Graduation Presentation Delft, University of Technology 1st Mentor: Philip Koppels 2nd Mentor: Hilde Remøy Commissoner: Remon Rooij Lab coordinator: Theo van der Voordt Student number: 1382136 Date: 21-05-2014 In-transparency of the Amsterdam office market: The underlying incentive and effective rental price development A quantitative research into the market dynamics and spatial segmentation of the Amsterdam office market over the period 2002- 2012 1 /50
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Graduation Presentation Delft, University of Technology 1st Mentor: Philip Koppels 2nd Mentor: Hilde Remøy Commissoner: Remon Rooij Lab coordinator: Theo.
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Graduation PresentationDelft, University of Technology1st Mentor: Philip Koppels2nd Mentor: Hilde RemøyCommissoner: Remon RooijLab coordinator: Theo van der VoordtStudent number: 1382136Date: 21-05-2014
In-transparency of the Amsterdam office market:
The underlying incentive and effective rental price development
A quantitative research into the market dynamics and spatial segmentation of the Amsterdam office market over the period 2002-2012
1 /50
I. Problem introduction
II. Problem definition, Approach & Methods
III. Theoretical framework
IV. Empirical research
V. Conclusions
VI. Reflection on outcomes
Content
Content | I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection 2 / 50
2. In-transparency/Asymmetric information availability
1. Segmentation / Sub-market behaviour
2A
2B
Problem introduction
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
4 / 50
Explanation ?
• 1. Self-sustaining system
Other consequences of limited/in-transparency
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
5 / 50
• 3. Research implications
• 2. Barrier third parties & Competitive functioning market
I. Problem introduction
II. Problem
definition
III.Theoretical framework and conclusions
IV. Empirical research
V. Conclusions
VI. Reflection on outcomes 6 / 50
• 1. To what extend does a price index based on face rents, provide an accurate reflection of the market dynamics in the Amsterdam Office market over the period 2002 – 2012?
• 2. Do spatial market segments differentiate in market dynamics in the Amsterdam office market over the period 2002-2012?
Main research questions
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
7 / 50
Approach
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
8 / 50
Supply dataSupply dataTransaction data
Property database
Vacancy data
Supply data
Approach | Datamining process
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
9 / 50
GIS Data
BAG Database
Office Stock database
Own Research Data
Approach
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
10 / 50
Approach | Data analyses (1/3)
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
11 / 50
Study 1 Study 2Average developmentIncentives & effective rents+ market comparison
Face rental price
Incentive
Effective rental price
Testing relations between variables - by development
|Method | Analyzing development
|Method | (Lagged) Correlation
VacancyVacancy
IncentivesIncentives
Rental pricesRental prices
Eco. indicators
Eco. indicators
Approach | Data analyses (2/3)
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
42 / 50
Post-Hoc test & Development analysis Correlation outcomes
Study 5: “Transparency” analysis
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
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Transaction analysis
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
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• Connected 238 of 454 transactions
• Deleted: transactions > 106 final accurate transactions
• Average difference 20%
I. Problem introduction
II. Problem
definition
III.Theoretical framework and conclusions
IV. Empirical research
V. Conclusions
VI. Reflection on outcomes 45 / 50
1. “To what extend does a price index based on face rents, provides an accurate reflection of the market dynamics in the Amsterdam Office market over the period 2002 – 2012?
• Face rental prices – effective rental price (development): diff: 16-23 % (Study 1); diff: 20% (Study 5)• Underlying development; similar correlation | Prime rent development not representative for total market
(Study 1)• Effective rents vs. face rental indices more cyclical and volatile (Study 2)• Sig. correlation face rents & vacancy and real eff. rents & vacancy similar rental adjustment / market
dynamics (Study 3)
Overall conclusion: index based on (real) effective rental price more accurate reflection of market dynamics
Conclusions
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
46 / 50
2. “Do spatial market segments differentiate in market dynamics in the Amsterdam office market over the period 2002-2012?”
- Incentives : - Significant different in height- No market segmentation in development; similar correlation in incentive
development- Surrounding business districts correlated; Centre / Sloterdijk
- Effective rental price: - Significant differences in height sub-office and business districts (nominal)- Yes, partial market segmentation in development (Stevenson, 2007)- West, North and South-East correlated- Surrounding business districts in City-district South-East correlated
Conclusions
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
• Study 1: % Incentives and effective rental price– Higher incentives?– Market comparison; few transactions
• Study 2: Hedonic price index– Low R Square (max. 0,33) in research– Cyclicality and market realistic reflection
might change in more accurate model• Study 3: Vacancy & Rents
• Other vacancy rates; different outcomes• No difference from natural vacancy used
Reflection on outcomes
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
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• Rental adjustment equation: stronger correlation with real effective rents; possible explanations:• Small amount of transactions LFA >
500 m2• Vacancy existing offices instead of
entire market• Current scale level not most
appropriate
• Study 4: Spatial segmentation• No diff. above and below 500 m2• Post-Hoc only diff. between some
variables
• Study 5: Face and effective rental price- Only 106 transactions; unsure whether
transactions are well-connected- Only indication of total difference
Questions & Answers?
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
50 / 50
• Data analysis & Reliability check– Transaction data Municipal Tax Office
• Rental questionaire; incentives, rental prices – to tenant instead of landlord
• Only “accepted” transactions used in this research• Goal: test its market conformity
• 5 step Screening method– Step 1: Controlling/Checking input – Step 2: Consistency analysis– Step 3: Screening of the rental value– Step 4: Reliability check– Step 5: Assigning a particular status/condition to the transaction
Main rejecting reasons:• Improbable sale or rental price
- forced auction sales, (anti-) squatters, income requirement, sale-leaseback, rental price extension, temporary lease obligation with end-date, lower rent due rental defects of property, short rental contract, large investments in object
• (Possible) Family transaction
• Multiple disciplines in rent
• Objects which are out of use
• (Only a parking lot is rented)
Approach | Data Validity
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection
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Data reliability checkData reliability check
Recommendations for further research
I – Problem introduction | II – Problem definition | III -Theoretical framework | IV - Empirical research | V – Conclusions | VI – Reflection