Price hedonic index with control of the perceived location quality in the Paris office market

The aim of this paper is to study the evolution of office prices on the Paris market through the construction of a hedonic price index. The underlying heterogeneity of assets included in the index is a serious source of bias if not correctly considered. To solve this problem, we propose a methodology enabling to develop an indicator of perceived location quality in our model. This indicator is based, first, on the identification of a set of characteristics that contribute to the location quality of an office. Second, each attribute is weighted with a collection of preferences through surveys realized with professionals of commercial real estate. The tests we have realized so far seems to suggest two main results. First, when controlling of location quality with our perceived quality indicator, the growth of office prices in Paris seems to have been more important during the 2010 decade than the one expressed by the indices used by CRE professionals. This increase of price seems to accelerate around 2015, which is the period where the European central bank launched a program of Quantitative easing to support the economic growth in the European Union. Second, the investigation of the coefficients of the location quality indicator seems to indicate that the sensitivity of prices to it has risen during the period. This observation could reveal an increase of the price of centrality during the period.