Academic journal article Real Estate Economics

Office Rent Processes: The Case of U.S. Metropolitan Markets

Academic journal article Real Estate Economics

Office Rent Processes: The Case of U.S. Metropolitan Markets

Article excerpt

This paper synthesizes elements of the traditional and contemporary theory of real estate markets to formulate an empirical framework for exploring metropolitan office rent processes. Such a framework is then applied to the analysis of office rents across 18 U.S. office markets during 1986-1995. The empirical results underscore the sluggishness of rental adjustments, highlight the extent of rental disequilibria across markets, and uncover the role of office employment factors (such as size, diversity, spatial organization, growth rates, and volatility), construction costs, interest rates, amenities, and zoning in shaping interarea differentials in the equilibrium component of office rents.

Foreward

The paper that follows is the last one written by my wife, Professor Rena Mourouzi-Sivitanidou, who prematurely passed away from cancer on June 30, 2000. Rena was a most dedicated and extremely hard-working researcher and educator who went out of her way to help each and every one of her students. She was a compassionate, knowledgeable, intelligent, and motivated professor; an ideal teacher blending academic excellence with personal integrity; a true friend with whom students shared their hopes, their fears, and their aspirations; and a role model that had a positive impact on their lives. Rena's unparalleled devotion and commitment to her students and her outstanding teaching performance won her the Best Professor Award in each and every one of the nine years she taught in the Planning and Development Program at the University of Southern California (USC).

After completing her undergraduate studies at the National Technical University of Athens in Greece, Rena entered the Planning program at the Georgia Institute of Technology in Atlanta, where she received her Masters in City Planning. She completed her graduate studies in 1991 at the Department of Urban Studies and Planning at MIT, where she received her Ph.D. During her doctoral studies she focused on urban and regional economics, with emphasis on urban, land, and real estate economics. After completing her doctoral work, she was hired as an Assistant Professor at the School of Urban and Regional Planning at USC.

Rena's research was groundbreaking. She combined rigorous theoretical modeling with sound empirical analysis to explore critical issues in the field of urban and real estate economics. Her work has considerably advanced our knowledge and understanding of the workings of the contemporary urban real estate and land markets by systematically and meticulously analyzing intraurban location patterns and spatial pricing in office and industrial markets. In addition, her research has advanced our understanding of aggregate real estate market behavior, especially as far as capitalization rates, construction investments, and rent processes are concerned. The analytical and empirical findings of Rena's research are not only of interest to academicians in the fields of urban economics, real estate, planning, and development, but also to professionals in both the public and private sectors.

Despite her short academic life of nine years, Rena forged a deep imprint within the academic and research community, as well as within the hearts of the people that knew her. Her persistent pursuit and achievement of excellence; her grace, nobility, compassion, and humbleness; and her integrity, courage, and unparalleled devotion to her family, her profession, and her students will be always remembered.

Petros Sivitanides

Introduction

Available data throughout the 1980s and most of the 1990s suggest that wide and persistent variations in office rents exist across U.S. metropolitan markets. (1) Such differentials have largely been overlooked by the existing real estate research, which has already explored interurban differences in residential prices and intraurban variations in both residential and nonresidential rents. …

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