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Office Rent in the Chicago CBD
Author(s) -
Brennan Thomas P.,
Cannaday Roger E.,
Colwell Peter F.
Publication year - 1984
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00321
Subject(s) - econometrics , explanatory power , unit (ring theory) , economics , regression analysis , linear regression , linear model , lease , log linear model , reciprocal , statistics , mathematics , finance , philosophy , linguistics , mathematics education , epistemology
This study focuses on the Chicago CBD office market, an important market at the local, regional, national and international levels. The purpose of this study is to develop a hedonic regression model that explains the variation in office rent per square foot. Five functional forms (linear, reciprocal, logarithmic, semi‐log and log‐linear) of the model are considered. A generally log‐linear model is determined to be the best model based on a series of Box‐Cox/Box‐Tidwell type transformations and likelihood ratio tests. The regression results reveal that the model has very high explanatory power. The methodology of this study differs substantially from that of previous studies on this topic. Perhaps most importantly, the unit of analysis is the office unit rather than the building. This choice suggested the use of specific lease terms for actual transactions and location of the unit within the building as new variables. Finally, the modeling of location of the building within the CBD was found to be a critical step.