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

Posted: 1 Feb 2013

See all articles by Maria Ibanez

Maria Ibanez

Independent

Anthony Pennington-Cross

Marquette University - Dept. of Finance

Date Written: 2013

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 studies 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 towards equilibrium while industrial and flex markets adjust back to the long run equilibrium very quickly. For industrial and office types, the speeds of adjustment is substantially faster within quality segments and is strongest for grade A properties.

Keywords: commercial real estate, rent, dynamics, office property, flex property, retail property, industrial property

Suggested Citation

Ibanez, Maria and Pennington-Cross, Anthony N., Commercial Property Rent Dynamics in U.S. Metropolitan Areas: An Examination of Office, Industrial, Flex and Retail Space (2013). Journal of Real Estate Finance and Economics, Vol. 46, No. 2, 2013, Available at SSRN: https://ssrn.com/abstract=2209885

Maria Ibanez

Independent ( email )

Anthony N. Pennington-Cross (Contact Author)

Marquette University - Dept. of Finance ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

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