ERES2010 page. Chihiro SHIMIZU 2010 [email protected]1 Estimation of Redevelopment Probability using Panel Data -Asset Bubble Burst and Office Market in Tokyo- 24.June.2010 European Real Estate Society, Annual Conference 2010 SDA Bocconi School of Management Chihiro Shimizu(Reitaku University) Koji Karato(Toyama University) Yasushi Asami(University of Tokyo)
27
Embed
ERES2010 page. Chihiro SHIMIZU 2010 [email protected] 1 Estimation of Redevelopment Probability using Panel Data -Asset Bubble Burst and Office.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Estimation of Redevelopment Probability using Panel Data
-Asset Bubble Burst and Office Market in Tokyo-
24.June.2010European Real Estate Society, Annual Conference 2010
SDA Bocconi School of Management
Chihiro Shimizu(Reitaku University)
Koji Karato(Toyama University)
Yasushi Asami(University of Tokyo)
ERES2010
page. 2
Macro Dynamic Trend of House Price Indices
0.0
50.0
100.0
150.0
200.0
250.0
300.0
1983
/01
1983
/09
1984
/05
1985
/01
1985
/09
1986
/05
1987
/01
1987
/09
1988
/05
1989
/01
1989
/09
1990
/05
1991
/01
1991
/09
1992
/05
1993
/01
1993
/09
1994
/05
1995
/01
1995
/09
1996
/05
1997
/01
1997
/09
1998
/05
1999
/01
1999
/09
2000
/05
2001
/01
2001
/09
2002
/05
2003
/01
2003
/09
2004
/05
2005
/01
2005
/09
2006
/05
2007
/01
2007
/09
2008
/05
Tokyo_Condo
Tokyo_SingleHouse
LosAngeles
NewYork
London
HongKong
Melbourne
ERES2010
page.
1.Motivations: The purpose of this research
• 1.What happened in the Real Estate Market of Tokyo during the “lost decade” ?
• -What have we learned from these ups and downs in the real estate market?
• -Have recent real estate investment risk management efforts incorporated these lessons?
• 2. What are economic conditions for the redevelopment/conversion of buildings?
• - In the 1980s bubble, repeated rounds of speculative real estate transactions targeted urban areas in particular, and numerous lots were converted in poor ways.
• - Upon the collapse of the bubble, poorly located office spaces and the pencil buildings built on residential tracts suffered high vacancy rates.
3
ERES2010
page.
Distance from CBD
RentOffice
Residential
Excess Return
Opportunity Loss
Rent Curve :
4
Boundary
ERES2010
page.
Hedonic Index of Office rent and Residential Rent
5
0
2000
4000
6000
8000
10000
12000
14000
Y19
86Q
1Y
1986
Q4
Y19
87Q
3Y
1988
Q2
Y19
89Q
1Y
1989
Q4
Y19
90Q
3Y
1991
Q2
Y19
92Q
1Y
1992
Q4
Y19
93Q
3Y
1994
Q2
Y19
95Q
1Y
1995
Q4
Y19
96Q
3Y
1997
Q2
Y19
98Q
1Y
1998
Q4
Y19
99Q
3Y
2000
Q2
Y20
01Q
1Y
2001
Q4
Y20
02Q
3Y
2003
Q2
Y20
04Q
1Y
2004
Q4
Y20
05Q
3Y
2006
Q2
Y20
07Q
1Y
2007
Q4
Y20
08Q
3Y
2009
Q2
Office
Residential
ERES2010
page.
2.Theoretical Framework : Conditions for redevelopment
• Wheaton (1982) assumes that housing stock developed at one point in time exists at multiple time points.
6
Rent Rent
• Post Redevelopment Iincome
• Capital Cost
• Existing Income
ERES2010
page.
Empirical Analysis;
• Rosenthal and Helsley (1994) used an empirical analysis to verify Wheaton’s conditions for redevelopment.
