Implicit Forward Rents as Predictors of Future Rents

Peter Englund, Åke Gunnelin, Martin Hoesli and Bo Söderberg

Real Estate Economics, 2004, vol. 32, issue 2, 183-215

Abstract: This paper investigates the relation between the term structure of rents and future spot rents. A rich database of office rental agreements for various maturities is used to estimate the term structure of rents, and from this structure implicit forward rents are extracted. The data pertain to commercial properties in the three largest Swedish cities for the period 1998–2002. A positive relation between forward and spot rents is found in some regions, but forward rents underestimate future rent levels. Another contribution of the paper lies in the area of rental index construction. We provide evidence that rental indices should not only be quality constant (i.e., control for characteristics), but should also be maturity constant.

Date: 2004
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https://doi.org/10.1111/j.1080-8620.2004.00089.x

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Working Paper: Implicit Forward Rents as Predictors of Future Rents (2002)
Working Paper: Implicit Forward Rents as Predictors of Future Rents (2002)
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