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Adjustment in Property Space Markets: Taking Long-term Leases and Transaction Costs Seriously
Department of Finance, Stockholm School of Economics, Stockholm, Sweden; Finance Group, University of Amsterdam, Amsterdam, The Netherlands.
Department of Real Estate and Construction Management, Royal Institute of Technology, Stockholm Sweden.
Centre for Property Research, University of Aberdeen Business School, Aberdeen, Scotland; San Diego State University, San Diego, CA, USA .
University of Gävle, Department of Business Administration and Economics. (Fastighetsekonomi)
2008 (English)In: Real estate economics (Print), ISSN 1080-8620, E-ISSN 1540-6229, Vol. 36, no 1, p. 81-109Article in journal (Refereed) Published
Abstract [en]

Markets for property space adjust only gradually because tenants and landlords are constrained by long-term leases and transaction and information costs. Not only do rents adjust slowly, but space occupancy, which depends on historical rents, often differs from demand at current rent. This creates "hidden vacancies," vacancies that will develop in the future if market rent and the space demand driver are unchanged. That is, if current rent is greater/lesser than average rent, then hidden vacancies are positive/negative. Moreover, because of hidden vacancies, open vacancies and rent are not mirror images of each other. Thus it is necessary to estimate both rental and vacancy rate adjustment processes. We do this using annual data for Stockholm offices during the 1977-2002 period and simulate the response of rent and vacancies (open and hidden) to an employment shock.

Place, publisher, year, edition, pages
2008. Vol. 36, no 1, p. 81-109
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hig:diva-1187DOI: 10.1111/j.1540-6229.2008.00208.xISI: 000252900800005Scopus ID: 2-s2.0-38849204825OAI: oai:DiVA.org:hig-1187DiVA, id: diva2:117849
Available from: 2008-08-27 Created: 2008-08-27 Last updated: 2017-12-14Bibliographically approved

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CiteExportLink to record
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Citation style
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  • sv-SE
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More languages
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