2011 Awards for Excellence

Citation

(2012), "2011 Awards for Excellence", Journal of European Real Estate Research, Vol. 5 No. 1. https://doi.org/10.1108/jerer.2012.35905aaa.003

2011 Awards for Excellence

Article Type: 2011 Awards for Excellence From: Journal of European Real Estate Research, Volume 5, Issue 1

The following article was selected for this year’s Outstanding Paper Award for Journal of European Real Estate Research

“Supply elasticities and developers expectations: a study of European office markets”

Franz FuerstDepartment of Real Estate and Planning, Business School, The University of Reading, Reading, UK

Patrick McAllisterDepartment of Real Estate and Planning, Business School, The University of Reading, Reading, UK

Purpose -- The purpose of this paper is to investigate the relationships between supply and demand in 19 European office markets in the period 1991-2006. It estimates the variations in the price elasticity of supply across the different markets. The paper tests whether developers display evidence of myopic or rational expectations in their behaviour.

Design/methodology/approach -- The paper draws upon a time series of rental, take-up and new completions for 20 European office markets. A static measurement of price elasticity is calculated for each office market. To measure this expected supply response in the empirical analysis, the paper applies an impulse response analysis.

Findings -- There is an evidence of positive and negative price elasticity. In a significant proportion of cities, supply increases following falls in rental levels. As a result, there is some evidence of myopic behaviour in a proportion of the markets examined, there is little evidence to support the hypothesis that real estate developers systematically display myopic expectations. The diversity in developer responses to price signals is surprising. It is concluded that idiosyncratic rather than systematic factors may dominate supply-side responses to market signals.

Research limitations/implications -- This paper is essentially exploratory and raises a number of questions for further investigation. There is scope to address the research questions using better data series, in particular, net absorption rates, construction starts, real rental growth rates and different geographical definitions. There is also scope to extend the research to examine the causal factors underlying differences in supply elasticity, for instance, the relative contribution of constraining variables such regulatory restrictions and limitations in physical capacity. It is also possible to model the supply adjustment process more dynamically in an error-correction framework.

Practical implications -- The findings would suggest that the complexity and diversity of economic, institutional and capital market influences affecting European commercial real estate markets seem to be far too numerous for any single model of market or developer behaviour to explain.

Originality/value -- This is the first paper to examine supply elasticity across a broad range of European office markets.

Keywords: Supply and demand, Elasticity, Prices, Office buildings, Real estate, Europe

www.emeraldinsight.com/10.1108/17539261011040514

This article originally appeared in Volume 3 Number 1, 2010, pp. 5-23, Journal of European Real Estate Research

The following articles were selected for this year’s Highly Commended Award

“The effect of subsidy on housing construction in various regions of Sweden”

Abukar Warsame, Mats Wilhelmsson and Lena Borg

This article originally appeared in Volume 3 Number 3, 2010, Journal of European Real Estate Research

Outstanding Reviewer

Dr Peter EnglundStockholm School of Economics, Sweden