On real estate development activity: the relationship between commercial and residential real estate markets

Real estate development and the construction of commercial and residential buildings largely determine the future spatial distribution of job and residential locations, thereby giving public planners an instrument with which they can steer urbanization. This paper measures whether the real estate development and urban management planning process, in terms of construction permits, enables a relationship between commercial and residential real estate developments and thus between future job and residential locations. We use data on construction permits for the Netherlands over 1990-2012. Our conclusion is that the real estate development and urban planning process, in terms of construction permits, allows a complementary effect between commercial and residential real estate developments. A one per cent increase in commercial real estate development permits leads to a 0.35 per cent increase in residential real estate development permits. Finally, the data reveal differences across regions suggesting that different local factors are at work.