Development of an effective rent (lease) index for the Chicago CBD

Article Abstract:

Fluctuations in effective rental rates for the 1985-1991 period for office space in the central business district of Chicago are examined. Unlike other studies, this investigation relies on detailed lease-level data to measure a price index for effective-rent changes in a metropolis. Because the real estate index is based on effective-rent changes, the measure of changes in the market is not affected by changes in the market for capital. Findings show that effective rents in the area dropped by about half the original rate during the 1985-1988 period and slightly increased for the 1988-1991 period. Meanwhile, asking rents remained constant over the same timeframe. Average base rent is found to be lower than the average asking rent and steadily became more volatile over time. However, base rents are revealed to be higher and less volatile than effective rents.

Prices and rates, Contracts, Commercial leases, Chicago, Illinois, Office buildings, Rents (Property), Price indexes

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The substitution theorem in urban consumer theory

Article Abstract:

The application of the substitution theorem in urban consumer theory is considered using two nonparametric approaches. This theorem states the nonpositivity of compensated own price effects on demand. Application to models involving consumer choice indicates that this theorem holds for goods whose prices do not vary spatially. However, in the case of goods with spatial price variations such as housing, the substitution theorem holds only for 'parallel' spatial price surface shifts. Nonspatial demand analysis in this case fails to explain 'upward' or 'downward' shifts in price surfaces. These results are robust and may be applied to many configurations of intra-urban location choice models, such as those involving price and net income spatial variation, the revealed preference approach and less restrictive distance preferences.

Consumer behavior, Substitution (Economics), Homesites

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