Vacancy Rates and the Future of Office Rents

This research confirms the existence of a strong vacancy rental adjustment mechanism in the market for office space, such as has been found in housing markets. Using national time-series data, we find that real office rents drop approximately 2% annually, for every percentage point of "excess vacancy" in the market. We also find that the definition of "excess vacancy" has been trending upward over time. Using a recent vacancy forecast suggests that office income streams seem likely to decline in both real and nominal dollars over the next few years.     

An Investment Model of the Demand and Supply For Industrial Real Estate

A recent inventory of industrial building in fifty-two major metropolitan areas of the country indicates that most such space is either owner occupied or single tenant. This suggests that the production of industrial space may be modeled as a firm "investment" decision. Using the completion date of each inventoried building, we construct a time series of plant completions that moves similarly to some other national investment data. We are able to successfully estimate an "accelerator" type model of plant deliveries, driven by movements in employment and the after-tax cost of corporate capital. Our model can be used to estimate a measure of excess plant capacity in the market, and historic values of this measure do move parallel to some recent industrial vacancy data.     

The CB Commercial/Torto-Wheaton Database

This article describes the CB Commercial/Torto-Wheaton (CBC/TW) database from the collection of data through the creation of the aggregate database. In addition, information on accessing the data for research purposes is included.     

Income and Appraised Values: A Reexamination of the FRC Returns Data

This paper compares the income of those office properties that are included in the FRC index, with the appraised values that are used to determine the index's appreciation component. We find that the appraised value of the portfolio was a constant multiple of its current income, over the 1978–1988 period. This seems at odds with what modern valuation theory would suggest, since both nominal interest rates and several measures of real rates varied widely over the sample. An alternate interpretation of our results is that the appraised values were based on a set of expectations about future income growth, that turned out over the period, to be continually at odds with respect to actual income.     

The Cyclic Behavior of the Greater London Office Market

This paper applies structural econometric methodology to estimating and forecasting the greater London office market. We assemble a time series covering the 1970–1995 period and estimate equations for net space absorption, movements in rents, and new building orders. Together with two identities, calculating the stock and vacancy, these form a complete model. We estimate a generally inelastic supply and demand relationship that yields a dynamically stable system. Without unanticipated economic shocks, the market is noncyclic. Therefore the building boom of the 1980s largely is delayed response to the huge growth in service jobs that occurred over that period.