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.

"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.

Food marketing technology and contingency market valuation

Marketing activities are introduced into a rational expectations model of the food marketing system. The model is used to evaluate effects of alternative marketing technologies on the distribution of the benefits of contingency markets in agriculture. Benefits depend on two parameters: the cost share of farm inputs and the elasticity of substitution between farm and nonfarm inputs in food marketing. Over a broad spectrum of technologies, consumers are likely to be the net beneficiaries and farmers the net losers from the provision of contingency markets

Do real balance effects invalidate the Taylor principle in closed and open economies?

This paper examines the determinacy implications of forecast-based monetary policy rules that set the interest rate in response to expected future inflation in a Neo-Wicksellian model that incorporates real balance effects. We show that the presence of such effects in closed economies restricts the ability of the Taylor principle to prevent indeterminacy of the rational expectations equilibrium. The problem is exacerbated in open economies, particularly if the policy rule reacts to consumer-price, rather than domestic-price, inflation. However, determinacy can be restored in both closed and open economies with the addition of monetary policy inertia.

Beyond tokenism? Community-led planning and rational choices: findings from participants in local agenda-setting at the neighbourhood scale in England

The article confronts some key issues raised in the literature on public participation via a series of interrogatory questions drawn from rational choice theory. These are considered in relation to the design and process of public participation opportunities in planning and wider processes of local governance at the neighbourhood scale. In doing this, the article draws on recent research that has looked in some depth at a form of community-led planning (CLP) in England. The motives and expectations of participants, the abilities of participants, as well as the conditions in which participation takes place are seen as important factors. It is contended that the issues raised by rational choice theory are pertinent to emerging efforts to engage communities. As such, the article concludes that advocates of public participation or community engagement should not be afraid of responding to the challenges posed by questions of motive and reward of participants if lasting and worthwhile participation is to be established. Indeed, questions such as 'what's in it for me?' should be regarded as legitimate, necessary and indeed standard, in order to co-devise meaningful and durable participation opportunities and appropriate institutional environments. However, it is also maintained that wider considerations and capacity questions will also need to be confronted if participation is to become embedded as part of participatory neighbourhood-scale planning.

The representation of conditional expectations of non-Gaussian noise

For Wiener spaces conditional expectations and $L^{2}$-martingales w.r.t. the natural filtration have a natural representation in terms of chaos expansion. In this note an extension to larger classes of processes is discussed. In particular, it is pointed out that orthogonality of the chaos expansion is not required.

Rational modification of the hierarchy of intermolecular interactions in molecular crystal structures by using tunable halogen bonds

A family of 16 isomolecular salts (3-XpyH)(2)[MX'(4)] (3-XpyH=3-halopyridinium; M=Co, Zn; X=(F), Cl, Br, (I); X'=Cl, Br, I) each containing rigid organic cations and tetrahedral halometallate anions has been prepared and characterized by X-ray single crystal and/or powder diffraction. Their crystal structures reflect the competition and cooperation between non-covalent interactions: N-H center dot center dot center dot X'-M hydrogen bonds, C-X center dot center dot center dot X'-M halogen bonds and pi-pi stacking. The latter are essentially unchanged in strength across the series, but both halogen bonds and hydrogen bonds are modified in strength upon changing the halogens involved. Changing the organic halogen (X) from F to I strengthens the C-X center dot center dot center dot X'-M halogen bonds, whereas an analogous change of the inorganic halogen (X') weakens both halogen bonds and N-H center dot center dot center dot X'-M hydrogen bonds. By so tuning the strength of the putative halogen bonds from repulsive to weak to moderately strong attractive interactions, the hierarchy of the interactions has been modified rationally leading to systematic changes in crystal packing. Three classes of crystal structure are obtained. In type A (C-F center dot center dot center dot X'-M) halogen bonds are absent. The structure is directed by N-H center dot center dot center dot X'-M hydrogen bonds and pi-stacking interactions. In type B structures, involving small organic halogens (X) and large inorganic halogens (X'), long (weak) C-X center dot center dot center dot X'-M interactions are observed with type I halogen-halogen interaction geometries (C-X center dot center dot center dot X' approximate to X center dot center dot center dot X'-M approximate to 155 degrees), but hydrogen bonds still dominate. Thus, minor but quite significant perturbations from the type A structure arise. In type C, involving larger organic halogens (X) and smaller inorganic halogens (X'), stronger halogen bonds are formed with a type II halogen-halogen interaction geometry (C-X center dot center dot center dot X' approximate to 180 degrees; X center dot center dot center dot X'-M approximate to 110 degrees) that is electrostatically attractive. The halogen bonds play a major role alongside hydrogen bonds in directing the type C structures, which as a result are quite different from type A and B.

