The Economic Effects of Owner Distance and Local Property Management in U.S. Office Markets

Forthcoming in the Journal of Economic Geography

56 Pages Posted: 23 Sep 2014 Last revised: 12 Dec 2015

See all articles by Piet M. A. Eichholtz

Piet M. A. Eichholtz

University of Maastricht - Limburg Institute of Financial Economics (LIFE)

Rogier Holtermans

University of Southern California - Lusk Center for Real Estate

Erkan Yönder

John Molson School of Business, Concordia University

Date Written: May 27, 2015

Abstract

Using a large dataset of U.S. offices we analyze the relationship between investors’ distance to their assets and the effective rent of these assets, and study the extent to which property managers can influence this relationship. We construct hedonic rent models to control for other known rent determinants. It turns out that proximity matters: holding everything else constant, investors located closely to their office buildings are able to extract significantly higher effective rents from these assets, especially if these buildings are of low quality. This effect is due to significant differences in occupancy levels. Interestingly, property managers can affect this relationship, mitigating the adverse effects of investor distance on effective office rents. Especially if the owner does not reside in the same state as the building, external property management is of importance, most prominently so for class-B office buildings.

Keywords: Commercial real estate, investor proximity, real estate investment, rental value, property management

JEL Classification: G11, R12, R32, R33

Suggested Citation

Eichholtz, Piet M. A. and Holtermans, Rogier and Yönder, Erkan, The Economic Effects of Owner Distance and Local Property Management in U.S. Office Markets (May 27, 2015). Forthcoming in the Journal of Economic Geography, Available at SSRN: https://ssrn.com/abstract=2498547 or http://dx.doi.org/10.2139/ssrn.2498547

Piet M. A. Eichholtz

University of Maastricht - Limburg Institute of Financial Economics (LIFE) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883648 (Phone)
+31 43 3258530 (Fax)

Rogier Holtermans (Contact Author)

University of Southern California - Lusk Center for Real Estate ( email )

650 Childs Way
Los Angeles, CA 90089
United States
+15103098392 (Phone)

Erkan Yönder

John Molson School of Business, Concordia University ( email )

Montreal
Canada

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