The value of contractual terms in office leases

This paper uses a comprehensive data set to develop a hedonic model of office rent that estimates values of contractual terms such as tenant improvement allowances, leasing commissions, and options. The model includes variables to control for building characteristics and market conditions, as well as basic lease terms. Although other studies have used a similar approach, the prior work in this area was limited by the lack of data regarding contractual terms. The results show that there is a consistent, upward-sloping, convex term structure of rent. Furthermore, there is an insignificant "size premium" but the "proportion discount" is significant. In general, other variables, such as location variables and qualitative variables behave as expected, with the exception of the expense type dummy variables. Tenant improvement allowances and leasing commissions paid by the landlord do not have a predictable impact on rent at low levels. But high levels of allowances and commissions result in significant rent premiums. These results indicate that lower levels of allowances and commissions may be expected by the market. At higher levels, however, these contractual terms are clearly priced into rent levels.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Architecture.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2006

Author dc:creator

• Sheehan, Kevin T. (Kevin Thomas)

Advisor dc:contributor.advisor

• Henry O, Pollakowski.

• Architecture.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/37445
• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Identifier URI

http://dspace.mit.edu/handle/1721.1/37445

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/37445