A significant amount of real estate research has been directed towards developing empirical models explaining rental growth. This paper develops an error correction mechanism (ECM) model which is built on the general theoretical formulation of the Hendershott et a.l (2002a). Income, as measured by local market services output, is used as a key determinant of office demand. A total office stock variable is also used which is derived from the cumulated level of development completions. The model is estimated empirically for 12 office market locations across Europe using panel data techniques and the full sequence of panel model selection tests. The approach allows the behaviour of different markets to be readily compared and contrasted, and provides inferences about intra-market dependence and the comparative speed of adjustment towards long-run equilibrium. The study also compares the short-term predictive performance of the proposed model to a number of alternatives which has been covered in the literature, including a-theoretical models. The results offer some support for the proposed model for predicting shortterm rental movements.

Despite the pervasiveness of planning intervention in the land and property market, the economic effects of the planning system have been little researched. While there is a growing body of work addressing this issue in the housing sector, similar work considering the business sector is marked only by its absence. The paper describes the first substantive attempt to explore this subject area through an analysis of the impact of planning on business rents. A full structural model of a local property market was developed. It incorporates the planning regime as a key element of the system and it allows for the interaction between property market use sectors. The model formed the basis for the creation of a simplified five-equation system that could be operationalised within extant data constraints. Upon application, a local effect of planning was identified that was consistent with theory. As planning regimes become tighter, the local supply of space decreases. This has a negative effect on local economic activity and a positive effect on local rents. However, the results must be much qualified. The study was affected by various limitations relating to data, to the geography upon which the model was based and to its cross-sectional character. Nevertheless, the work makes a contribution to the development of a theoretically robust model for analysing and estimating the effect of planning on the property sector of the local economy.

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