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Information Asymmetry, Lease Incentives, and the Role of Advisors in the Market for Commercial Real Estate

Author

Listed:
  • Martijn (M.I.) Droes

    () (University of Amsterdam & Amsterdam School of Real Estate; Tinbergen Institute, The Netherlands)

  • Boris Ziermans

    () (Cushman & Wakefield)

  • Philip Koppels

    () (TU Delft)

Abstract

Using a unique transactions dataset from the Amsterdam office market, this paper examines the determinants of property lease incentives. The study focuses on the type of landlord involved (institutional/private) and whether the tenant or landlord used an advisor (professional broker) to help negotiate the lease. The results show that an institutional landlord, ceteris paribus, offers 3 percentage points more incentives than a private owner. In addition, a landlord who uses the services of an advisor pays 9 percentage points less incentives. An advisor at the side of the tenant increases incentives by 7 percentage points. However, if both parties use an advisor there are no additional benefits in terms of lease incentives. These findings are in line with a prisoner's dilemma story. Further results show an effect of the lease term and economic cycle on lease incentives. The results in this paper highlight the crucial role of market information, information asymmetry, and bargaining in the market for commercial real estate.

Suggested Citation

  • Martijn (M.I.) Droes & Boris Ziermans & Philip Koppels, 2017. "Information Asymmetry, Lease Incentives, and the Role of Advisors in the Market for Commercial Real Estate," Tinbergen Institute Discussion Papers 17-106/IV, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20170106
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    References listed on IDEAS

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    More about this item

    Keywords

    commercial real estate; office market; lease incentives; advisor; information asymmetry;

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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