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Commercial Property Rent Dynamics in U.S. Metropolitan Areas: An Examination of Office, Industrial, Flex and Retail Space

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  • Maria Ibanez
  • Anthony Pennington-Cross

Abstract

This paper is concerned with the market rental rate for space offered by commercial property and how that rental rate evolves over time. Rental rates reflect the value of the services provided by the property and can have a significant impact on the ability of its owners to make monthly debt obligations. We investigate commercial property rent dynamics for 34 large metropolitan areas in the U.S. The dynamics are studied from the second quarter of 1990 through the second quarter of 2009 and the results are compared across four property types or uses (office, industrial, flex, and retail). There is substantial heterogeneity in both the long and short run responses to changing demand and supply conditions. In general, the office market is the slowest to adjust back towards equilibrium while industrial and flex markets adjust back to the long run equilibrium very quickly. For industrial and office types, the speed of adjustment is substantially faster within quality segments and is strongest for grade A properties. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Maria Ibanez & Anthony Pennington-Cross, 2013. "Commercial Property Rent Dynamics in U.S. Metropolitan Areas: An Examination of Office, Industrial, Flex and Retail Space," The Journal of Real Estate Finance and Economics, Springer, vol. 46(2), pages 232-259, February.
    • Handle: RePEc:kap:jrefec:v:46:y:2013:i:2:p:232-259
    DOI: 10.1007/s11146-011-9347-7
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    Cited by:

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    2. Roddy Allan & Ervi Liusman & Teddy Lu & Desmond Tsang, 2021. "The COVID-19 Pandemic and Commercial Property Rent Dynamics," JRFM, MDPI, vol. 14(8), pages 1-24, August.
    3. Odilon Costa & Wesley Mendes-da-Silva, 2016. "The Recent Slowdown in Sao Paulo’s Office Market: A Comparison of Hedonic Indices," LARES lares-16-costa_therecent_, Latin American Real Estate Society (LARES).
    4. Moussawi-Haidar, Lama & Çömez-Dolgan, Nagihan, 2017. "Percentage rent contracts between co-stores," European Journal of Operational Research, Elsevier, vol. 258(3), pages 912-925.
    5. Hermansson, Cecilia & Lundgren, Berndt, 2022. "What factors matter in rent negotiations? Differences in views between landlords and retail trade tenants," Working Paper Series 22/9, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    6. Dimitrios Papastamos & George Matysiak & Simon Stevenson, 2014. "A Comparative Analysis of the Accuracy and Uncertainty in Real Estate and Macroeconomic Forecasts," Real Estate & Planning Working Papers rep-wp2014-06, Henley Business School, University of Reading.
    7. Eduardo Fernandes Cazassa & Odilon Costa, 2017. "Real Estate Indices: the good and the bad," LARES lares_2017_paper_65, Latin American Real Estate Society (LARES).
    8. Xin Zhang & David Geltner & Richard Neufville, 2018. "System Dynamics Modeling of Chinese Urban Housing Markets for Pedagogical and Policy Analysis Purposes," The Journal of Real Estate Finance and Economics, Springer, vol. 57(3), pages 476-501, October.
    9. Voigtländer, Michael & Schuster, Florian, 2019. "European office markets, user costs and speculative bubbles," IW-Reports 31/2019, Institut der deutschen Wirtschaft (IW) / German Economic Institute.

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