• McGrath (2000) conducted an empirical analysis of commercial real estate by considering redevelopment conditions while taking into account soil pollution risks of land for redevelopment.
7
ERES2010
page.
Panel Data Analysis: Office Use to Residential Use
• Panel Data 1991→1996→2001• Bubble Bursting Period
• Conversion from Office Use to Residential Use• a)- The conversion of offices into housing apparently occurs after
landowners acknowledge land-use failures and closely examine profitability of land when it is used for office buildings and for housing.
• b)- We can ignore variables of urban planning constraints in the office-to-housing conversion case.
itu : error component : coefficient of the common constant term i : each group’s random effect it : random variable
ERES2010
page.
3. Data• Land uses and use conversions• There is about 1.7 million(1,665,152) buildings Metropolitan Area.
12
ERES2010
page.
3. Data• Land uses and use conversions
13
ERES2010
page.
Figure 1. Office Buildings (1991) = 40,516
14
Of the 40,516 office buildings that existed in 1991, 2,607 were redeveloped or converted into housing by 1996, with the remaining 37,909 buildings used still for offices.
Of the office buildings that existed in 1996, 3,576 were redeveloped or converted into housing by 2001. The remaining 36,940 office buildings remained as offices.
ERES2010
page.
Table 2. Descriptive Statistics of Office and Housing Rent Data
Individual Number of groups 40516 15055 9949 15234
Wald (chi squared) 1160.1 [.000]
98.8 [.000]
315.3 [.000]
242.8 [.000]
Log likelihood −15071.5 −2567.9 −3792.0 −8043.3
Note. Standard errors are presented in parentheses. The dependent variable in the probit equals one if the parcel is redeveloped, zero if parcel remains in its current use. is a correlation coefficient of random effect. Wald statistics test null hypothesis which all parameter is zero. Brackets [ ] are p-value for Wald test.
ERES2010
page.
Table 7. Probit Estimation of Redevelopment Probability
Individual Number of groups 40516 15055 9949 15234
Wald (chi squared) 1160.1 [.000]
98.8 [.000]
315.3 [.000]
242.8 [.000]
Log likelihood −15071.5 −2567.9 −3792.0 −8043.3
Note. Standard errors are presented in parentheses. The dependent variable in the probit equals one if the parcel is redeveloped, zero if parcel remains in its current use. is a correlation coefficient of random effect. Wald statistics test null hypothesis which all parameter is zero. Brackets [ ] are p-value for Wald test.
ERES2010
page.
5.Conclusion and Future work:
• This is the first empirical study using panel data to analyse conditions for redevelopment.
• We found that if random effects are used to control for individual characteristics of buildings, the redevelopment probability rises significantly when profit from land after redevelopment is expected to exceed that from present land uses. This increase is larger in the central part of a city.
• Limitations stem from the nature of Japanese data limited to the conversion of offices into housing. In the future, we may develop a model to generalize land-use conversion conditions.
24
ERES2010
page.
Tokyo Special District:
25
Tokyo Special District: Area: 621.97 square kilo-meter Population: 8,742,995(All Japan:127,510,000)
Data source: Real estate advertisement magazine (1986-2008: 23 years)
ERES2010
page.
Panel Data Analysis: Office Use to Residential Use
• Conversion from Office Use to Residential Use
• a)- The conversion of offices into housing apparently occurs after landowners acknowledge land-use failures and closely examine profitability of land when it is used for office buildings and for housing.
• b)- We can ignore variables of urban planning constraints in the office-to-housing conversion case.
• c)- We can ignore land intensification costs.
26
ERES2010
page. 27
coef. t-value
Constant term 24.140 2.673
log K 0.390 10.704
log L 0.670 15.077
Annual trend −0.011 −2.396
Ward dummy Yes
Adj. R2 0.959
Table 4. Floor Space Production Function
Note: The annual trend indicates an estimated coefficient of the trend term representing the time of completion
LAKQCobb–Douglas Production Function:
Q: stands for the total floor space, K: for construction costs and L :for the site area size