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The purpose of this study is to estimate an empirical model for new office space development starts, based on the theoretical treatment of urban growth. The study introduces a new parameter, namely, office space-usage pattern, to the office space development equation and tests whether developers respond to non-price measures in deciding to commence new developments.

The study first introduces a co-integration approach based on an error correction model to test for long-run relations and short-run dynamics of new office space development. A multivariate regression model is then introduced to identify significant determinants that influence office development starts. The study uses annual data over a time span of 30 years.

Estimated results provide strong evidence that the newly introduced parameter exerts a positive impact on new office space development. It suggests that if the average floor space per employee changes by one percentage point, new office development starts would change by 1.5 percentage point, indicating even a marginal change in floor-space usage per employee (SPE) would have a significant impact on new office space development. Empirical estimates also suggest a strong response of office development starts to the lagged land supply and office space stock.

The paper raises the concern about the importance of non-price measures of the supply-side of the office market. There is scope to address the research questions using better data sets. It is also possible to model the supply adjustment process more dynamically in an error correction framework.

The findings would suggest that non-price measures, such as space-usage pattern, need to be taken into account when planning and estimating future office space needs. This finding provides valuable insight for our current knowledge on factors affecting new office supply.

This is the first study to introduce office floor space usage as a determinant of office development starts in an urban growth conceptual framework for the Hong Kong office market.

Investment returns from property derive from rental income and change in value, and a property's value is a function of the current rent and the expected future rent. So, ultimately, investment returns derive from rent, and successful investment will depend on an understanding of the principles and forces which explain the market's determination of rental value. This paper explains the significance of supply elasticity to the determination of rental value and investigates the probable elasticities of the four main types of investment property. It concludes that, due to the very inelastic supply of farmland and prime High Street shops, trends in rental growth will reflect the profitability of occupation whereas, in general, the rental value of office and industrial property will tend to reflect development costs, due to their relatively elastic supply. The article investigates how far such predictions appear to be supported by evidence and briefly discusses the relative impact of obsolescence on the four property types.

The purpose of this paper is to examine the structure and dynamics of Singapore's Central Area office market. A long-run equilibrium relationship is tested and a short-run adjustment error correction model are estimated, incorporating appropriate serial error correction. The long-run equation is estimated for office rent, with office employment and available stock.

With the vector error correction model (VECM), the lagged rent, available stock, office employment, vacancy and occupied stock (OS) can impact the rental adjustment process. Equilibrium rent on the whole reacts positively to lagged rents, available stock, office employment, OS and negatively to vacancy rates (VC). Past levels of positive change in VC and rental growth can have negative effects on current OS.

While good economic conditions signaled by increases in rents increase the supply of new stock (available space), higher rents and VC dampen the long-term occupied space (space absorption) in accordance with economic theory. Available stock can be forecasted by past rent and absorption levels owing to the developer's profit-driven nature.

An understanding of the interaction between the macroeconomic variables and the Central Area office market is useful to domestic and foreign investors and developers, who then can better evaluate their decision making in commercial real estate investment and development projects.

It is implicit that the Singapore Central Area office market requires at least a year before any rental increase can potentially dampen the space demanded. Firms are attracted to locate there owing to agglomeration economies and they are willing to pay premium office rents in conjunction with office space intensification in the Central Area. Newly built space is positively affected by past rents. Urban Redevelopment Authority and private real estate developers should be wary of excess office sector vacancies by avoiding over supply, even though an increase in the supply of office space in the Central Area can have a positive impact on office rent in the longer term. Most of the office space development would tend to meet the demand in the long run. Rental stickiness is exemplified as rental changes are affected by lagged rent.

Policy makers are better enabled to stabilize the office sectors of the real estate market if so required.

The paper adopts the VECM and validated by empirical evidence, to investigate the long-run equilibrium relationship and short-term corrections underlying the dynamics of the Singapore Central office market. Delay in the restoration of equilibrium in real estate markets is attributed to factors like lease terms and supply lags.

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.

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.

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.

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.

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.

