Is There Momentum in Office Rental Growth? An Empirical Investigation and Test for Space Market Efficiency

Jun Chen, Ruijue Peng and Susan Hudson-Wilson

Journal of Real Estate Practice and Education, 2007, vol. 10, issue 1, 1-23

Abstract: This paper examines the momentum effect, or the persistence, in office rental growth rates. A set of previously unexplored cross-sectional time-series data from fourteen metropolitan office markets in the United States is examined. The findings indicated that the momentum effect exists but the degree of rental growth persistence varies significantly across markets. The findings also indicate that space market variables are more important than capital market variables in determining the implicit equilibrium rents. Furthermore, the out-of-sample forecast shows that a parsimonious model structure behaves better and produces more stable and realistic rent forecasts than would a more exhaustive structure.

Date: 2007
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DOI: 10.1080/10835547.2007.12091624

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