Rational expectations? Developer behaviour and development cycles in the central London office market

Purpose – Expectations of future market conditions are acknowledged to be crucial for the development decision and hence for shaping the built environment. The purpose of this paper is to study the central London office market from 1987 to 2009 and test for evidence of rational, adaptive and naive expectations. Design/methodology/approach – Two parallel approaches are applied to test for either rational or adaptive/naive expectations: vector auto-regressive (VAR) approach with Granger causality tests and recursive OLS regression with one-step forecasts. Findings – Applying VAR models and a recursive OLS regression with one-step forecasts, the authors do not find evidence of adaptive and naïve expectations of developers. Although the magnitude of the errors and the length of time lags between market signal and construction starts vary over time and development cycles, the results confirm that developer decisions are explained, to a large extent, by contemporaneous and historic conditions in both the City and the West End, but this is more likely to stem from the lengthy design, financing and planning permission processes rather than adaptive or naive expectations. Research limitations/implications – More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of large demand shocks and/or irrational behaviour. Practical implications – Developers may be able to generate excess profits by exploiting market inefficiencies but this may be hindered in practice by the long periods necessary for planning and construction of the asset. Originality/value – This paper focuses the scholarly debate of real estate cycles on the role of expectations. It is also one of very few spatially disaggregate studies of the subject matter.

Soils and their distribution on Bambouto volcanic mountain, West Cameroon highland, Central Africa

Morphological, physical and chemical studies were carried out on soils of Mount Bambouto, a volcanic mountain of the West Cameroon highland. These studies show that the soils of this region can be divided into seven groups according to Soils Taxonomy USA [Soil taxonomy: a basic system of soil classification for making and interpreting soils surveys: USDA Agriculture Handbook 436: Washington, DC, US Government Pronting Office, 1975, 754]: lithic dystrandept soils, typical dystrandept soils, oxic dystrandept soils, typical haplohumox soils, typical kandiudox soils, tropopsamment soils and umbriaquox soils. A soils map of this region at scale 1:50,000 has been drawn up, using the seven soils groups above as soil cartography units. These soils are organised into of three main categories: soils with andic characteristics in the upper region of the mountain (lithic dystrandept soils, typical dystrandept soils and oxic dystrandept soils); ferrallitic soils in the lower part of the mountain (typical haplohumox soils and typical kandiudox soils) and imperfectly developed soils (tropopsamment soils and umbraquox soils).

"Oft expectation fails": a time-series analysis of construction starts in the London office market

Expectations of future market conditions are generally acknowledged to be crucial for the development decision and hence for shaping the built environment. This empirical study of the Central London office market from 1987 to 2009 tests for evidence of adaptive and naive expectations. Applying VAR models and a recursive OLS regression with one-step forecasts, we find evidence of adaptive and naïve, rather than rational expectations of developers. Although the magnitude of the errors and the length of time lags vary over time and development cycles, the results confirm that developers’ decisions are explained to a large extent by contemporaneous and past conditions in both London submarkets. The corollary of this finding is that developers may be able to generate excess profits by exploiting market inefficiencies but this may be hindered in practice by the long periods necessary for planning and construction of the asset. More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of unexpected exogenous shocks.