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

Globally a new wave of retailers are threatening the viability of many wholesalers, especially smaller more vulnerable wholesale distributors, as these new wave retailers aggressively compete for the business customer. To better understand this new form of competition, a theoretical model is developed from the organizational buyer behavior literature to explain the relative patronage preferences of business customers for wholesale‐distributors as a supply source versus two types of multiplex retailers ‐ warehouse home centers and office supply superstores. The model, previously untested in the business‐to‐business literature, postulates that business buyers select supply sources based on a “total value of purchasing” criterion. The total value is a function of price and the perceived costs associated with credit services, product‐acquisition services, and risk‐reduction services. The model is empirically tested in both an office supply superstore and warehouse home center setting with survey research conducted in six cities in the USA. Substantial empirical support, with the exception of the credit component, is obtained for the model.

Examines the failure of the City of London office market over the last 30 years to transmit information on impending oversupply to developers as the market moved towards the top of the demand cycle. Notes that the resulting collapse in investment values and the exposure of the banking system to large‐scale non‐performing loans provides a picture of potentially destabilising market failure. Proposes that in order to prevent oversupply occurring and thereby secure investment values, a form of self‐regulation is required.

Shanghai is the most important economic centre in China. It also has the nation's largest modern office market in terms of floorspace and investment values. However, as with office markets in other cities and countries, the Shanghai market displays rental volatility. This paper aims to examine this issue.

Rental volatility is examined by econometrically constructing a long‐run equilibrium relationship between rent and underlying demand and supply side factors. In order to establish the validity of this model, it is tested for the presence of a cointegrating vector. From this a short‐run dynamic adjustment model is constructed. This is an error correction mechanism that links the short‐ and long‐run models. The impact of office vacancies, foreign direct investment, and changes in the real interest rate on the office market are explicitly considered.

The results indicate that both demand (as represented by gross domestic product (GDP)) and supply (stock) are significant determinants of rents. Space demand is found to be both price and income elastic. In the short‐run model the error correction term is significant and correctly signed. In comparison to other office markets, the Shanghai market adjusts rather slowly. Foreign direct investment is found to have a positive impact on long‐run rents and the vacancy rate is found to impact on short‐term rental adjustment.

The Shanghai office market is the most important in China. However, it has displayed significant rental volatility. This paper is the first to examine explicitly the rental adjustment process in this office market. The results suggest a market that is performing as expected by economic theory but which nevertheless displays relatively slow adjustment to market imbalances.

Attempts to describe the determinants of rent. Describes the initial stages in the development of a regional office rent prediction model which uses readily available data and should aid the investment decision‐making process. Rejects cross‐sectional analysis, preferring time series approaches. Formulates a spatially disaggregated model which allows for delays between changes in user output and changes in user demand, and which reflects the variable adjustment rate between these two factors. Argues that the combined influence of the independent variables in the derived equation can explain up to 97 per cent of the variation in rent over the period examined.

Office decentralization has been developing rapidly in Hong Kong since the early 1980s. Office tenants relocated their businesses to the Decentralized District (DD) with the benefits of lower rent, higher flexibility of space use and better supporting facilities. This study examines office decentralization in Hong Kong's office market, both the upturn and downturn. It analyzes the vacancy trend of the Grade A office market in Hong Kong: DD versus Central Business District (CBD), based on a Decentralization Index. This study found that the CBD is a more stable office market sector than the non‐CBD. During a market upturn, the Grade A office market in Hong Kong DD has outperformed that in the CBD. However, during a market downturn, the vacancy rate in the DD tends to increase at a greater rate than that in the CBD. The study also found that periods with a sufficiently high index of decentralization generally experienced increases in CBD rent premiums.

The purpose of this paper is to analyze patterns and causes of structural vacancy in Dutch office buildings focusing on investors perceptions in the context of behavioural economics issues.

The location and typological characteristics of structurally vacant office buildings were identified using data from the first quarter of 2007 of the Jones Lang LaSalle office supply database. Structured interviews of those investors responsible for decisions about structurally vacant office buildings in their portfolio were conducted and the results analyzed.

The analysis finds that structural vacancy is not distributed but concentrated more in distinct smaller buildings owned by non‐institutional investors and that these are found more often in office parks. It also shows that irrational optimism about the office market combined with overconfidence and the disposition effect limit the rationality of investor decisions about structurally vacant office buildings.

Further research focusing on behavioural economics factors in real estate could improve selection and sampling and the construction of questions.

Because they appear to understand functional obsolescence least of all, real estate investors would benefit from knowledge about diagnosing it.

Most research investigating behavioural economics in real estate has focused on the work of professional valuers, appraisers. This may be the first paper to show that real estate investors exhibit decision patterns consistent with beliefs and preferences described in behavioural economics and finance.