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Capital Market Expectations and the London Office Market

Author

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  • Simon Stevenson

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

  • James Young

    (University of Auckland)

Abstract

The analysis of office market dynamics has generally concentrated on the impact of underlying fundamental demand and supply variables. This paper takes a slightly different approach to many previous examinations of rental dynamics. Within a Vector-Error-Correction framework the empirical analysis concentrates upon the impact of economic and financial variables on rents in the City of London and West End of London office markets. The impulse response and variance decomposition reveal that while lagged rental values and key demand drivers play a highly important role in the dynamics of rents, financial variables are also influential. Stock market performance not only influences the City of London market but also the West End, whilst the default spread plays an important role in recent years. It is argued that both series incorporate expectations about future economic performance and that this is the basis of their influence upon rental values.

Suggested Citation

  • 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.
    • Handle: RePEc:rdg:repxwp:rep-wp2011-09
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    File URL: http://www.reading.ac.uk/REP/fulltxt/0211.pdf
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    References listed on IDEAS

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    Cited by:

    1. Simon Stevenson & Alexey Akimov & Elaine Hutson & Alexandra Krystalogianni, 2014. "Concordance in Global Office Market Cycles," Regional Studies, Taylor & Francis Journals, vol. 48(3), pages 456-470, March.

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