RE-160 Lecture Notes - Lecture 12: Capitalization Rate, Open Plan, Blue-Collar Worker
22 Dec 2020
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Pt. 1 office market bubbles: real capital gets allocated based on asset prices or values. Resources are erroneously attracted to the wrong sectors (wasted) Ex-ante investments may make sense, but ex-post may be disastrous: real rents are mean reverting (tend to lr demand for office) Price tends to rise with rent, making the cap rate stable: extrapolation (irrational bubbles) Key determinants of the demand for office space: effective rents. Long-run positive relation between real effective rents & employment: the employment of space-using firms. White collar workers are office users but relies on blue collar production: technology of space use. Higher occupied stock per worker (more space available per worker) indicates higher vacancy rate or recession. Open plan offices decreases space per worker. Pt. 3 lr fundamentals explained: vacancy is costly, so landlords will not hold space vacant unless: There is some benefit from holding vacancy: rational reasons for vacancy:
