Modelling Regime Shifts in the City of London Office Rental Cycle

Farrelly, Kieran; Sanderson, Ben

doi:10.1080/09599910600558553

Cited by 21 publications

(21 citation statements)

References 21 publications

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“…3 Hendershott et al (2002, hereafter HMT) and Englund et al (2008, hereafter EGHS) utilize a 1 Farrelly and Sanderson (2005) also use only two decades of London data, although theirs (quarterly) cover 1982-2002; Barras (2005) uses data that span 1974-2004 to generate elasticities for use in a simulation model of office supply. 2 The credit crunch has led to a rent and vacancy correction in the City; at end 2008, vacancy rates had risen back to 7% and nominal rents had fallen 17% from their peak values with significant falls in capital values observed.…”

Section: The Modelmentioning

confidence: 99%

“…Further, within such a VAR framework, it is hard to disentangle individual variable impacts. Other approaches that might be considered could include a VECM approach or some form of threshold autoregressive (TAR) model, perhaps a smooth transition structure, extending the work of Farrelly and Sanderson (2005) in a systems framework. These approaches may be better suited to markets with higher frequency data or even to a panel approach.…”

Section: The Modelmentioning

confidence: 99%

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Asymmetric Adjustment in the City of London Office Market

Hendershott

Lizieri

Macgregor

2009

J Real Estate Finan Econ

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Section: The Modelmentioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

Asymmetric Adjustment in the City of London Office Market

Hendershott

Lizieri

Macgregor

2009

J Real Estate Finan Econ

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“…The first, and most obvious, has been the shortness of time series. In the UK and US, annual data rarely go back beyond 1970 and thus it has only been relatively recently that it has been possible to identify long run relationships (Hendershott et al, 2002aand b, Farrelly and Sanderson 2005, Mouzakis and Richards 2007. In China, time series are significantly shorter, since the property market virtually did not exist before 1980s, the pre-reform era.…”

Section: Literature Reviewmentioning

confidence: 99%

An econometric analysis of Shanghai office rents

White

2009

Journal of Property Investment &Amp; Finance

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PurposeShanghai is the most important economic centre in China. It also has the nation's largest modern office market in terms of floorspace and investment values. However, as with office markets in other cities and countries, the Shanghai market displays rental volatility. This paper aims to examine this issue.Design/methodology/approachRental volatility is examined by econometrically constructing a long‐run equilibrium relationship between rent and underlying demand and supply side factors. In order to establish the validity of this model, it is tested for the presence of a cointegrating vector. From this a short‐run dynamic adjustment model is constructed. This is an error correction mechanism that links the short‐ and long‐run models. The impact of office vacancies, foreign direct investment, and changes in the real interest rate on the office market are explicitly considered.FindingsThe results indicate that both demand (as represented by gross domestic product (GDP)) and supply (stock) are significant determinants of rents. Space demand is found to be both price and income elastic. In the short‐run model the error correction term is significant and correctly signed. In comparison to other office markets, the Shanghai market adjusts rather slowly. Foreign direct investment is found to have a positive impact on long‐run rents and the vacancy rate is found to impact on short‐term rental adjustment.Originality/valueThe Shanghai office market is the most important in China. However, it has displayed significant rental volatility. This paper is the first to examine explicitly the rental adjustment process in this office market. The results suggest a market that is performing as expected by economic theory but which nevertheless displays relatively slow adjustment to market imbalances.

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“…So far the office literature has been dominated by papers focusing on explaining the rent dynamics of one single office market. Examples are London by Wheaton, Torto and Evans (1997a), Hendershott et al (1999), and Farelly and Sanderson Farrelly and Sanderson (2005), Stockholm by Gunnelin and Söderberg (2003), Englund et al (2008a, b), Sydney by Hendershott (1996), San Francisco by Rosen (1984), Hong Kong by Hui and Yu (2006), Dublin by D' Arcy et al (1999), and Boston by McClure (1991).…”

mentioning

confidence: 99%

“…An extensive literature study of measures of office employment shows that most studies use employment in finance, insurance and real estate (FIRE), and service industries as a proxy for office employment. This type of office employment definition is used by for example Hekman (1985), Wheaton (1987), Wheaton et al (1997b), Sivitanides (1997), Sivitanides (1998), Shilton (1998) Hendershott et al (1999), Mourouzi-Sivitanidou (2002) 6 , Hendershott et al (2002), Farrelly and Sanderson (2005), and Englund et al (2008a, b). Other studies use a narrower approximation of office employment which only includes FIRE industries (see for example Rosen (1984), Hui and Yu (2006) and Pollakowski et al (1992).…”

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confidence: 99%

Asymmetric Properties of Office Rent Adjustment

Brounen

Jennen

2009

J Real Estate Finan Econ

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In this paper we use an error correction model for understanding the changes in real office rents for a panel of 15 U.S. MSA's over the period [1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005][2006][2007]. We find that office rents in all cities react positively to a rise in office employment and lagged rent changes, while lagged deviations from equilibrium rent levels exhibit a slow and partial adjustment over time. Given the non-negativity constraint of vacancy rates we extend the basic model by examining whether rents react to positive changes in employment conditional on the vacancy rate level. Our results show that office rents react significantly stronger to increases in employment when vacancy rates are below the long-term average. We also repeat the analysis for clusters of cities based on similarities in rent and employment dynamics using multi dimensional scaling. The cluster results confirm the overall conclusions and show that our results are not solely valid for the full panel of cities.

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Modelling Regime Shifts in the City of London Office Rental Cycle

Cited by 21 publications

References 21 publications

Asymmetric Adjustment in the City of London Office Market

Asymmetric Adjustment in the City of London Office Market

An econometric analysis of Shanghai office rents

Asymmetric Properties of Office Rent Adjustment

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