Presentation on theme: "*Qiulin Ke and **Michael White"— Presentation transcript:
1The Evolution of Chinese Office Markets: A Comparison of Beijing and Shanghai *Qiulin Ke and **Michael White*Nottingham Trent University, Nottingham**Heriot-Watt University, Edinburgh
2Motivation for Research Global investors have been searching for higher returns beyond their local markets.Emerging markets in Chinese cities have been increasingly targeted for investment opportunities.Beijing and Shanghai (Tier 1 cities (JLL, 2008)) have the largest investable real estate assets in China and are the most transparent markets in China.Due to the emergent status of these markets, empirical studies on Chinese office markets are rare.
3Compare and contrast rental adjustment in the Beijing and Shanghai; Research ObjectivesCompare and contrast rental adjustment in the Beijing and Shanghai;Examining the amplitude of fluctuation in rents and vacancy rates in the process of market adjustment;Testing the role played by foreign direct investment.
4Methodology Demand is a function of rent and economic activity Demand equals non vacant space in equilibrium
21Market Structure and Vacancy Rates Following Voith and Crone (1988), and Grenadier (1995)The final model permits testing hypotheses of city specific (α), time specific (β) and market specific shocks (ρ) to the vacancy rate.
22Impact of City, Time, and Market City ComponentTime ComponentMarket ComponentBeijing*****Shanghai*****The time component is insignificant in both cities.City and market components are significantThe market component suggests slow adjustment to shocks
23ConclusionsCointegration tests support evidence of a valid long run relationship in Beijing and Shanghai office markets.The error correction coefficient implies adjustment to market imbalance in both markets.Shocks show evidence of persistenceQuite large difference in price elasticity of demand for space.Unlike previous study of Shanghai office market, FDI is insignificant for both Beijing or Shanghai in both the long and short run.