Inflation and rental change in industrial property : A multi‐level analysis

Purpose – The industrial property market has traditionally been under‐researched but, in recent years, studies have ranged from examining rental change at the national level to examining supply factors at the local level. These studies are valuable to the real estate community, but there still remain significant gaps. This paper aims to focus on two of these inter‐related gaps. The interaction between inflation and rental change has been largely overlooked at all levels of data aggregation. Further, the relative importance of national factors, and regional and local factors, in rental determination has also been ignored. Design/methodology/approach – National and regional long‐run time series models are estimated accounting for the impact of inflation on real rents, using approaches adopted in macro‐economic consumption function analyses. The statistical validity of these models is confirmed from co‐integration tests. Local level spatio‐temporal rental changes are then examined using the hierarchical method of cluster analysis. Findings – This paper finds that, at national and regional levels, inflation reduces real industrial rents. National regional and local factors are all found to be important in governing rental change in local markets. This implies that factors operating on all spatial scales must be considered in rental studies. Originality/value – This paper combines two methodological approaches to examine the interaction between inflation and rental change, and the relative importance of national, regional and local factors in rental determination. The results suggest that factors operating on all spatial scales should be considered in rental studies.