Optimal Rental policies for investors and tenants
||Bachofner, Monika; Haussler Matthias; Wilhelm Martin
||Optimal Rental policies for investors and tenants
||10th European Real Estate Society Conference (10-13 June 2003) Helsinki, Finland
||In the paper the authors provide a model to describe market imperfections on rental markets and their impact for an equilibrium rent. Real estate differs in many aspects regarding size, site, quality, etc. Therefore, there is no consistent rental market, but the market is divided into different sub-segments. But even when considering the sub-market for only one type of building with its special features, the rents often differ significantly from one building to another. A consistent rental fee can only be observed for newly rented buildings. It is called the market rent. The main reason for differing rents is that the investors try to obtain optimal incomes during the lifetime of the rental contracts. In order to establish an optimization model, we analyze the factors that influence their rental strategies. Amongst other things, we consider the depreciation of the property depending on the quality of the tenants and the preferences of the tenants regarding the rental object. The solution of the optimization problem supports the decision-making process of investors, but also influences the behaviour of tenants. There are information asymmetries that should be removed to increase the profit of both, but there is also unilateral information that should be hidden.
||Imperfect markets; rental markets; preferences; asymmetric information; equilibrium rent; contract rent
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||Session 8, Retail & rental markets
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