Structural Breaks of Office Rental Market in Seoul after Financial Crisis

Abstract

Recent years after financial crisis have witnessed significant upward movement in both vacancy rate and rental price in seoul office rental market. Such an outcome runs contrary to the traditional view of rental office market operation. However, previous papers didn’t estimate the effect of structural break. The purpose of this study is to analyze the change of relationship between asking rent and determinants in office market. The model was built by using serial data of 55 quarters from 2001 to 2014 including office rent index, consumer price index, office vacancy rate, interest rate in Seoul. And we used Chow-test to examines significant change and break point of structural change in office rental market. At first, there were significant structural change of the determinants of consumer price index and vacancy rate in there first quarter 2009. Second, the effects of consumer price index is decreased by risk of vacancy rate, and negative effect of vacancy rate was changed positive effect by rent-free.