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Adjustment in Property Space Markets: Estimates from the Stockholm Office Market

Author

Listed:
  • Peter Englund
  • Åke Gunnelin
  • Patric H. Hendershott
  • Bo Söderberg

Abstract

"Rent setting behavior of landlords relates to rental rates on new leases, while tenant demand for space depends on the average rental rate on existing space. Thus models of the space market need to identify the roles of these two rates. A market or new lease rent series is constructed for the Stockholm office rental market for the time-period 1977ñ2002 by applying a standard hedonic approach to a data-set of some 2,400 individual leases. Given the market rent series and the lease length distribution, we estimate a time series on the average rent on existing leases. We explain the adjustment of both real market rent and vacancies and show the role played by ""hidden vacancies"" in the stock (the difference between space demand at the new and existing lease rates divided by the existing stock) in this process. We further calculate the natural vacancy rate assuming a trending equilibrium in the Stockholm office market. Simulations illustrate the importance of the lease length to the adjustment process. "

Suggested Citation

  • Peter Englund & Åke Gunnelin & Patric H. Hendershott & Bo Söderberg, 2005. "Adjustment in Property Space Markets: Estimates from the Stockholm Office Market," ERES eres2005_166, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2005_166
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    Cited by:

    1. Charles Ka Yui Leung & Patrick Wai Yin Cheung & Erica Jiajia Ding, 2008. "Intra-metropolitan Office Price and Trading Volume Dynamics: Evidence from Hong Kong," International Real Estate Review, Global Social Science Institute, vol. 11(2), pages 47-74.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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