Office space requirements: comparing occupiers’ preferences with agents’ perceptions
| Pages | 45-60 |
| Date | 01 February 2003 |
| DOI | https://doi.org/10.1108/14635780310468301 |
| Published date | 01 February 2003 |
| Author | C. Leishman,N.A. Dunse,F.J. Warren,C. Watkins |
| Subject Matter | Property management & built environment |
Academic papers:
Office space
requirements
45
Journal of Property Investment &
Finance
Vol. 21 No. 1, 2003
pp. 45-60
#MCB UP Limited
1463-578X
DOI 10.1108/14635780310468301
ACADEMIC PAPERS
Office space requirements:
comparing occupiers'
preferences with agents'
perceptions
C. Leishman
Department of Building Engineering and Surveying, Heriot-Watt
University, Riccarton, Edinburgh, UK
N.A. Dunse
Centre for Property Research, Department of Land Economy,
Kings College, University of Aberdeen, Aberdeen, UK
F.J. Warren
Department of Building Engineering and Surveying, Heriot-Watt
University, Riccarton, Edinburgh, UK, and
C. Watkins
Centre for Property Research, Department of Land Economy,
Kings College, University of Aberdeen, Aberdeen, UK
Keywords Space planning, Offices
Abstract This paper reports the results from the first stage of a research project that examines
changes in urban office occupiers' space requirements and their impact on the structure of urban
office markets. The specific objectives of the project are to compare occupiers' trade-offs and
preferences between submarkets in the Edinburgh market and to look at the way in which agents
influence the process by which occupiers are matched to space in particular submarkets. The
results discussed are based on two surveys: first we analyse a detailed survey of office occupiers in
two office submarkets in Edinburgh; and second, office agents are surveyed. This allows us to
compare their perception of occupiers' space requirements with those expressed by respondent
occupiers. The results suggest that agents' knowledge of occupier preferences vary across
submarkets and that, in particular, they are less well informed about occupiers' preferences in
non-traditional submarkets.
Introduction
In standard urban and real estate economics textbooks, office location decisions
are influenced by factor costs, transport and communications costs, the quality of
the urban environment and agglomeration economies (Ball et al., 1998; Evans,
1985). As a result office occupiers have tended to show an overriding preference
for locations within the central business district (CBD). This has been supported
by both occupier surveys (see for example Goddard, 1973; Gad, 1979; Code, 1983
and more recently, Wyatt, 1999) and a number of econometric analyses which,
using the hedonic technique, show the existence of negative price gradient in
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46
urban markets (see, amongst others, Clapp, 1980; Bollinger et al., 1998; Brennan
et al., 1984; Dunse et al., 2000, 2001). Recently, however, it has been argued that the
structures of urban office markets are being altered by decentralisation and
changing business practices including ``telecommuting'', ``hot desking'',
``outsourcing'' and ``delayering'' (see Gibson and Lizieri, 1998) and it seems that the
importance of agglomeration economies may be diminishing (Ball et al., 1998).
In a recent RICS funded research project we set out to examine this issue by
undertaking a detailed econometric analysis of rental patterns and the
determinants of rents in Edinburgh and Glasgow (see Dunse et al., 2000, 2001,
2002). The analysis sought to provide a test of the influence of agglomeration
economies by considering whether the rent trade-off model implied by textbook
economics best explains the pattern of rents observed. The alternative
explanation explored was based on the notion that office submarkets exist and
that significant differences in rental values can be observed between these
submarkets. In exploring the existence of submarkets we follow Graaskamp
(1985) in trying to attach economic meaning to a concept that implicitly informs
the market analyses of property professionals.
The results of this study were inconclusive. Although, as expected, there
was clear evidence of submarket existence in Glasgow, the analysis suggested
that Edinburgh operated as a unitary market. There were two possible
explanations for these results. First, agglomeration economies still dominate
office location decisions in Edinburgh. Second, the submarket dimensions
examined were poorly or incorrectly identified.
Incorrect identification of submarket boundaries may have been a
consequence of the failure to consider both supply and demand side factors in
the definition of submarkets. From theory, it is argued that submarkets
arise because of the interactions between discontinuous supply and demand
functions. On the demand side the consumers of office space (the tenants) face
constrained information, significant search and transaction costs and are
differentiated by their preferences and budget constraints. On the supply side
the stock is heterogeneous and spatially immobile and elasticity is low partly
because of the planning system. In a sense it is useful to consider the stock in
terms of differentiated product groups. Although both demand-side and
supply-side influences are important in giving rise to submarkets, the empirical
examination of the submarket structure was based on delineation by stock
and locational characteristics only. As such, an important limitation of this
approach is that it fails to account for the significance of differential demander
preferences (the discontinuous/segmented demand function) in creating
submarkets. Indeed the submarket analysis raised the need for a clearer
understanding of the way in which differences in occupiers' preferences and
space requirements impacted on the structure of the market. In addition there is
a related need to understand the extent to which agents are able to match
demanders to units within the vacant stock that meets their requirements.
This paper represents an extension to this analysis. It seeks to contribute to
our understanding of the economic structure of urban markets by directly
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