Projections in the Industrial Property Market using a Simultaneous Equation System

Robert Thompson and Sotiris Tsolacos

Journal of Real Estate Research, 2000, vol. 19, issue 2, 165-188

Abstract: This article is the winner of the Industrial Real Estate manuscript prize (sponsored by the Society of Industrial and Office REALTORs) presented at the 1999 American Real Estate Society Annual Meeting.A three-equation simultaneous system is used to model the industrial property market in Great Britain. Strong relationships are found between new industrial building supply and both real rents and construction costs, and between rents, industrial floorspace availability and the gross domestic product. The performance of ex post simulations of new building supply, rents and floorspace availability are satisfactory with the exception of rent simulations post 1993. The central forecast of the model indicates a quiet market until 2001 (lower level of new supply, constant levels of real rents and increasing availability of industrial space) but a more active market in 2002 and 2003. This study suggests that simultaneous equation models can prove useful alternative tools in analyzing the industrial property market and generating forecasts both at the aggregate and more localized level of analysis.

Date: 2000
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DOI: 10.1080/10835547.2000.12091014

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