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Commercial Real Estate Market with Two-sided Random Search: Theory and Implications

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  • Garrison Hongyu Song
  • Abeba Mussa

Abstract

In this paper, we set up a two-sided random search model to study the trading behaviour between buyers and sellers in the commercial real estate market. Our model shows that the interaction between search and bargaining has a profound influence on the role played by the market search friction regarding the equilibrium transaction price of commercial property and the well-being of both buyers and sellers. Against the traditional view that the existence of search friction always plays a negative role in the commercial real estate market, we find that under some conditions the market search friction can increase the equilibrium transaction price of commercial property and thus benefit sellers, which is considered the most valuable especially during the downturn of a business cycle.

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  • Garrison Hongyu Song & Abeba Mussa, 2021. "Commercial Real Estate Market with Two-sided Random Search: Theory and Implications," Journal of Property Research, Taylor & Francis Journals, vol. 38(1), pages 1-24, January.
    • Handle: RePEc:taf:jpropr:v:38:y:2021:i:1:p:1-24
    DOI: 10.1080/09599916.2020.1844784
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    Cited by:

    1. Garrison Hongyu Song, 2022. "Capital Mobility vs. Labor Mobility:Theory and Implications," International Journal of Economics and Financial Issues, Econjournals, vol. 12(4), pages 47-55, July.

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