Four-Quadrant Model: 6 Key Terms

By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026

The DiPasquale-Wheaton model links the space market, where tenants rent buildings, to the asset market, where investors price them, using a four-quadrant diagram that connects rents, asset values, new construction, and total stock in a single equilibrium. Its small but precise vocabulary, including stock adjustment and supply overshoot, helps explain why real estate markets often overbuild and then correct over multiyear cycles. These terms appear in the optional market-analysis module of the free Real Estate Finance course.

These terms are taught in The DiPasquale-Wheaton Four-Quadrant Model & Market Analysis of the free Real Estate Finance course; the full course glossary collects every chapter in one place.

asset market: The capital or property market, where investors buy and sell ownership interests and the price is a capital value, rent capitalized at the required return (P = R ÷ cap rate).
DiPasquale-Wheaton model: A four-quadrant diagram (DiPasquale & Wheaton, 1996) that links the space market (rent), the asset market (price), the construction sector (new supply), and stock adjustment into one long-run equilibrium, showing where rent, cap rates, and supply come from.
four-quadrant model: The DiPasquale-Wheaton diagram: rent → price (asset market) → construction → stock → rent, solved so all four corners agree. Equilibrium is the single rectangle whose corners sit on all four relationships at once.
space market: The user or rental market, where tenants demand square footage against the existing stock and the price that clears is rent. One of the two markets every property trades in.
stock adjustment: The condition that the stock of space is stable only when annual construction just replaces depreciation and obsolescence (C = δ × Stock); building above that rate grows the stock and lowers rent.
supply overshoot: The tendency of long construction lags to deliver space started during a price spike after demand has cooled, pushing the stock past equilibrium and driving rents below the smooth-adjustment path, the engine of the real-estate cycle.

More Real Estate Finance term guides

Put the vocabulary to work: the free calculators and decision guides apply these terms, and the free Real Estate Finance course teaches them in context.