IDEAS home Printed from https://ideas.repec.org/p/rdg/repxwp/rep-wp2009-03.html
   My bibliography  Save this paper

Asymmetric Space Market Adjustment in the London Office Market

Author

Listed:
  • Patric Hendershott
  • Colin Lizieri

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

  • Bryan MacGregor

Abstract

Earlier estimates of the City of London office market are extended by considering a longer time series of data, covering two cycles, and by explicitly modeling of asymmetric space market responses to employment and supply shocks. A long run structural model linking real rental levels, office-based employment and the supply of office space is estimated and then rental adjustment processes are modeled using an error correction model framework. Rental adjustment is seen to be asymmetric, depending both on the direction of the supply and demand shocks and on the state of the space market at the time of the shock. Vacancy adjustment does not display asymmetries. There is also a supply adjustment equation. Two three-equation systems, one with symmetric rental adjustment and the other with asymmetric adjustment, are subjected to positive and negative shocks to employment. These illustrate differences in the two systems.

Suggested Citation

  • Patric Hendershott & Colin Lizieri & Bryan MacGregor, 2009. "Asymmetric Space Market Adjustment in the London Office Market," Real Estate & Planning Working Papers rep-wp2009-03, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:repxwp:rep-wp2009-03
    as

    Download full text from publisher

    File URL: http://www.henley.reading.ac.uk/rep/fulltxt/0309.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kieran Farrelly & Ben Sanderson, 2005. "Modelling Regime Shifts in the City of London Office Rental Cycle," ERES eres2005_170, European Real Estate Society (ERES).
    2. Peter Englund & Åke Gunnelin & Patric H. Hendershott & Bo Söderberg, 2008. "Adjustment in Property Space Markets: Taking Long‐Term Leases and Transaction Costs Seriously," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(1), pages 81-109, March.
    3. 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.
    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. 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.
    6. 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.
    7. 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.
    8. Webb, R. Brian & Fisher, Jeffrey D., 1996. "Development of an Effective Rent (Lease) Index for the Chicago CBD," Journal of Urban Economics, Elsevier, vol. 39(1), pages 1-19, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Catherine Bruneau & Souad Cherfouh, 2015. "Long-run equilibrium for the Greater Paris office market and short-run adjustments," Journal of Property Research, Taylor & Francis Journals, vol. 32(4), pages 301-323, December.
    2. John McCartney, 2012. "Short and long-run rent adjustment in the Dublin office market," Journal of Property Research, Taylor & Francis Journals, vol. 29(3), pages 201-226, April.
    3. Arvydas Jadevicius & Brian Sloan & Andrew Brown, 2012. "Examination of property forecasting models - accuracy and its improvement through combination forecasting," ERES eres2012_082, European Real Estate Society (ERES).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patric Hendershott & Colin Lizieri & Bryan MacGregor, 2010. "Asymmetric Adjustment in the City of London Office Market," The Journal of Real Estate Finance and Economics, Springer, vol. 41(1), pages 80-101, July.
    2. Dirk Brounen & Maarten Jennen, 2009. "Asymmetric Properties of Office Rent Adjustment," The Journal of Real Estate Finance and Economics, Springer, vol. 39(3), pages 336-358, October.
    3. Catherine Bruneau & Souad Cherfouh, 2015. "Long-run equilibrium for the Greater Paris office market and short-run adjustments," Journal of Property Research, Taylor & Francis Journals, vol. 32(4), pages 301-323, December.
    4. Coën, Alain & Lefebvre, Benoit & Simon, Arnaud, 2018. "International money supply and real estate risk premium: The case of the London office market," Journal of International Money and Finance, Elsevier, vol. 82(C), pages 120-140.
    5. Clark, David & Pennington-Cross, Anthony, 2016. "Determinants of industrial property rents in the Chicago metropolitan area," Regional Science and Urban Economics, Elsevier, vol. 56(C), pages 34-45.
    6. V.Atilla Oven & Dilek Pekdemir, 2004. "A comparison between office rent determinants of Istanbul and other major metropolitan areas," ERSA conference papers ersa04p166, European Regional Science Association.
    7. Dimitrios Papastamos & George Matysiak & Simon Stevenson, 2014. "A Comparative Analysis of the Accuracy and Uncertainty in Real Estate and Macroeconomic Forecasts," Real Estate & Planning Working Papers rep-wp2014-06, Henley Business School, University of Reading.
    8. Simon Stevenson & James Young, "undated". "Capital Market Expectations and the London Office Market," Real Estate & Planning Working Papers rep-wp2011-09, Henley Business School, University of Reading.
    9. Peter Englund & Ake Gunnelin & Patric H. Hendershott & Bo Soderberg, 2005. "Adjustment in Property Space Markets: Estimates from the Stockholm Office Market," NBER Working Papers 11345, National Bureau of Economic Research, Inc.
    10. Alain Coen & Benoît Lefebvre & Arnaud Simon, 2018. "International money supply and real estate risk premium: The case of the London office market," Post-Print hal-01778910, HAL.
    11. Richard Malle, 2010. "Un modèle à équations simultanées du cycle des bureaux en région parisienne," Économie et Prévision, Programme National Persée, vol. 194(3), pages 93-108.
    12. Abadie, Alberto & Dermisi, Sofia, 2008. "Is terrorism eroding agglomeration economies in Central Business Districts? Lessons from the office real estate market in downtown Chicago," Journal of Urban Economics, Elsevier, vol. 64(2), pages 451-463, September.
    13. Jonathan Wiley & Justin Benefield & Ken Johnson, 2010. "Green Design and the Market for Commercial Office Space," The Journal of Real Estate Finance and Economics, Springer, vol. 41(2), pages 228-243, August.
    14. Allison M. Orr & Colin Jones, 2003. "The Analysis and Prediction of Urban Office Rents," Urban Studies, Urban Studies Journal Limited, vol. 40(11), pages 2255-2284, October.
    15. Sofia Dermisi, 2005. "Industry location patterns in metropolitan area office markets - Central Business Districts versus suburbs," Urban/Regional 0509007, University Library of Munich, Germany.
    16. V. Öven & Dilek Pekdemir, 2006. "Office Rent Determinants Utilising Factor Analysis—A Case Study for İstanbul," The Journal of Real Estate Finance and Economics, Springer, vol. 33(1), pages 51-73, August.
    17. Voigtländer, Michael, 2010. "The Link between the Office Market and Labour Market in Germany," MPRA Paper 23994, University Library of Munich, Germany.
    18. Maria Ibanez & Anthony Pennington-Cross, 2013. "Commercial Property Rent Dynamics in U.S. Metropolitan Areas: An Examination of Office, Industrial, Flex and Retail Space," The Journal of Real Estate Finance and Economics, Springer, vol. 46(2), pages 232-259, February.
    19. Richard Stanton & Nancy Wallace, 2009. "An Empirical Test of a Contingent Claims Lease Valuation Model," Journal of Real Estate Research, American Real Estate Society, vol. 31(1), pages 1-26.
    20. Jonathan A. Wiley, 2014. "Gross Lease Premiums," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(3), pages 606-626, September.

    More about this item

    Keywords

    office market models; rental adjustment; asymmetric responses; vacancy rate;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rdg:repxwp:rep-wp2009-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marie Pearson (email available below). General contact details of provider: https://edirc.repec.org/data/bsrdguk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.