UK commercial property investment: time-series characteristics and modelling strategies

Abstract

Modelling of UK commercial property development has been a growth industry in recent years. This paper examines the time series characteristics of the data on commercial output and considers the fruitfulness of modelling strategies with respect to it. The models estimated here make sense, and highlight the importance changes in national income, property values and construction costs in determining changes in commercial output. However, several technical and theoretical reasons suggest that they are likely to have poor forecasting ability. One reason is the data on commercial output have a low volatility, while the orders data are of poor accuracy and so are a bad substitute. Doubt is expressed over whether future econometric models can improve on this situation.