Information Asymmetry, Lease Incentives, and the Role of Advisors in the Market for Commercial Real Estate

Abstract

Using a unique transactions dataset, this paper examines the determinants of lease incentives in the Amsterdam office market. The study focusses on the type of landlord involved (institutional/privately owned) and whether the tenant or landlord used an advisor to help them with the transaction.
The results show that an institutional landlord, ceteris paribus, offers 11 percentage points more incentives than a private owner. In addition, a landlord who uses the services of an advisor pays 16 percentage points less incentives. An advisor at the side of the tenant increases incentives by 7 percentage points. If both parties use an advisor lease incentives are not statistically different from using no advisors at all. The results in this paper highlight the crucial role of market information, information asymmetry, and bargaining in the market for commercial real estate.