Information Asymmetry, Lease Incentives, and the Role of Advisors in the Market for Commercial Real Estate

Tinbergen Institute Discussion Paper 2017-106/IV

36 Pages Posted: 14 Nov 2017 Last revised: 18 Nov 2017

See all articles by Martijn Dröes

Martijn Dröes

University of Amsterdam

Boris Ziermans

Cushman & Wakefield

Philip Koppels

Delft University of Technology

Date Written: November 3, 2017

Abstract

Using a unique transactions dataset from the Amsterdam office market, this paper examines the determinants of property lease incentives. The study focuses on the type of landlord involved (institutional/private) and whether the tenant or landlord used an advisor (professional broker) to help negotiate the lease. The results show that an institutional landlord, ceteris paribus, offers 3 percentage points more incentives than a private owner. In addition, a landlord who uses the services of an advisor pays 9 percentage points less incentives. An advisor at the side of the tenant increases incentives by 7 percentage points. However, if both parties use an advisor there are no additional benefits in terms of lease incentives. These findings are in line with a prisoner’s dilemma story. Further results show an effect of the lease term and economic cycle on lease incentives. The results in this paper highlight the crucial role of market information, information asymmetry, and bargaining in the market for commercial real estate.

Keywords: commercial real estate, office market, lease incentives, advisor, information asymmetry

JEL Classification: R30, D82, L85

Suggested Citation

Dröes, Martijn and Ziermans, Boris and Koppels, Philip, Information Asymmetry, Lease Incentives, and the Role of Advisors in the Market for Commercial Real Estate (November 3, 2017). Tinbergen Institute Discussion Paper 2017-106/IV, Available at SSRN: https://ssrn.com/abstract=3068660 or http://dx.doi.org/10.2139/ssrn.3068660

Martijn Dröes (Contact Author)

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Boris Ziermans

Cushman & Wakefield ( email )

United States

Philip Koppels

Delft University of Technology ( email )

Stevinweg 1
Stevinweg 1
Delft, 2628 CN
Netherlands

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