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.