What Determine the Office Rent?: A Time-Series Cross-Sectional Analysis of Chinese Markets

As the Chinese economy is growing rapidly, the office market has become a heated investment area in the 21st century in China. However, there are few academic researches on China office market especially the rent level. In order to find out the determinants of office rent, a time-series cross-sectional analysis is carried out in this paper based on a demand-supply equilibrium dynamic adjustment model, using data of 13 cities over ten year period 1998-2007. The demand resulting from the increase of GDP and use of foreign funds has significant positive influence on rent. Meanwhile, the rent level is cut down by tremendous supply measured by new completed office area. Other factors such as total service sector employment, employment in finance and real estate and short-term interest rate have weak influences on office rent.