This paper reassesses the debate around property market efficiency and introduces an institutional perspective. It considers property market efficiency in terms of the specific characteristics of property itself and the processes through which property is used and traded. It argues that the institutional dimension fundamentally alters the concept of efficiency and leads to a partial and contingent judgement on achieved efficiency. Instead of seeking a judgement on whether the 'property market' as an entity is efficient, the institutional approach allows the possibility that 'property market process' may be efficient for some market participants but not for others. It also introduces a time dimension, suggesting the need to assess the adaptability of property market process as economic and social conditions change.
The authors provide an empirical investigation of office market dynamics and model the user, investment, and development elements of this market. They recognise explicitly that the user and investment markets in office property influence trends in development and that development activity in turn affects office use and investment. This theoretical premise suggests that an analysis of these separate components of the market can make a significant contribution to a fuller understanding of office market dynamics, including swings in development activity. In the European context, there is a lack of research on modelling the functional elements of the office market individually, although such modelling is more common in US studies. Furthermore, most quantitative empirical work lacks an examination of the investment market for property and its intertemporal effects on development activity. In this paper, the authors estimate econometric models for rents, capital values, and development activity in the national office market in Great Britain. The results establish the significant influence of demand-side economic forces in the user market and the importance of use and investment market signals in the determination of office building output. However, the findings also strongly suggest that the investment market needs to be explored in more detail in order to identify and document the nature of the forces which interact in this sector of the office market.
S um m ary. This p aper argu es th at the em ergin g research on territor ial com p etition should b e supp lem ented by an exp licit con sideration of the role of real p rop erty, and p rop erty m ark et p rocess, in shaping u rban com petitiven ess. The com petitive position of urban areas depends d irectly on the existin g stock of prop erty an d the¯ow of n ew or m odi® ed build ings. Equally im portan t, how ever, are the institu tion al form and stru cture of th e prop erty m ark et, and the p rocess by which econ om ic p ressu res for change are tran slated into prop erty m ark et activity . Eviden ce from six con trastin g Europ ean cities dem on strates m ark ed differen ces in the in stitution al environ m en t of their resp ective prop erty m ark ets. These differen ces are exp lored in term s of their poten tial sign i® can ce for the d eterm ination of urban com petitiven ess. The illustrative case stud ies provid e a schedule of prop erty m ark et characteri stics w hich can be used to inform exp lanation s of urb an econ om ic change an d to support the d esign of policies for territor ial com petition .
IntroductionThis article focuses on the operation of use and investment markets in British real estate. In particular it considers whether the British property market is successful in reconciling use and investment decisions and, if so, over what time scale. Insofar as the market fails to achieve consistent use and investment choices, it examines the factors which might prevent adjustment from occurring. In theory these markets should exhibit a close relationship, realigning freely to ensure that investment values reflect accurately both current income generated by the use of property and expectations of future income growth. However, since use and investment decisions are subject to different influences and respond to different motives, there is some reason to believe they might track independent paths in practice.These issues are examined in the case of non-residential property markets which, for clarity, can be broken down into three functional components: use, investment and development (Fraser, 1993a; Keogh, 1991). Use and investment are clearly separable since the market itself commonly distinguishes between the right to use property and the right to hold a purely financial investment interest in property. In Britain, it is this distinction which forms the basis of the mature property investment market which currently exists (Keogh and D'Arcy, 1993). However, even where use and investment rights are embodied in a single property interest, for example an unencumbered freehold giving rights of owner occupation, existing buildings may be subdivided conceptually between use and investment. This reflects the different opportunities afforded by these distinct aspects of property ownership and the fact that the balance between them can be modified to meet changing market requirements. The third element, development, is conceptually distinct but is crucial to the explanation of use and investment markets. It is changes in these markets which stimulate development activity, and development which in turn supplies new user and investor rights into the market. Clearly it has a role to play in determining the balance between use and investment since legal interests in new property can be brought to the market in differing configurations.This breakdown provides the building blocks for the simple model of property market relationships illustrated in Figure 1. Each component of the model represents a market arena in which trade occurs and prices are determined by the interaction of demand and supply. As indicated in Figure 1,The author is grateful to Eamonn D'Arcy, Alan Evans, Bruno Giussanni, Sotiris Tsolacos and other colleagues who commented on an earlier draft, and to Alan Mooney of Sheffield Hallam University who assisted with the revision of data for the final version.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.