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Office Market Dynamics in Madrid : Modelling with a Single-Equation Error Correction Mechanism



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Rodríguez Ramírez, Ramiro J. and Sosvilla-Rivero, Simón (2017) Office Market Dynamics in Madrid : Modelling with a Single-Equation Error Correction Mechanism. International Real Estate Review, 20 (4). pp. 451-491. ISSN 2154-8919


Official URL: http://www.umac.mo/fba/irer/papers/current/vol20n4_pdf/03.pdf


This paper seeks to explain the office market dynamics in Madrid by using cointegration models. Specifically, we focus on the equilibrium path of stock, vacancy rate and letting rents, and feedback with two exogenous economic determinants, namely, service sector employment and gross domestic product. We apply for the first time a single-equation error correction mechanism (ECM) to a system of equations for the commercial property market of Madrid and examine its accuracy when compared to the more frequently used classical two-step ECM. The main findings to emerge from our empirical analysis are that rents and vacancy rates react rapidly when they do not correspond to their equilibrium level. Stock, as expected, responds more slowly when it
does not correspond to its long-term path. We draw on quarterly observations for the Madrid market between 2001:Q1 and 2015:Q2.

Item Type:Article
Uncontrolled Keywords:Error Correction Model, Office Market, Single-Equation Error Correction Mechanism.
Subjects:Sciences > Statistics > Commercial research
Social sciences > Economics > Economic indicators
ID Code:60046
Deposited On:20 Apr 2020 12:25
Last Modified:24 Apr 2020 10:27

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