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The Rent Adjustment Process and the Natural Vacancy Rate of Office Building in Seoul: Difference in Office Size

Min, Seonghun 1 Koh Sung Soo 1

1건국대학교

Accredited

ABSTRACT

The natural vacancy rate is one of the key elements to understand the rent adjustment process, the study on the issue, however, has not been so active in Seoul office market because of the lack of time series data. This study establishes three models, 1) fixed value, 2) moving average and 3) optimal inventory, and analyzes rent adjustment process by office size using quarterly data from 2003 on Seoul office market. The empirical results suggest that the natural vacancy rate mechanism works differently by office size. In the large-sized office group fixed value model is more significant amid both fixed value and optimal inventory models are working. In the middle-sized office group all the three models work and are significant. In the small-sized office group, on the contrary, any model is not significant. That means the rent of large-sized office regresses to fixed target vacancy rate, the rent of middle-sized office moves actively clearing the excess vacancy rate between current vacancy rate and natural vacancy rate which is responding sensitively to the change of market variables, and the rent of small-sized office is not explained through the three models above.

Citation status

* References for papers published after 2022 are currently being built.