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A Study on the Relationship between Rent and Vacancy Rate in the Office Rental Market:a Time Series Analysis

  • Korea Real Estate Review
  • 2012, 22(3), pp.215-233
  • Publisher : korea real estate research institute
  • Research Area : Social Science > Law > Law of Special Parts > Law of Real Estate

Chun Haejung 1

1중앙대학교

Accredited

ABSTRACT

This research used time series data from the 3rd quarter of 1999 to the 1st quarter of 2012 to assess office rents and vacancy rates in Seoul, city center, Gangnam, Yeoui-do; and to observe the dynamic correlation between the office rents and vacancy rates and the macroeconomic variables affecting office rents and vacancy rates from a theoretical and empirical perspective. After confirming that there was a long run equilibrium relationship between the variables, a Vector Error Correction Model (VECM) was used to conduct an impulse response analysis and a variance decomposition analysis. Results of the analysis showed differences across locations however, the following variables showed the following relationship respectively in regards to office rent: positive (+) for domestic actual total production, negative (-) for vacancy rate, positive (+) for corporate stock profitability, and positive (+) for office rent itself. Furthermore, the following variables showed the following relationship respectively in regards to vacancy rate: positive (+) for office rent, negative (-) for employment, positive (+) for area of construction permit, and positive (+) for vacancy rate itself. We also confirmed that thoretical models and empirical results were the same and office rent and vacancy were affected by macroeconomic variables, that their interrelationship was significant. There were differences across locations in regards to the results of the theoretical model and empirical analysis, however, most results coincided with each other, and we were able to confirm that economic stimulation enhanced office rent levels and decreased office vacancy rates.

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