The Cyclic Behavior of the National Office Market

Abstract

A review of the post WWII data on national office building construction and vacancy, reveals a recurrent ten‐twelve year cycle. Specifying and estimating a structural econometric model for these series leads to several conclusions about this commercial real estate sector. First, the office market appears to “clear” quite slowly, and long‐run expectations play an important role in market behavior. Second, supply is definitely more responsive to market conditions than demand. Finally, a six‐year forecast suggests that the current over‐supply in the market will not go away as fast as in the past.

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