Lease Maturity and Initial Rent: Is There a Term Structure for UK Commercial Property Leases?

Lease Maturity and Initial Rent: Is There a Term Structure for UK Commercial Property Leases? Seminal work by Grenadier (J. Financ. Econ. 38:297–331, 1995) derived a set of hypotheses about the pricing of different lease lengths in different market conditions. Whilst there is a compelling theoretical case for and a strong intuitive expectation of differential pricing of different lease maturities, to date the empirical evidence is inconclusive. Drawing upon a substantial database of commercial lettings in central London (West End and City of London) over the last decade, we investigate the relationship between rent and lease maturity. In particular, we test whether building quality, credit risk and micro-location variables omitted in previous studies provide empirical results that are more consistent with the theoretical and intuitive a priori expectations. It is found that initial leases rates are upward sloping with the lease term and that this relationship is constant over time. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Lease Maturity and Initial Rent: Is There a Term Structure for UK Commercial Property Leases?

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Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-007-9096-9
Publisher site
See Article on Publisher Site

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