National Vacancy Rates and the Persistence of Shocks in U.S. Office Markets

Abstract

In this paper, we develop and estimate a model that decomposes the variance in office vacancy rates into market-specific, time-specific, and random components. The results indicate significant differences in natural vacancy rates across markets. We also find some persistence in deviations from these natural vacancy rates. The analysis is applied to both central business district (CBD) and suburban office markets. We find that natural vacancy rates differ across CBD markets and across suburban markets. Further, the persistence of disequilibrium in one CBD market seems to differ significantly from that in another. This is not shown to be true for suburban markets. Copyright American Real Estate and Urban Economics Association.

Office Rent Processes: The Case of U.S. Metropolitan Markets

“…These persistence rates are consistent with Wheaton and Torto's (1994) estimates for five cities ranging between 0.67 and 0.78. They are also somewhat higher than Voith and Crone's (1988) estimates of persistence rates for downtown office vacancy rates for 17 cities, ranging from −0.13 to 0.79, with the majority of them being higher than 0.50. Because most of the estimated autocorrelation coefficients are rather sizable, it can be argued that prevailing office rents adjust slowly toward the implicit equilibrium rent levels dictated by prevailing market realities (e.g., EMPL, GROWTH, and DISCOUNT).…”

Situations Vacant: A Conceptual Framework for Commercial Real Estate Vacancy

“…Various researchers have examined vacancy; those interested in obsolescence and depreciation (Baum, 1991(Baum, , 1993Baum & McElhinney, 1997;Dunse et al, 2002;Andrew & Pitt, 2006;Crosby & Devaney 2006;Crosby et al 2011); those interested in the adaptation of vacant properties (Barlow & Gann, 1996;Beauregard, 2006;Kincaid, 2002;Heath 2001;Geraedts & van der Voordt, 2003;Agre, 2005;Langston et al, 2008;Remoy, 2010;Remoy and Wilkinson, 2012;Wilkinson and Read, 2011) those who want to map the characteristics of vacancy (Myers & Wyatt, 2004;Katyoka & Wyatt, 2008;Remoy H & Koppels, 2009); those who model the cyclical behaviour of the economy and property (Ball 2003;Barras, 2009;Wheaton 1999); and those who reflect on the medium to long-term rental adjustment process (Blank & Winnick, 1953;Wincott, 1997;Voith & Crone, 1988;Crone, 1989;Grenadier, 1995;Pissarides, 2000Pissarides, , 2005Sanderson, et al, 2006;Miceli & Sirmans, 2013). Concurrently, professional practices regularly also use relative vacancy levels (alongside absorption and take-up, rent and yield) to monitor the performance of local markets (see quarterly updates from international commercial real estate companies, CBRE, Colliers and Cushman and Wakefield, BNP Paribas, Jones Lang LaSalle).…”

Elasticity and urban vacancy: A longitudinal comparison of U.S. cities

“…It has been theorized that if a city cannot grow, it may suffer 'death by strangulation', (Voith & Crone, 1988), or deteriorating central cities/fragmentation of the urban region. Relatedly, Rusk (1993) suggests that urban expansion leads to a strengthening of the overall central city, thereby arresting decline and reducing the number of vacant lots.…”