Office market response to earthquake risk in New Zealand

Olga Filippova, Michael Rehm and Chris Dibble

Journal of Property Investment & Finance, 2017, vol. 35, issue 1, 44-57

Abstract: Purpose - With the marked increase in the awareness of earthquake risks following the Canterbury earthquakes, the purpose of this paper is to assess if the reassessment of risk has influenced rents for office accommodation in commercial buildings. Two contrasting office markets are examined: New Zealand’s largest market within a high-risk earthquake zone – Wellington, and the country’s largest market within a low-risk zone – Auckland. Design/methodology/approach - A sample of 252 leasing transactions were collected from a proprietary database of Colliers International, one of the largest commercial brokerage firms in New Zealand. Hedonic pricing models were developed to isolate the effects of building seismic strength on office rents. Findings - Wellington office market rents tend to increase with higher earthquake strength (New Building Standard) ratings, all other factors held equal. In contrast, rents in Auckland, a low-risk earthquake area, do not exhibit such price effects. Practical implications - The study provides estimates of the economic value associated with seismic retrofits which are vital for building owners’ decision making who must weigh retrofit costs against the economic benefits of doing so. Originality/value - This study provides the first empirical analysis of office rents in New Zealand and the first quantitative analysis, internationally, of the impact of earthquake risk on commercial rents.

Keywords: New Zealand; Hedonic modelling; Rent; Office space; Earthquake risk; Earthquake-prone buildings (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:jpif-05-2016-0026

DOI: 10.1108/JPIF-05-2016-0026

Access Statistics for this article

Journal of Property Investment & Finance is currently edited by Nick French

More articles in Journal of Property Investment & Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().