Economics, Econometrics and Finance
8 years ago

Real estate market faces suboptimal construction due to demand uncertainty.

Real Estate Economics
Supply Adjustments to Demand Shocks in the Commercial Real Estate Market
George H. Lentz, K. S. Maurice Tse

Paper Summary

The article explores how real estate developers decide to build commercial spaces based on demand. It looks at how they adjust their supply when demand is certain or uncertain. The researchers found that when demand is known, developers react differently to small changes compared to big ones. And when demand is uncertain, building based on pent-up demand is not the best strategy.

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