Office Property Pricing and Macroeconomic Shocks: European Regions through the Real Estate Cycle

We study the relation between European office prices and their fundamentals by using a panel dataset of 29 major European cities over 25 years. We control for the dotcom crisis, global financial crisis (GFC), and sovereign debt crisis to analyze the varying impact of our variables. We find real estate variables such as rent and vacancies to be the most important factors in explaining for office values. For the European Monetary Union, we find monetary policy measures played a considerable role only during the GFC. For Europe as a whole, monetary policy variables are less important. We document a strong negative linkage of the risk premium of investors to office prices during crisis times, but not in normal times. The dotcom crisis left European office prices almost unaffected. The German and Swiss office markets exhibit safe haven characteristics.