Apartment Security: A Note on Gated Access and Rental Rates

This study empirically examines the dynamics of the private industrial market in Singapore using a Vector Error Correction Model (VECM), which is derived based on the theoretical framework of an extended accelerator investment model. The GDP in manufacturing sector (LMGDP) and the composite leading indicator (LCLI) were two unrestricted long-run forcing variables included in the VECM for the industrial space demand, together with a pre-determined error correction mechanism (ecm) and other determinants. The results of the VECM estimation showed negative effects of the changes in the manufacturing GDP (LMGDP) at different lags on the private industrial demand (LPRD). Three possible reasons are hypothesized for the negative manufacturing outputs and industrial space demand relationship. First, firms substitute space for other factors of production when the demand for their output increases. Second, firms take up more space than that required for the existing scale of production and the excess space can be converted to meet the production needs for the short-term surge in the outputs. A possible switch of demand from the private to the public industrial markets during a period of strong output growth may be the third contributory factor. In the generalized forecast error variance decomposition analysis, one-standard deviation shocks to the manufacturing GDP (LMGDP) was found to account for an average 67.10% of the variances of LPRD. However, in shorter terms of less than 15-period, the industrial demand own shocks appeared to be the most important determinant of the variation in industrial real estate demand. It was also found that the most volatile impulse responses from the industrial demand variance.