Price diffusion across international private commercial real estate markets

63 Pages Posted: 13 Dec 2021

See all articles by Zhu Bing

Zhu Bing

affiliation not provided to SSRN

Dorinth van Dijk

De Nederlandsche Bank; Massachusetts Institute of Technology (MIT)

Colin Lizieri

University of Cambridge - Department of Land Economy

Date Written: November 25, 2021

Abstract

We explore spatio-temporal aspects of global commercial real estate price movements and consider two channels where prices may spill over between global cities: (i) through a dominant market and (ii) through “neighbouring” markets. Neighbouring, here, is defined as the degree of overlap in ownership. We document significant ripple effects from both channels in commercial real estate prices across 22 markets from 2005 to 2019. In particular, London is found to be the dominant market and price shocks significantly diffuse across other global
cities in the short- to medium-run. Additionally, shocks from neighbouring markets are important in the short- to medium-run. In the long-run, macroeconomic factors play a much more critical role. The spillover effect through both channels is more predominant during the financial crisis. In fact, the dominant market channel is mostly driven by the financial crisis. By contrast, the neighbouring market channel is significant throughout the economic cycle.

Keywords: Commercial Real Estate, Prices, Spillovers, Spatial Dependence, Global Markets

JEL Classification: R3, R12

Suggested Citation

Bing, Zhu and van Dijk, Dorinth and Lizieri, Colin M., Price diffusion across international private commercial real estate markets (November 25, 2021). De Nederlandsche Bank Working Paper No. 732, Available at SSRN: https://ssrn.com/abstract=3981421 or http://dx.doi.org/10.2139/ssrn.3981421

Zhu Bing (Contact Author)

affiliation not provided to SSRN

Dorinth Van Dijk

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Colin M. Lizieri

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/staff/profiles/clizieri.htm

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