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Asymmetric Space Market Adjustment in the London Office Market

  • Patric Hendershott
  • Colin Lizieri

    ()

    (Department of Real Estate & Planning, University of Reading Business School)

  • Bryan MacGregor

Models of the City of London office market are extended by considering a longer time series of data, covering two cycles, and by explicit modeling of asymmetric rental response to supply and demand model. A long run structural model linking demand for office space, real rental levels and office-based employment is estimated and then rental adjustment processes are modeled using an error correction model framework. Adjustment processes are seen to be asymmetric, dependent both on the direction of the supply and demand shock and on the state of the rental market at the time of the shock. A complete system of equations is estimated: unit shocks produce oscillations but there is a return to a steady equilibrium state in the long run.

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File URL: http://www.henley.reading.ac.uk/rep/fulltxt/0708.pdf
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Paper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2008-07.

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Length: 34 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:rdg:repxwp:rep-wp2008-07
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Web page: http://www.henley.reading.ac.uk/

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  1. Hendershott, Patric H., 1996. "Rental Adjustment and Valuation in Overbuilt Markets: Evidence from the Sydney Office Market," Journal of Urban Economics, Elsevier, vol. 39(1), pages 51-67, January.
  2. Farrelly, Kieran & Sanderson, Ben, 2005. "Modelling Regime Shifts in the City of London Office Rental Cycle," ERES eres2005_170, European Real Estate Society (ERES).
  3. Wheaton William C. & Torto Raymond G., 1994. "Office Rent Indices and Their Behavior over Time," Journal of Urban Economics, Elsevier, vol. 35(2), pages 121-139, March.
  4. Wheaton, William C & Torto, Raymond G & Evans, Peter, 1997. "The Cyclic Behavior of the Greater London Office Market," The Journal of Real Estate Finance and Economics, Springer, vol. 15(1), pages 77-92, July.
  5. Kieran Farrelly & Ben Sanderson, 2005. "Modelling Regime Shifts in the City of London Office Rental Cycle," Journal of Property Research, Taylor & Francis Journals, vol. 22(4), pages 325-344, December.
  6. Richard Barras, 2005. "A Building Cycle Model for an Imperfect World," Journal of Property Research, Taylor & Francis Journals, vol. 22(2-3), pages 63-96, October.
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