Exploring the determinants of rental change in industrial real estate

Abstract

The industrial property market has traditionally been under-researched because of the dominance of owner-occupation and its consequent low weighting in institutional investment portfolios. However, in recent years, studies have ranged from examining rental change at the national level to examining supply factors at the local level. These studies are valuable to the real estate community, but there still remain significant gaps. This paper focuses on two of these inter-related gaps. The interaction between inflation and rental change has been largely over-looked at all levels of data aggregation. Further, the relative importance of national factors, such as inflation, and regional and local factors in rental determination have also been ignored. This paper finds that, at a national level, inflation reduces real industrial rents. This result is reinforced at the regional level. National, regional and local factors are all found to be important in governing rental change in local markets. This implies that factors operating at all spatial scales must be considered in rental studies.