Estimating Commercial Property Price Misalignment in the CEE Countries

In this article, we estimate the misalignment of commercial property prices. To this end, we propose a semi-structural model which imitates the functioning of various segments of the commercial real estate market. To estimate this model, we use a unique set of data on the markets for two property types (office and industrial) in five CEE countries and Germany, provided by JLL. First, we estimate the model for each property type on a panel of countries to capture the international nature of the markets. Secondly, for the example of the Czech Republic we estimate the model on a panel of property types to capture the possible orientation of individual investors towards a certain country. Finally, we compare the outcomes. The results suggest that investors tend to orientate towards certain property types rather than particular countries. It also shows that our approach avoids the end-point bias which can be present when assessing commercial property prices with an HP filter.