Krzysztof Nowak
Determinants of Yield Rate on the Office Market in Warsaw
Purpose – In the article, we attempt to check whether polish monetary aggregate and PLN exchange rate determine yield rate in the main office market in CEE. We look for GFC and beginning of Covid-19 impact on the Warsaw office yield rate. Moreover, we investigate if structural breaks can be found in the time series of the yield rate on the Warsaw office market.
Design/methodology/approach – The error-correction model approach is used to determine factors affecting yield rate on the Warsaw office market. Based on the analysis of the literature we set three groups of possible factors i.e. endogenous (market), macroeconomic and regional (international). Moreover, we formulated dummy variables to check impact of the global financial crisis and beginning of the covid-19 pandemic on the yield rate. Also, structural breaks in the yield rate time series representing changes in market conditions were used to define subsequent dummy variables.
Findings – The results of the study indicate that yield rate on the office market in Warsaw, in the long and the short term, was determined by monetary liquidity (M2 aggregate) and by exchange rate (EUR/PLN). No clear dependence of yield rate on dummy variables of GFC and Covid-19 was detected. Furthermore, the obtained results indicate that certain changes of market conditions, which influenced the yield rate, can actually be identified after the first quarters of 2010 and 2015. The dependence of the office yield rate in Warsaw on the Vacancy rate was found only in long term. The risk premium variable in short-term also was statistically insignificant.
Research limitations – Limitations of the study are related to the time span of available time series. Time range of the data did not allow for the comprehensive verification of the impact of GFC and Covid-19 on the local office market yield.
Research implications – The obtained results may be substantial information for commercial real estate practitioners, as they indicate drivers of the local office market yield.
Keywords: office market, yield rate, capitalization rate, property yields, error correction model
JEL codes: R30, R33
Article type: research article
CITATION (APA): Nowak, K. (2021). Determinants of Yield Rate on the Office Market in Warsaw. World of Real Estate Journal, 118(4), 4-20. https://doi.org/10.14659/WOREJ.2021.118.01.
DOI: https://doi.org/10.14659/WOREJ.2021.118.01
