vacancy rate may indeed vary both through time and across markets.

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  • Petros S. Sivitanides, 1997. "The Rent Adjustment Process and the Structural Vacancy Rate in the Commercial Real Estate Market," Journal of Real Estate Research, American Real Estate Society, vol. 13(2), pages 195-210.
    • Handle: RePEc:jre:issued:v:13:n:2:1997:p:195-210
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    1. Arthur A. Eubank & C. R. Sirmans, 1979. "The Price Adjustment Mechanism for Rental Housing in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(1), pages 163-168.
    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, March.
    3. Shilling, James D. & Sirmans, C. F. & Corgel, John B., 1987. "Price adjustment process for rental office space," Journal of Urban Economics, Elsevier, vol. 22(1), pages 90-100, July.
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    Cited by:

    1. Francois Des Rosiers & Marius Theriault & Laurent Menetrier, 2005. "Spatial Versus Non-Spatial Determinants of Shopping Center Rents: Modeling Location and Neighborhood-Related Factors," Journal of Real Estate Research, American Real Estate Society, vol. 27(3), pages 293-320.
    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. Sofia F. Franco & W. Bowman Cutter, 2016. "The determinants of non-residential real estate values with special reference to local environmental goods," Nova SBE Working Paper Series wp603, Universidade Nova de Lisboa, Nova School of Business and Economics.
    4. Chang-I Hua, 2017. "A Structural Model of a Housing Market with Friction," International Real Estate Review, Global Social Science Institute, vol. 20(4), pages 397-416.
    5. Franco, Sofia F. & Cutter, W. Bowman, 2022. "The determinants of non-residential real estate values with special reference to environmental local amenities," Ecological Economics, Elsevier, vol. 201(C).
    6. 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.
    7. Peter Colwell & Henry Munneke, 2006. "Bargaining Strength and Property Class in Office Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 33(3), pages 197-213, November.
    8. Barrett A. Slade, 2000. "Office Rent Determinants during Market Decline and Recovery," Journal of Real Estate Research, American Real Estate Society, vol. 20(3), pages 357-380.
    9. Yavas, Abdullah, 2001. "Resolution of Demand Uncertainty and Competitive Rent Adjustment," Journal of Housing Economics, Elsevier, vol. 10(4), pages 472-481, December.
    10. Allen C. Goodman & Brent C Smith, 2023. "Medical Service Quality and Office Rent Premiums: Reputation Spillovers," The Journal of Real Estate Finance and Economics, Springer, vol. 66(3), pages 680-708, April.
    11. Eunkwang Kim & Sanghong Lee, 2020. "Sustainability and the Expected Effects of Office-to-Residential Conversion in Historic Downtown Areas of South Korea," Sustainability, MDPI, vol. 12(22), pages 1-18, November.
    12. Nowak Krzysztof, 2020. "Hidden Vacancy Rate as a Part of Office Market Dynamics in Selected Polish Cities," Real Estate Management and Valuation, Sciendo, vol. 28(1), pages 1-12, March.
    13. Jan Vlachý, 2016. "Valuation of Contractual Assets Using Statistical Simulation," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 10(2), June.
    14. V.Atilla Oven & Dilek Pekdemir, 2004. "A comparison between office rent determinants of Istanbul and other major metropolitan areas," ERSA conference papers ersa04p166, European Regional Science Association.
    15. Rena Sivitanidou, 1999. "Office Rent Processes: The Case of U.S. Metropolitan Markets," Working Paper 8664, USC Lusk Center for Real Estate.
    16. 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.
    17. 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.
    18. Jaroslaw Morawski, 2022. "Impact of working from home on European office rents and vacancy rates," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 8(2), pages 173-188, October.
    19. Ingrid Nappi‐Choulet Pr. & Tristan‐Pierre Maury, 2009. "A Spatiotemporal Autoregressive Price Index for the Paris Office Property Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 305-340, June.
    20. Capone, Charles Jr. & Goldberg, Lawrence, 2001. "Renter Mobility and Multifamily Mortgage Default Risk," Journal of Housing Economics, Elsevier, vol. 10(1), pages 21-40, March.
    21. Dirk Brounen & Maarten Jennen, 2009. "Asymmetric Properties of Office Rent Adjustment," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 336-358, October.

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    JEL classification:

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

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