Evaluation and monitoring of office markets

Abstract

The main aim of this study is to understand the relevant variables underlying the mechanisms of office supply, office demand, and market equilibrium to support municipal decision-making processes. Public decisions, at the local level, are expected to ensure that office prices are kept under control, avoiding the speculative behaviour of real-estate agents, and are able to prepare appropriate forms of intervention over supply and demand, in the short term as well as in the medium or long term. In order to reach these goals an identification of the most relevant variables that shape office supply and office demand and their respective elasticities is carried out, and ongoing supply, demand, and market equilibrium hedonic appraisal models are developed. These models allow for: (1) the computation of the influence of the identified variables on office prices (per m2); (2) the measurement of the price gaps between demand and supply according to location; and (3) the characterization of market balances. Despite short-term adjustments between supply and demand functions, in search of market equilibrium, balances are ephemeral because they are modelled by different factors that change over time. However, these models can be adjusted and applied to different moments in time and extended to other urban contexts. As such they are able to support municipal decisions concerning land-use office location and management.