Property-Specific Factors and the Term Structure of Commercial Office Rents in Central London

48 Pages Posted: 30 Nov 2017

See all articles by Robert Arscott

Robert Arscott

Syracuse University; University of Rochester - Simon Business School, Students

Date Written: November 19, 2017

Abstract

This paper explores the term structure of commercial office rents using a unique data set constructed from marketing materials published by several brokers in the London market. Consistent with prior studies, OLS specifications yield estimates of a significantly positive, time-invariant term structure. However, the effect disappears after controlling for heterogeneity at the property level, suggesting that the term effects uncovered in similar studies may be the result of omitted variables bias. The preference for shorter leases in older, lower quality properties is consistent with landlords maximizing the value of their redevelopment option. Short leases are preferred at times when the property is expected to require redevelopment in the near future.

Suggested Citation

Arscott, Robert, Property-Specific Factors and the Term Structure of Commercial Office Rents in Central London (November 19, 2017). Available at SSRN: https://ssrn.com/abstract=3074062 or http://dx.doi.org/10.2139/ssrn.3074062

Robert Arscott (Contact Author)

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

HOME PAGE: http://https://whitman.syr.edu/directory/showInfo.aspx?nid=rjarscot

University of Rochester - Simon Business School, Students ( email )

Rochester, NY
United States

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