Dynamics and asymmetric rent adjustments in the office market in Warsaw
Abstract
Dynamics of rent, vacancy, supply and demand on the office market of emerging commercial real estate markets have long been under-researched. The paper fills the gap in economic literature by investigating the growing office market in Warsaw. In particular, we evaluate whether the influence of demand and supply shocks differ depending on the current market conditions. Using Error Correction Model approach, we investigated the rent adjustments on the office market in Warsaw, which is the major property market in Central and Eastern Europe. We replaced variables of the basic model with asymmetric variables to check for asymmetric adjustments in the office market. The study period covers data from 2005:1Q to 2016:1Q. The empirical results suggest that demand shock had a stronger impact on rent when the market vacancy rate was below the average for the period considered. Additionally, the demand shock had a stronger impact on rent when the rent was above the equilibrium level.
Keyword : office market, rents, asymmetric adjustments, demand shock, supply shock, Poland
How to Cite
Nowak, K., Gluszak, M., & Belniak, S. (2020). Dynamics and asymmetric rent adjustments in the office market in Warsaw. International Journal of Strategic Property Management, 24(6), 428–440. https://doi.org/10.3846/ijspm.2020.13647
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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https://doi.org/10.1080/09599910701297713
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Stevenson, S. (2007). Exploring the intra-metropolitan dynamics of the London office market. Journal of Real Estate Portfolio Management, 13(2), 93–98. https://doi.org/10.1080/10835547.2007.12089774
Brounen, D., & Jennen, M. (2009b). Local office rent dynamics. A tale of ten cities. Journal of Real Estate Finance and Economics, 39(4), 385–402. https://doi.org/10.1007/s11146-008-9118-2
Bruneau, C., & Cherfouh, S. (2015). Long-run equilibrium for the Greater Paris office market and short-run adjustments. Journal of Property Research, 32(4), 301–323.
https://doi.org/10.1080/09599916.2015.1089310
CBRE. (2014). 25 lat polskiego rynku nieruchomości biurowych. http://www.cbre.pl/portal/pls/portal/CBWEB.utils_news_public.show_image?id=16948&field=doc1&trans=y
CBRE. (2015). Poland office destinations. http://www.officego.pl/img/cms/publications/Poland_Office_Destinations_2015_19_08_2015_04_56_37.pdf
CBRE. (2017). Rynek biurowy w strefie City Centre West. https://idealab.cbre.pl/wp-content/uploads/2017/10/rynekbiurowywstrefiecitycentrewest.pdf
Chau, K. W., & Wong, S. K. (2016). Information asymmetry and the rent and vacancy rate dynamics in the office market. Journal of Real Estate Finance and Economics, 53(2), 162–183. https://doi.org/10.1007/s11146-015-9510-7
Colliers International. (2016). Market insights. Polska, raport roczny 2016. http://www.colliers.com/pl-pl/-/media/files/emea/poland/reports/2016/Colliers_International_Raport_Roczny_2016.pdf?smclient=4cfe-4fad-00cc-481e-ac9f-87660f616600&timeZoneId=CET
Devaney, S. (2010). Trends in office rents in the City of London: 1867−1959. Explorations in Economic History, 47(2), 198–212. https://doi.org/10.1016/j.eeh.2009.11.001
Englund, P., Gunnelin, Å., Hendershott, P. H., & Söderberg, B. (2008). Adjustment in property space markets: taking long-term leases and transactions costs seriously. Real Estate Economics, 36(1), 81–109. https://doi.org/10.1111/j.1540-6229.2008.00208.x
Eurostat. (2018). Harmonised index of consumer prices (HICP), HICP (2015 = 100) – monthly data (monthly rate of change). https://ec.europa.eu/eurostat/web/hicp/data/database
Farrelly, K., Głuszak, M., & Matysiak, G. (2014). Panel modelling of European office market rent dynamics and asymmetries. In European Real Estate Society Conference. Bucharest, Romania.
Hendershott, P. H., Lizieri, C. M., & MacGregor, B. D. (2010). Asymmetric adjustment in the City of London office market. Journal of Real Estate Finance and Economics, 41(1), 80–101. https://doi.org/10.1007/s11146-009-9199-6
Hendershott, P. H., MacGregor, B. D., & Tse, R. (2002a). Estimation of the rental adjustment process. Real Estate Economics, 30(2), 165–183. https://doi.org/10.1111/1540-6229.00036
Hendershott, P. H., MacGregor B. D., & White, M. (2002b). Explaining real commercial rents using an error correction model with panel data. Journal of Real Estate Finance and Economics, 24(1−2), 59–87. https://doi.org/10.1023/A:1013930304732
Ho, K. H. D., Rengarajan, S., & Glascock, J. (2014). An examination of the structure and dynamics of Singapore’s maturing central area office market. Journal of Property Investment & Finance, 32(5), 485–504. https://doi.org/10.1108/JPIF-02-2014-0013
Ibanez, M., & Pennington-Cross, A. (2013). Commercial property rent dynamics in U.S. metropolitan areas: an examination of office, industrial, flex and retail space. Journal of Real Estate Finance and Economics, 46(2), 232–259.
https://doi.org/10.1007/s11146-011-9347-7
Ke, Q., & White, M. (2013). A tale of two Chinese cities: the dynamics of Beijing and Shanghai office markets. Journal of Real Estate Portfolio Management, 19(1), 31–47. https://doi.org/10.1080/10835547.2013.12089940
Kiehelä, S., & Falkenbach, H. (2014). Modelling and forecasting central Helsinki office rents. International Journal of Strategic Property Management, 18(3), 292–306.
https://doi.org/10.3846/1648715X.2014.942720
McCartney, J. (2012). Short and long-run rent adjustment in the Dublin office market. Journal of Property Research, 29(3), 201–226. https://doi.org/10.1080/09599916.2012.689990
Mouzakis, F., & Richards, D. (2007). Panel data modelling of prime office rents: a study of 12 major European markets. Journal of Property Research, 24(1), 31–53.
https://doi.org/10.1080/09599910701297713
PAIiIZ and JP Weber Dudarski Sp. k. (2015). Investor’s guide – Poland. How to do business 2015. http://www.paiz.gov.pl/publikacje/jak_prowadzic_dzialalnosc_gospodarcza_w_polsce
Raslanas, S., & Lukošienė, I. (2013). The determination of rents in shopping centers during recession period in Lithuania. International Journal of Strategic Property Management, 17(3), 221–232. https://doi.org/10.3846/1648715X.2013.819389
Simon, Z., Achsani, N., Manurung, A. H., & Sembel, R. (2015). The determinants of rental rates and selling prices of office spaces in Jakarta: a macroeconometric model using VECM approach. International Journal of Economics and Finance, 7(3), 165–178. https://doi.org/10.5539/ijef.v7n3p165
Stevenson, S. (2007). Exploring the intra-metropolitan dynamics of the London office market. Journal of Real Estate Portfolio Management, 13(2), 93–98. https://doi.org/10.1080/10835547.2007.12089774