The Office Market in Vienna: An Analysis of Trends and Cycles

Peter Sittler and Alexander Bosak

ERES from European Real Estate Society (ERES)

Abstract: In the economic situation the existence of real estate cycles is evident. Especially the office market is influenced by several micro- and macroeconomic factors. In contrast to the housing market rents the office market rents do not rise significantly in Vienna. They remain constant or even declined over the years.In the first part of the paper a brief overview to the theory of real estate cycles and the theoretical approach of analysing real estate cycles is given.In the second part of this paper a structural time-series methodology is used to predict the prime rent and real estate cycles in the Viennese office market. As a result two types of predicting long-time movement models are given. A correlation of delayed vacancy rates time series shows a cycle length of the Vienna office market of nine years. The model is based on data from CBRE Austria supplemented by own research. The investigation on real estate cycles in the Viennese office market has shown that a simplified model based on the vacancy rate and the growth rate of real gross domestic product (GDP) will also create valid results. From these calculations it can be determined that the change in the vacancy rate progresses the change in real prime rent by three years.In the third part recommendations for the management of real estate companies are given, which are based on the theoretical backgrounds and the empirical analysis. How investors or asset managers operate in office markets is highly depending on the occurring office market cycles for example in order to determine the optimal time of lease renewal.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2015-07-01
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