Development of Hedonic Office Rent Indices (eBook)

Dr. Simon Kempf wrote his dissertation at the Real Estate Management Institute (REMI) of the EBS European Business School. 

PREFACE OF THE EDITORS 6
PREFACE OF THE AUTHOR 8
CONTENT OVERVIEW 9
APPENDIX 12
CONTENT 13
LIST OF FIGURES 21
LIST OF TABLES 24
LIST OF ABBREVIATIONS 37
LIST OF SYMBOLS 39
1 Introduction 42
1.1 Research Problem 42
1.2 Aim and Objectives 49
1.3 Research Approach and Methodology 50
1.3.1 Research Approach 50
1.3.2 Research Methodology 53
1.3.3 Theoretical Framework 55
1.4 Relevance of the Study 57
1.5 Outline of the Research 60
2 Theory of the Construction of Hedonic Price Indices 64
2.1 Hedonic Function (Estimation Stage) 64
2.1.1 Demand or User Side 66
2.1.2 Supply, Producer, or Landlord Side 68
2.1.3 Market Equilibrium 70
2.1.4 Interpretation of Regression Coefficients in Hedonic Functions 71
2.2 Construction Methodology for Hedonic Price Indices (Composition Stage) 75
2.2.1 Time Dummy Variable Method 75
2.2.2 Adjacent Period Dummy Variable Method 76
2.2.3 Characteristics Price Index Method 76
2.2.4 Comparison and Evaluation of the Index Construction Method 78
2.3 Chapter Summary 79
3 Fundamentals of the Office Property Market and the Implications for Hedonic Price Indices 81
3.1 Characteristics of Office Property 81
3.1.1 Characteristics of Real Estate 81
3.1.2 Office Property and Its Differences from Other Property Types 82
3.2 Defining Principles 86
3.2.1 Rent 86
3.2.2 Price 88
3.2.3 Value 89
3.2.4 Worth 90
3.3 Office Market Dynamics 91
3.3.1 User Market 91
3.3.2 Financial Asset Market 93
3.3.3 Development Market 94
3.3.4 Land Market 96
3.3.5 Adjustment Processes for the Office Property Markets and the Importance of Rent 97
3.4 Office Property Market Efficiency 99
3.4.1 Definitions and Forms of Property Market Efficiency 99
3.4.2 Causes of Office Property Market Inefficiency 100
3.4.3 Implications of Inefficient Office Property Markets 101
3.5 Real Estate Office Rental Cycles 102
3.5.1 Causes for Real Estate Cycles and Cycle Phases 102
3.5.2 Office User and Landlord Behaviour during Cycle Phases and its Implication for Hedonic Price Indices 108
3.6 Chapter Summary 110
4 Office Rent Determinants 112
4.1 International Literature Review 112
4.1.1 Location Factors and Spatial Relationships 112
4.1.2 Building Factors 126
4.1.3 Equipment and Layout Factors of Office Space 135
4.1.4 Lease Factors 136
4.1.5 Market Situation and Bargaining Power 145
4.2 German Office Property Market 148
4.2.1 City Profile of Major Office Property Markets 148
4.2.2 Office Market Data and Research Situation 160
4.2.3 Legal and Economic Foundation of German Office Leases 162
4.3 Survey among German Real Estate Professionals 167
4.3.1 Methodology and Statistical Tests 167
4.3.2 Empirical Results 174
4.4 Implications for the Development of Hedonic Office Rent Indices 186
4.4.1 Selection of Variables 186
4.4.2 Location Delimitation of German Office Markets 187
4.5 Chapter Summary 188
5 Hedonic Analysis of German Office Rents 190
5.1 Data Source 190
5.1.1 Data Provider and Representativeness of Lease Contract Data 190
5.1.2 Representativeness of Lease Contract Data (Initial Dataset) 192
5.1.3 Database Structure 193
5.2 Step 1A: Data Mining 195
5.2.1 Variable Selection (Initial Dataset to Working Dataset 1) 196
5.2.2 Plausibility Checks and Data Transformation (Working Dataset 1 to Working Dataset 2) 196
5.2.3 Descriptive Statistics of Working Dataset 2 204
5.3 Step 1B: Data Mining - Missing Value Analysis 207
5.3.1 Types of Missingness 208
5.3.2 Strategies for Handling Missing Data 210
5.3.3 Missing Value Analysis 217
5.3.4 Adopted Strategies for Handling Missing Data 219
5.4 Step 2: Hedonic Function 227
5.4.1 Hypotheses, Econometric Models and Statistical Tests 227
5.4.2 Identification of the Best Functional Form 240
5.4.3 Empirical Findings 246
5.5 Chapter Summary 261
6 Development, Application and Evaluation of Hedonic Office Rent Indices 264
6.1 Development of Hedonic Office Rent Indices 264
6.1.1 Choice of Index Formula and Weighting Procedure 264
6.1.2 Calculation of Hedonic Office Rent Indices 266
6.1.3 Selection of the Comparative Office Rent Indices - German Society of Property Researchers Office Rent Indices (GIF-ORIX) 267
6.2 Application 268
6.2.1 Interregional Rent Change 269
6.2.2 Intertemporal Rent Change / Comparison of Indices 272
6.2.3 Fields of Application for Real Estate Practitioners 283
6.3 Evaluation and Comparison with German Society of Property Researchers Office Rent Indices 286
6.3.1 Evaluation Criteria 286
6.3.2 Evaluation and Comparison 288
6.4 Implications for Real Estate Practitioners 291
6.5 Chapter Summary 292
7 Conclusion 294
7.1 Summary of the Findings 294
7.2 Limitations of the Study 300
7.3 Suggestions for further Research 301
Appendix 303
Bibliography 392