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Toward a Model of the Office Building Sector

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  • Kenneth T. Rosen

Abstract

High rise office buildings represent large capital outlays in very competitive markets. Investment and development decisions require careful market analysis to assure sufficient demand to lease the office space at rental rates which will make the venture financially attractive. Present methodology for analyzing future commercial real estate market conditions can at best be said to be inadequate. This methodology relies on concepts such as “market absorption” rates and “normal” vacancy rates. These concepts usually rely on accounting type and trend line techniques to provide forecasts of space demand. In this paper we provide an alternative methodology for forecasting the key variables in the office space market by developing a statistical model of supply and demand. The key variables that need to be forecasted are the stock of office space (in square feet), the flow of new office construction (in square feet), the vacancy rate (in percent), and the rent for office space (net rent per square foot).

Suggested Citation

  • Kenneth T. Rosen, 1984. "Toward a Model of the Office Building Sector," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 261-269, September.
    • Handle: RePEc:bla:reesec:v:12:y:1984:i:3:p:261-269
    DOI: 10.1111/1540-6229.00322
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    References listed on IDEAS

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    1. Smith, Lawrence B, 1974. "A Note on the Price Adjustment Mechanism for Rental Housing," American Economic Review, American Economic Association, vol. 64(3), pages 478-481, June.
    2. Arthur A. Eubank & C. R. Sirmans, 1979. "The Price Adjustment Mechanism for Rental Housing in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(1), pages 163-168.
    3. Rosen, Kenneth T & Smith, Lawrence B, 1983. "The Price-Adjustment Process for Rental Housing and the Natural Vacancy Rate," American Economic Review, American Economic Association, vol. 73(4), pages 779-786, September.
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    Cited by:

    1. Landis, John & Loutzenheiser, David, 1995. "BART Access and Office Building Performance," University of California Transportation Center, Working Papers qt6pn3g1kk, University of California Transportation Center.
    2. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 509-580, Elsevier.
    3. Cheong, Chee Seng & Gerlach, Richard & Stevenson, Simon & Wilson, Patrick J. & Zurbruegg, Ralf, 2009. "Equity and fixed income markets as drivers of securitised real estate," Review of Financial Economics, Elsevier, vol. 18(2), pages 103-111, April.
    4. Kim Hiang Liow, 2000. "The dynamics of the Singapore commercial property market," Journal of Property Research, Taylor & Francis Journals, vol. 17(4), pages 279-291.

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