ABSTRACT
This chapter examines the contribution of spatial characteristics including location when constructing a price index to analyse transactions of office buildings. Although the reference is to commercial office buildings which predominantly have an ‘office’ land use, the application of this methodology is relevant to a diverse range of office buildings. In the analysis a case study approach is used based on transactions of office property buildings located in the Melbourne central business district (CBD) between 2000 and 2015. Accordingly, the research question for this chapter is: To what extent does spatial dependency exist in the transactional market for office buildings? An investigation is undertaken into office building indexes and the spatial dependency of office property. The methodology for the case study is based on analysing every sale of whole or entire office buildings between 2000 and 2015, which equates to a total of 289 transactions. The findings confirmed the issue of spatial dependency existed for the transactional market of whole office buildings. Furthermore, it was shown that the spatial error model and spatial lagged model produced very similar indexes. The index from the hedonic model exhibited high volatility especially between 2007–2009, which was the period incorporating the 2007 Global Financial Crisis. These findings confirmed inclusion of the spatial weights matrix to control for the spatial dependency changes the output for the office property price index.
