THE SHAKE OUT OF THE OFFICE MARKET: SPATIAL CONCENTRATION AND QUALITATIVE SEGMENTATION

Jo. P. Soeter and Philip W. Koppels

ERES from European Real Estate Society (ERES)

Abstract: Since 2001 the Dutch office market is dominated by oversupply. The growth of the stock in use stagnates and new office production is completely available for replacement of existing stock. Due to this development, in combination with limited demolition and limited transformation, vacancy of outdated offices has increased to 13 percent of total office stock. Despite the expectations by owners and investors that the second-hand office market will revive, most of the vacant outdated office buildings will remain out of use. From a spatial point of view, office stock in use is concentrated in The Randstad, especially in the Amsterdam region. This reduces office investment performance outside the concentrations. However, the asset market did not react on the deteriorated market conditions with higher target yields. Increased vacancy levels and rental risks seem to be compensated by the low real cost of ownership due to low real interest. The relation chain from space market to asset market and to construction market ultimately leads to an unbalance of supply and demand of stock. The oversupply of offices is an advantage for users, however from social, environmental and owners/investors point of view the financial and social loss is a growing problem. From Dutch point of view modelling the office market has to be refined for price inelasticity of space demand, non-rational target yields, and weak influence of construction market conditions and segmentation of the office stock.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2008-01-01
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