Commercial Property Rent Dynamics in U.S. Metropolitan Areas: An Examination of Office, Industrial, Flex and Retail Space

Maria R. Ibanez, Anthony Pennington-Cross*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

Abstract

This paper is concerned with the market rental rate for space offered by commercial property and how that rental rate evolves over time. Rental rates reflect the value of the services provided by the property and can have a significant impact on the ability of its owners to make monthly debt obligations. We investigate commercial property rent dynamics for 34 large metropolitan areas in the U. S. The dynamics are studied from the second quarter of 1990 through the second quarter of 2009 and the results are compared across four property types or uses (office, industrial, flex, and retail). There is substantial heterogeneity in both the long and short run responses to changing demand and supply conditions. In general, the office market is the slowest to adjust back towards equilibrium while industrial and flex markets adjust back to the long run equilibrium very quickly. For industrial and office types, the speed of adjustment is substantially faster within quality segments and is strongest for grade A properties.

Original languageEnglish (US)
Pages (from-to)232-259
Number of pages28
JournalJournal of Real Estate Finance and Economics
Volume46
Issue number2
DOIs
StatePublished - Feb 2013

Keywords

  • Commercial real estate
  • Dynamics
  • Flex property
  • Industrial property
  • Office property
  • Rent
  • Retail property

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies

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