REM 300 Lecture Notes - Lecture 7: Cbre Group, Price Elasticity Of Demand, Office Space

• School: Ryerson University
• Department: Real Estate Management
• Course: REM 300
• Professor: David Atkinson

Document Summary

Suburban office space in toronto: suburban vacancy rates are higher, and rental rates are lower, vacancy rates can be sticky as firms continue to occupy space for the duration of the lease. * graph tells us developers are responding to markets, not leading (cbre office market) The vacancy rate as a barometer of what stage of the cycle a market is in (not a good forward indicator) backward looking not forward looking. Vacancy rates encapsulate the supply/demand of markets: tends to be an inverse relationship between the path of vacancy rates and rental growth. Elastic demand implies that tenants put a high importance to the rent they pay and will hence, on average, tend to shop around for longer before occupying a building. In markets where demand is more elastic the natural vacancy rate tends to be higher. There are 2 main factors that affect demand elasticity in a market: location preference and search cost for new space.