A Simultaneous Equation Model of the Office Cycle for the Parisian Region (French)

This paper presents a simultaneous equation model for the office market. We determine supply and demand relationships to link main fundamentals of commercial real estate: net absorption, vacancy rate, real rents and construction. This model is applied to the office market in the Paris region over the 1994-2008 period. Office market cycles are then established according to different employment forecasts from 2009 to 2020. The results show that the employment cycle determines the cycle of office market fundamentals. Interest rates have a limited impact on the decisions of property actors. From 2009 to 2010, empirical results show that real rents may be historically low because of the economic shock in 2008-2009.