Property Booms and Busts: Retail Property and Office Yield Trends

The classic property market boom and bust is conceptualised as a short term adjustment process generated by the interaction of occupation demand, the business cycle, the national credit cycle and supply lags consequent on the development cycle. An alternative perspective views the process following Shiller as a bubble that subsequently bursts. In a previous paper by the authors that studied the office market they argue that the traditional exposition of the property cycle with its time lags needs to be augmented to encompass bubble effects. The conclusion of that paper was that it may be better to view the Barras property cycle as a special case that adds time lags to a more generic model of cycles centring on adaptive expectation stimulated by external shocks. This paper sheds further light on these issues by repeating the analysis for retail property and then comparing our results with office markets. The paper takes an urban perspective and analyses property yield movements in UK cities over the period 1981-2009