Testing for the existence of office submarkets: evidence from two cities

Most conceptual and applied economic models of the structure of urban office markets have been developed from traditional location theory. In their basic form, these models tend to posit a trade-off between accessibility and space. In the light of changing business practices and decentralisation, however, some authors, have noted that the influence of agglomeration economies on the locational dynamics of commercial property markets may be declining. In this paper, we seek to undertake an indirect test of the power of intraurban office location theory. The paper is developed in two stages. In the first part, we examine the theoretical case for the existence of sub-markets in urban office markets and outline the implications of sub-market existence for traditional office location theory In the second part of the paper, using data from Edinburgh and Glasgow, we undertake empirical tests for sub-market existence. A comparison of the results from the two city markets provides limited evidence of the existence of spatial sub-markets and suggests that markets might take different spatial forms depending on the urban context. The paper concludes by highlighting the need to account for the complex structure of urban property markets in developing models for property, appraisal, taxation and land use planning purposes.