Commercial property and the location decision

A theoretical model of the commercial property market is developed which takes account of the firm’s choice between alternative forms of occupancy (owner-occupancy or tenancy) and locations (centre or periphery), and which assumes that equilibrium rents and prices are determined by a set of simultaneous market-clearing conditions in sub-markets for the different occupancy types and locations. The model suggests that under some conditions, there may be unexpected movements in rents and prices in response to exogenous factors such as changes in interest rates and transport costs.