Planning regulations and their impact on European metropolitan commercial property dynamics

The authors aim to extend previous literature on variations in returns across local commercial markets by examining the linkage of commercial market dynamics (viz. dynamics in stock, vacancy and direct and indirect returns for offices and retail units) at the European Metropolitan level to planning regulations as an important element of the institutional structure of local markets. Previous literature suggests that return rates differ widely across local office markets, substantiating the view that returns are intertwined with conditions at the local level. Whether and to what degree differences in local markets relate to differences in planning regulations has not been addressed. This is the central issue of this research proposed. The research design consists of three coherent steps to address the central issue. Step 1 addresses the issue of how institutions may determine differences in commercial market dynamics. The literature on institutions and regulations is vast, however typically addressing housing market institutions. Yet, this literature forms a relevant source to draw on when considering how planning regulations and commercial market behaviour are intertwined. We use current contributions in the literature, culminating in a concise review of the literature on planning regulations and commercial market behaviour. Step 2 aims to measure the degree of differences in commercial market returns. We use a cross-country approach to first determine the degree of differences in local markets between countries. For this we use data across European Metropolitan areas.. Step 3 considers the interrelations between commercial market dynamics and planning regulations to explain the observed differences in step 2. For this we model commercial market dynamics now including the various types of planning regulations identified in step 1. These results will indicate which and to what degree regulations explain observed differences in local commercial market dynamics.