Supply constraints and search equilibrium in office markets

Marcato, G. ORCID: https://orcid.org/0000-0002-6266-4676 and Tong, L. M. M. (2023) Supply constraints and search equilibrium in office markets. Journal of Real Estate Finance and Economics. ISSN 1573-045X doi: 10.1007/s11146-023-09955-y

Abstract/Summary

We present a new conceptual framework to estimate office supply elasticity, where net business survival, physical and economic mismatch are used to identify frictional and structural vacancy. Alongside regulatory and geographical constraints, we also find an unobserved feature of supply elasticity linked to natural vacancy. Our results confirm that US Metropolitan Statistical Areas are generally supply inelastic and the search and matching process plays a significant role in supply dynamics. In the least inelastic markets, investors tend to be more flexible to respond to negative demand shocks. As a result, we observe a reduction in structural vacancy and a subsequent increase in cyclical vacancy given the slow short-term movement in absorption. These findings also shed light upon office market dynamics during the COVID-19 period.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/109134
Item Type	Article
Refereed	Yes
Divisions	Henley Business School > Real Estate and Planning Henley Business School > Finance and Accounting
Publisher	Springer
Download/View statistics	View download statistics for this item