Supply, demand and a failure of understanding: addressing the culture clash between archaeologists' expectations for training and employment in 'academia' versus 'practice

A university degree is effectively a prerequisite for entering the archaeological workforce in the UK. Archaeological employers consider that new entrants to the profession are insufficiently skilled, and hold university training to blame. But university archaeology departments do not consider it their responsibility to deliver fully formed archaeological professionals, but rather to provide an education that can then be applied in different workplaces, within and outside archaeology. The number of individuals studying archaeology at university exceeds the total number working in professional practice, with many more new graduates emerging than archaeological jobs advertised annually. Over-supply of practitioners is also a contributing factor to low pay in archaeology. Steps are being made to provide opportunities for vocational training, both within and outside the university system, but archaeological training and education within the universities and subsequently the archaeological labour market may be adversely impacted upon by the introduction of variable top-up student fees.

Rational conversion of substrate and product specificity in a Salvia monoterpene synthase: structural insights into the evolution of terpene synthase function

Terpene synthases are responsible for the biosynthesis of the complex chemical defense arsenal of plants and microorganisms. How do these enzymes, which all appear to share a common terpene synthase fold, specify the many different products made almost entirely from one of only three substrates? Elucidation of the structure of 1,8-cineole synthase from Salvia fruticosa (Sf-CinS1) combined with analysis of functional and phylogenetic relationships of enzymes within Salvia species identified active-site residues responsible for product specificity. Thus, Sf-CinS1 was successfully converted to a sabinene synthase with a minimum number of rationally predicted substitutions, while identification of the Asn side chain essential for water activation introduced 1,8-cineole and alpha-terpineol activity to Salvia pomifera sabinene synthase. A major contribution to product specificity in Sf-CinS1 appears to come from a local deformation within one of the helices forming the active site. This deformation is observed in all other mono- or sesquiterpene structures available, pointing to a conserved mechanism. Moreover, a single amino acid substitution enlarged the active-site cavity enough to accommodate the larger farnesyl pyrophosphate substrate and led to the efficient synthesis of sesquiterpenes, while alternate single substitutions of this critical amino acid yielded five additional terpene synthases.

Do construction companies need to match employees' expectations?

Commitment of employees is relatively low in construction. This problem is exasperated by companies inability to attract, motivate, and retain talent that is then often channelled into other more attractive industrial sectors where the prospects, conditions and rewards are perceived to be much higher. The purpose of this study is thus primarily to develop a generic model to maximise employees' engagement, improve their motivation and increase the retention levels. To achieve this aim, the investigation looks into how perceived employment obligations and expectations impact commitment and through that organisational performance. The study is based on the postulations of Luhmann's theory of social systems with communication viewed as a constitutive element of a social system. Consequently expectations of a particular party in an employment relationship are represented in a communicative space requiring the other party's understanding in order to align expectations of both sides in the relationship. Explicitly, alignment of by an employee perceived manager's expectations determines his/ her commitment to fulfil obligations towards the manager. The result of this first stage of research is a conceptual model developed following the substantial supporting evidence in the literature and it forms the framework for mitigation of low commitment, motivation and retention of employees. The model particularly focuses on factors affecting employees' perceived expectations like reneging, incongruence and the process of communication. In the future the model will be validated using empirical data from a combination of observational and enquiry-based research. Once completed, the model will provide a framework for informing Human Resource Management policies with the aim to improve commitment of employees, increase the levels of retention and consequently improve the performance of construction organisations.