29 research outputs found

    Retail Building Cycles: Evidence from Great Britain

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    This study examines the cyclical pattern of retail property development in Great Britain. It develops and estimates an econometric model of the volume of new development starts for retail buildings. Within the theoretical framework proposed, a dynamic specification based on changes in real retail rents and total consumer spending appears to adequately capture the cyclical variation in retail development. Changes in the values of these variables induce new retail construction within two years and an Almon polynomial lag scheme best describes the dynamic distribution of their lagged effects. Investment market influences on retail building development at the national level are not established in this study. There is also some indication of a changing economic relationship between new retail development and retail rents after mid-1995, but this can only be confirmed by appropriate tests when additional observations become available.

    Projections in the Industrial Property Market using a Simultaneous Equation System

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    A three-equation simultaneous system is used to model the industrial property market in Great Britain. Strong relationships are found between new industrial building supply and both real rents and construction costs, and between rents, industrial floorspace availability and the gross domestic product. The performance of ex post simulations of new building supply, rents and floorspace availability are satisfactory with the exception of rent simulations post 1993. The central forecast of the model indicates a quiet market until 2001 (lower level of new supply, constant levels of real rents and increasing availability of industrial space) but a more active market in 2002 and 2003. This study suggests that simultaneous equation models can prove useful alternative tools in analysing the industrial property market and generating forecasts both at the aggregate and more localised level of analysis.

    Interactions within the Office Market Cycle in Great Britain

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    This article adopts an unrestricted vector autoregressive framework methodology to examine the cyclical activity of office property development in Great Britain. The empirical analysis provides supporting evidence for the significant influence of office rents on the rate of new office construction. Service sector output has a small impact on office development, whereas the results do not establish a relationship with employment and interest rates. The significance of rents is attributed to the tenure characteristics of the market and the important role of developers and property investors in initiating office projects in Great Britain. A period of up to three years appears to be the optimum period between the time that rental signals are generated and the time that buildings are put in place, as a response to those signals.

    Rent Adjustments and Forecasts in the Industrial Market

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    This study estimates models of industrial rents at the national level in Great Britain. James Lan Wooten and CB Hillier Parker rent indices are used to model changes in real rents. These changes are positively related to changes in real GDP and inversely affected by absorption, as measured by King Sturge & Co. Additionally, changes in rents convey information not captured by GDP and absorption. The lagged effects of the variables differ for each index, attributable to the construction methodologies followed. Dynamic forecasts for both models show a small overprediction in 1996 and 1997. Ex ante forecasts suggest that both will show positive real growth throughout 1998 and 1999.

    Forecasting UK Real Estate Cycle Phases With Leading Indicators: A Probit Approach

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    This paper examines the significance of widely used leading indicators of the UK economy for predicting the cyclical pattern of commercial real estate performance. The analysis uses monthly capital value data for UK industrials, offices and retail from the Investment Property Databank (IPD). Prospective economic indicators are drawn from three sources namely, the series used by the US Conference Board to construct their UK leading indicator and the series deployed by two private organisations, Lombard Street Research and NTC Research, to predict UK economic activity. We first identify turning points in the capital value series adopting techniques employed in the classical business cycle literature. We then estimate probit models using the leading economic indicators as independent variables and forecast the probability of different phases of capital values, that is, periods of declining and rising capital values. The forecast performance of the models is tested and found to be satisfactory. The predictability of lasting directional changes in property performance represents a useful tool for real estate investment decision-making.commercial real estate, turning points, leading indicators, probit models
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