Investment in industrial buildings: Modelling the determinants of new orders

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Abstract
This paper develops an econometric model of investment in industrial buildings in the UK using quarterly data for the period 1957 to 1991. It examines the determinants of new orders for industrial buildings and works placed with contractors. Based on the principle of the flexible accelerator, industrial output changes emerge as a significant determinant of new orders over the whole sample period. Estimates using an Almon polynomial lag specification for industrial output changes seem to capture more readily the dynamic adjustment process of investment behaviour. Chow tests for structural stability, however, suggest that the significance of this specification is reduced in the 1980s. Consequently, the study incorporates additional explanatory variables and the results demonstrate the prominence of real industrial rents and the availability of industrial floorspace in the determination of new orders in the period 1982 to 1991.