Real Estate Rental Payments: Application of Stock-Inventory Modelling

Posted: 7 Oct 2003

See all articles by Philip McCann

Philip McCann

University of Reading - Department of Economics

Charles W.R. Ward

University of Reading

Abstract

This paper analyses the rental term structure taking into account the opportunity costs faced by the tenant for varying lease lengths. The analysis involves the application of a multi-period stock inventory model. The implication of the model is that the term structure of rents is determined by a clientele effect that can bias the occupancy value derived from using rational-expectations in the term structure relationship. The model does however reveal the characteristic stock-inventory U-shaped function that will determine the optimal lease length for a given tenant.

Suggested Citation

McCann, Philip and Ward, Charles W.R., Real Estate Rental Payments: Application of Stock-Inventory Modelling. Available at SSRN: https://ssrn.com/abstract=436947

Philip McCann

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom
+44 (0)118 9314074 (Phone)

HOME PAGE: http://www.rdg.ac.uk/IEAS/staff/McCann.htm

Charles W.R. Ward (Contact Author)

University of Reading ( email )

ICMA Centre,
Henley Business School
Reading, RG6 6AB
United Kingdom
T: +44 (0)118 378 8239 (Phone)

HOME PAGE: http://www.icmacentre.ac.uk/about_us/academic_staff/professor_charles_ward,

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