National Vacancy Rates and the Persistence of Shocks in U.S. Office Markets

In this paper, we develop and estimate a model that decomposes the variance in office vacancy rates into market‐specific, time‐specific, and random components. The results indicate significant differences in natural vacancy rates across markets. We also find some persistence in deviations from these natural vacancy rates. The analysis is applied to both central business district (CBD) and suburban office markets. We find that natural vacancy rates differ across CBD markets and across suburban markets. Further, the persistence of disequilibrium in one CBD market seems to differ significantly from that in another. This is not shown to be true for suburban markets.