Asymmetric adjustment in the City of London office market

Patric H Hendershott, Colin M Lizieri, Bryan D MacGregor

    Research output: Contribution to journalArticlepeer-review

    30 Citations (Scopus)

    Abstract

    Earlier estimates of the behavior of the City of London office market are extended by considering a longer time series of data, covering two full cycles, and by explicitly modeling asymmetric space market responses to employment and supply shocks. A long run structural model linking real rental levels, office-based employment and the supply of office space is estimated and then rental adjustment processes are modeled using an error correction model framework. Rental adjustment is seen to be asymmetric, depending both on the direction of the supply and demand shocks and on the state of the space market at the time of the shock. Vacancy adjustment does not display statistically significant asymmetries. There is also a supply adjustment equation. Two three-equation systems, one with symmetric rental adjustment and the other with asymmetric adjustment, are subjected to positive and negative shocks to employment. These illustrate differences in the properties of the two systems.
    Original languageEnglish
    Pages (from-to)80-101
    Number of pages22
    JournalThe Journal of Real Estate Finance and Economics
    Volume41
    Issue number1
    Early online date27 Aug 2009
    DOIs
    Publication statusPublished - Jul 2010

    Keywords

    • office market models
    • rental adjustment
    • asymmetric responses
    • vacany rate

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