A Spatial Analysis of the Central London Office Market

The central London office market has received much attention in the literature. Regarded as a highly liquid and relatively transparent direct commercial real estate market, research has examined, for example, the cyclical nature of the market, market adjustment, the division of the market into submarkets, and the importance of international investment. However, relatively little research has examined spatial patterns of rents and prices. Partly this may reflect limited data for heterogeneous real estate assets. This paper uses transactions data on offices over a long time period and focuses on the main central London office submarkets. Different models are estimated to attempt to capture space and time varying influences on the property market. The results highlight the importance and significance of neighbouring and contiguous influences in real estate pricing. Considering a number of central locations, we find price and distance to be inversely related even across markets which have a high level of accessibility.