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Which Factors Drive Rental Depreciation Rates for Office and Industrial Properties?

Author

Listed:
  • NEIL CROSBY

    (University of Reading)

  • STEVEN DEVANEY

    (University of Reading)

  • ANUPAM NANDA

    (University of Reading)

Abstract

As new buildings are constructed in response to changes in technology or user requirements, the value of the existing stock will decline in relative terms. This is termed economic depreciation and it may be influenced by the age and quality of buildings, amount and timing of expenditure, and wider market and economic conditions. This study tests why individual assets experience different depreciation rates, applying panel regression techniques to 375 UK office and industrial assets. Results suggest that rental value depreciation rates reduce as buildings get older, while a composite measure of age and quality provides more explanation of depreciation than age alone. Furthermore, economic and local real estate market conditions are significant in explaining how depreciation rates change over time.

Suggested Citation

  • Neil Crosby & Steven Devaney & Anupam Nanda, 2016. "Which Factors Drive Rental Depreciation Rates for Office and Industrial Properties?," Journal of Real Estate Research, American Real Estate Society, vol. 38(3), pages 359-392.
    • Handle: RePEc:jre:issued:v:38:n:3:2016:p:359_392
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    Cited by:

    1. Fabozzi, Frank J. & Xiao, Keli, 2017. "Explosive rents: The real estate market dynamics in exuberance," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 100-107.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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