Forecasting the Manhattan Office Market with a Simultaneous Equation Model

34 Pages Posted: 25 Oct 2004

See all articles by Franz Fuerst

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

Date Written: October 22, 2004

Abstract

In order to explore the predictability of the Manhattan office market with an econometric model, a three-stage system of simultaneous equations is utilized in this paper. The first stage incorporates the office space market in terms of occupied space and absorption of new space. The second stage captures the adjustment of office rents to changing market conditions and the third stage specifies the supply response to market signals in terms of construction of new office space.

The empirical estimation demonstrates that the New York office market reacts efficiently and predictably to changes in market conditions, especially to the economic shock generated by the 9/11 attacks. The significance of the estimated parameters underscores the general validity and robustness of the simultaneous equation approach. The modifications of the standard model, notably the inclusion of sublet space in the rent equation, contributed considerably to improving the explanatory power of the model.

Finally, a forecast of the Manhattan office market until 2010 is presented under three different scenarios of exogenously determined office employment.

Keywords: Simultaneous equation model, econometric forecasting

JEL Classification: R33, C32, C53

Suggested Citation

Fuerst, Franz, Forecasting the Manhattan Office Market with a Simultaneous Equation Model (October 22, 2004). Available at SSRN: https://ssrn.com/abstract=608703 or http://dx.doi.org/10.2139/ssrn.608703

Franz Fuerst (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

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