TY  - JOUR
AU  - Englund,Peter
AU  - Gunnelin,Ake
AU  - Hendershott,Patric H.
AU  - Soderberg,Bo
TI  - Adjustment in Property Space Markets: Estimates from the Stockholm Office Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11345
PY  - 2005
Y2  - May 2005
UR  - http://www.nber.org/papers/w11345
L1  - http://www.nber.org/papers/w11345.pdf
N1  - Author contact info:
Peter Englund

Ake Gunnelin

Patric H. Hendershott
Fisher Hall
Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 218/963-1393
Fax: 218/963-9484
E-Mail: hendershott.2@osu.edu

Bo Soderberg
AB  - Markets for property space adjust only gradually because tenants are constrained by long-term leases and landlords and tenants face transactions and information costs.  Not only do rents adjust slowly, but space occupancy may differ from demand at current rent, giving rise to %u201Chidden vacancies%u201D.  We estimate the joint dynamics of office rents and vacancies using an error-correction model using a new lease rent series for Stockholm offices 1977­2002 estimated on 2,500 leases.  It takes 5-10 years for the market to adjust to a shock.  In a model simulation of a positive employment shock open vacancies fall from the natural level of 7 percent to below 4 percent, while hidden vacancies increase by about as much.  Most of the variation in hidden vacancies over time is explained by the difference between demand at current and average rent on existing leases, which we calculate using data on contract lease length.
ER  -