The application of short‐term forecasting techniques to the prediction of commercial rental values generates valuable information about the dynamics of rent movements. It also captures short‐run trends more effectively than do other forecasting procedures. Makes use of ARIMA models to provide one‐step‐ahead predictions. The results show that ARIMA models perform better in the case of retail and office sectors. The forecasts for these sectors are satisfactory. Retail rents bear a relationship to their past values, whereas office rents are influenced by shocks in the market – demand or supply driven. The results of the present study are useful for incorporation in more general models of rent forecasting. Also presents a full methodology which facilitates its application.
The authors provide an empirical investigation of office market dynamics and model the user, investment, and development elements of this market. They recognise explicitly that the user and investment markets in office property influence trends in development and that development activity in turn affects office use and investment. This theoretical premise suggests that an analysis of these separate components of the market can make a significant contribution to a fuller understanding of office market dynamics, including swings in development activity. In the European context, there is a lack of research on modelling the functional elements of the office market individually, although such modelling is more common in US studies. Furthermore, most quantitative empirical work lacks an examination of the investment market for property and its intertemporal effects on development activity. In this paper, the authors estimate econometric models for rents, capital values, and development activity in the national office market in Great Britain. The results establish the significant influence of demand-side economic forces in the user market and the importance of use and investment market signals in the determination of office building output. However, the findings also strongly suggest that the investment market needs to be explored in more detail in order to identify and document the nature of the forces which interact in this sector of the office market.
Applies the methodology adopted in contemporary business cycle research on establishing the stylized facts of aggregate output fluctuations, in the context of the office, industrial and retail building cycle. The objective of the study is to identify the degree to which cyclical regularities, which are in conformity with theoretical modelling, are identified across property sectors. Undertakes a statistical analysis of the cyclical properties of certain variables in relation to the building cycle in the respective commercial property sectors. The variables considered capture real economic conditions and trends in both the property and investment markets. The findings illustrate that certain variables display a cyclical pattern in relation to the property cycles which is in accordance with theoretical intuition. They also show that either other variables do not display any cyclical relationship to the commercial building cycles or the relationship does not conform to the predictions of the existing theoretical treatment of property development.
This paper investigates whether the prices of UK equity-traded property stocks over the past fifteen years contain evidence of a speculative bubble. Speculative bubbles are generated when investors include the expectation of the future price in their information set. In the presence of speculative bubbles, positive expected bubble returns will lead to increased demand and will thus force prices to diverge from their fundamental value. The present analysis draws upon the methodologies adopted in various studies examining price bubbles in the general stock market. Fundamental values are generated using two models: the dividend discount and the Gordon growth. Variance bounds tests are then applied to test for bubbles in UK property asset prices. Finally, cointegration analysis is conducted to provide further evidence on the presence of bubbles. Evidence of the existence of bubbles is found but these appear to be transitory and concentrated in the mid-to-late 1990s. Investors in property stocks should be aware that in periods when bubbles are present the market does not move on the basis of the fundamentals and abrupt price corrections can occur.
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