The Commercial Real Estate Analysis for CEECs region

• Název práce v češtině: Analýza komerčních nemovitostí CEE regionů
• Název v anglickém jazyce: The Commercial Real Estate Analysis for CEECs region
• Klíčová slova: Komerční nemovitosti, CEE regiony, determinanty cen komerčních nemovitostí, finanční stabilita, ceny komerčních nemovitostí
• Klíčová slova anglicky: Commercial Real Estate, CEECs region, determinants of commercial property prices, financial stability,commercial property prices
• Akademický rok vypsání: 2018/2019
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: PhDr. Michal Hlaváček, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 23.05.2019
• Datum zadání: 23.05.2019
• Datum a čas obhajoby: 09.09.2020 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26, O105, Opletalova - místn. č. 105
• Datum odevzdání elektronické podoby: 01.08.2020
• Datum proběhlé obhajoby: 09.09.2020
• Oponenti: Mgr. Roman Kalabiška

Seznam odborné literatury

Bibliography
ECB (2008). Commercial Property Markets: Financial Stability Risks, Recent Developments and EU Banks’ Exposures. European Central Bank. ISBN 978-72-899-0368-4.
ECB (2011). Indicators for Detecting Possible Value Misalignment in Commercial Property Markets.
European Central Bank. Financial Stability Review, Box 6, pp. 44–46.
ESRB(2018). Report on vulnerabilities in the EU commercial real estate. European Systemic Risk Board. Report, pp. 2-151
Davis, E. P., Zhu, H. (2009). Commercial property prices and bank performance. The Quarterly
Review of Economics and Finance, 49(4), 1341–1359. DOI: 10.1016/j.qref.2009.06.001.
Gyourko, J. (2009). Understanding Commercial Real Estate: Just How Diff erent from Housing is it?
NBER. Working Paper No. 14708.
Jones Lang LaSalle (2013). Office Market Pulse. Jones Lang LaSalle. Available from:
http://www.joneslanglasalle.eu/EMEA/EN-GB/Pages/cee_research.aspx
ESRB (2015): Report on Commercial Real Estate and Financial Stability in the EU.
ESRB (2018): Report on Vulnerabilities in the EU commercial real estate sector.
HLAVÁČEK, M., NOVOTNÝ, O. and RUSNÁK, M. (2014): Office Property in Central European Countries, Financial Stability Report 2013/2014, Czech National Bank, pp. 148–155.
HLAVÁČEK, M., NOVOTNÝ, O., RUSNÁK, M. (2016): Analýza cen komerčních nemovitostí v zemích střední Evropy, Politická ekonomie Vol. 64 No. 1, pp. 3-18
LIESER, K., GROH A. P. (2011): The Determinants of International Commercial Real Estate Investments, IESE Working Paper WP-935
LAURIN, PHD, Frederic, Thea GOGINASHVILI, MA a John-John D’ARGENSIO, M.SC (2010). The Real Estate Conundrum in the CEE Office Markets: Thinking Too Big? Final Report 2010. CERGE-EI, pp. 2-35

Předběžná náplň práce v anglickém jazyce

Research question and motivation

We can notice that demand of commercial property is rapidly raised, especially in Prague. Some buildings were sold at a very high price. Is means that our economy is going to increase or is going to reach a peak? Or it is called a bubble which indicates a crisis after that? Can the behavior of the commercial property price indicate a crisis or the period of the economic cycle?
Commercial properties are important segment of financial stability. However, unlike residential properties, there are few studies covering advanced economies and practically no studies covering the CEE region, with an exception being periodical descriptive analyses issued by specialized firms. On the other hand, residential properties have several empirical studies and theoretical models explaining the interaction between prices and procyclical lending etc.
One of the few works done by Davis and Zhu (2004) is inspecting the relation between commercial property prices and bank lending by formulating theoretical model of commercial property cycles with fixed supply of commercial property in the short run while in the long run, the supply is increased by new commercial properties funded by collateralized bank loans. Furthermore, the cycles in commercial property prices that have an influence on the credit financing of the new construction also depends on exogenous business cycle shocks and characteristics of the real estate market. Using sample of 17 developed countries and identifying the interaction between commercial property prices, credit and GDP utilizing panel error-correction model and Grangar causality tests, the results indicated strong interaction for countries hit by the banking crisis in 1985-1995.
Another work done by Gyourko (2019) identify the relationship between residential and commercial property prices for which common demand drivers can be expected. Based on the data from 32 metropolitan areas of the USA, the results conclude that the cycles have commonalities.
So far there is not much research on CEE region, hence the aim of this thesis is to interpret the behavior of commercial real estate prices in five CEE countries and to compare their main factors with Germany as the Western European country. This work will describe mainly the office sector of real commercial real estate since it is the largest and most comparable across countries.

Contribution
This thesis conducts an econometric analysis of the determinants of commercial property prices. As is said, commercial property prices play an important role in economic policy. It can be used as a variable in making monetary policy decisions or as an indicator of problems that banks and lending institutions may be facing. For instance, the model allows us to analyse the value of commercial property if it is overvalued or vice versa. In other words, to identify the bubble in this area. In the past, it has shown that the commercial property markets also have a significant impact on financial crises, as stated in the Financial Report ESRB 2018. Therefore, this thesis will contribute to indicators of financial stability.

Methodology
The data used in this study are in the form of quarterly time series from the period 2002 to 2019 for five countries (the Czech Republic, Hungary, Poland, Romania, and Slovakia). According to the literature review, this work focuses mainly on four variables, namely real commercial prices, GDP, interest rate and inflation. Data for commercial property prices deflated by CPI mostly come from country statistical offices. Otherwise, we will calculate it based on the formula. To use the formula, we need variables such as prime yields, vacancy rate and prime rents which are collected from global real estate agency Jones Lang LaSalle and Knight Frank. Data for GDP, interest rate and inflation we get from statistical offices. Using all these data, this work will determine an error correction model on panel data. Furthermore, this work will try to find and test the significance of other variables that are pointed out from Financial reports from CNB, ECB, and ESRB.