The Predictability of New Office Supply

This paper examines how accurate property experts have been in forecasting one and two year office supply. The study covers 12 years of new supply and refurbishment forecasts for Australian state capitals. A range of statistical tests shows that the expert's forecasts for new supply and refurbished space provided a poor indicator of actual office supply. The margin of error suggests that property experts' assumptions on the timing of future supply were imprecise with the trend to overestimate new and refurbished supply, apart for year two refurbishment forecasts, which underestimated future refurbished space. During the office supply cycle, the forecast accuracy varied, with relatively good forecasts for new supply during the oversupply period, compared with high forecast error during the low supply period. A more robust analysis of future supply could be achieved using probability analysis on the timing of new supply, and employing econometric modelling techniques for refurbishment forecasts to link property and space market conditions to office lease expiry profiles.