Institutional Differences in European Metropolitan

The authors aim to extend previous literature on variations in returns across local office markets by examining the linkage of office market dynamics (viz. dynamics in stock, vacancy and direct and indirect returns) at the European Metropolitan level to the institutional structure of local markets. Previous literature suggests that return rates differ widely across local office markets, substantiating the view that returns are intertwined with conditions at the local level. Whether and to what degree differences in local markets relate to differences in institutions has not been addressed. This is the central issue of this research proposed. The research design consists of three coherent steps to address the central issue. Step 1 addresses the issue of how institutions may determine differences in office market dynamics. The literature on institutions and regulations is vast, however typically addressing housing market institutions. Yet, this literature forms a relevant source to draw on when considering how institutions and office market behaviour are intertwined. We use current contributions in the literature, culminating in a concise review of the literature on institutions and office market behaviour. Step 2 aims to measure the degree of differences in office market returns. We use a cross-country approach to first determine the degree of differences in local markets both within and between countries. This enables us to determine whether within or between country conditions dominate. For this we use data across European Metropolitan areas. We model local behaviour as relating to fundamental economic and social conditions identified in step 1. Step 3 considers the interrelations between office market dynamics and institutions to explain the observed differences in step 2. For this we model a dynamic panel error correction model, now including the various institutional measures identified in step 1. These results will indicate which and to what degree the various institutional measures explain observed differences in local office dynamics.