The Economics of Architecture and Urban Design: Some Preliminary Findings
AbstractThis paper makes a preliminary attempt to evaluate empirically the nature of the contribution of architectural quality to the value of buildings. An economic model is postulated that predicts equilibrium rent and vacancy behavior as a function of both design and non-design characteristics. Vacancies are created in equilibrium as a result of search and information costs and tenant heterogeneity and are observed by the landlord as price-inelastic demand behavior. Design quality is seen to influence both rent and vacancy behavior. Its effect, however, is dependent on characteristics both of the production and operating cost functions and of tenant demand for the design vs. non-design amenity. An important characteristic of the design amenity is that it is not, in general, independent of the production function for non-design amenities. The model is tested using disaggregate cross-sectional and longitudinal operating performance and amenity data from a set of 102 class A office buildings in Boston and Cambridge. Data on design quality for the set of buildings were provided by a detailed evaluation of each structure by a panel of architects. Results confirm a strong influence of design on rents; structures rated in the top 20% for design quality were predicted to extract almost 22% higher rents than those rated in the bottom 20%. In contrast, the data showed a weak relationship between vacancy behavior and design quality. Finally, good design was shown to cost more to produce on average, but not necessarily in every case. The magnitude of the point estimates of the rent, vacancy, and construction cost effects suggest that good design may not in fact be more profitable on average, but as with a lottery, may provide a small probability of a high return to the developer. Copyright American Real Estate and Urban Economics Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.
Volume (Year): 17 (1989)
Issue (Month): 2 ()
Contact details of provider:
Postal: Indiana University, Kelley School of Business, 1309 East Tenth Street, Suite 738, Bloomington, Indiana 47405
Phone: (812) 855-7794
Fax: (812) 855-8679
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1080-8620
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ben-Shahar, Danny & Deng, Yongheng & Sulganik, Eyal, 2009. "Property appraisal in high-rises: A cooperative game theory approach," Journal of Housing Economics, Elsevier, vol. 18(1), pages 25-33, March.
- Burcin Yazgi & Vedia Dokmeci, 2006. "Analysis of Different Urban Forms in Istanbul," ERSA conference papers ersa06p72, European Regional Science Association.
- Robin A. Howarth & Emil E. Malizia, 1998. "Office Market Analysis: Improving Best-Practice Techniques," Journal of Real Estate Research, American Real Estate Society, vol. 16(1), pages 15-34.
- Fuerst, Franz & McAllister, Patrick, 2008.
"Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings,"
11446, University Library of Munich, Germany, revised Sep 2008.
- Franz Fuerst & Patrick McAllister, 2008. "Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings," Real Estate & Planning Working Papers rep-wp2008-09, Henley Business School, Reading University.
- Francois Des Rosiers & Marius Theriault & Laurent Menetrier, 2005. "Spatial Versus Non-Spatial Determinants of Shopping Center Rents: Modeling Location and Neighborhood-Related Factors," Journal of Real Estate Research, American Real Estate Society, vol. 27(3), pages 293-320.
- Brent W. Ambrose, 1990. "An Analysis of the Factors Affecting Light Industrial Property Valuation," Journal of Real Estate Research, American Real Estate Society, vol. 5(3), pages 355-370.
- Lazrak, F. & Nijkamp, P. & Rietveld, P., 2009. "Cultural heritage and creative cities: an economic evaluation perspective," Serie Research Memoranda 0036, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- Leung, Charles Ka Yui & Ma, Wai Yip & Zhang, Jun, 2013. "The Market Valuation of Interior Design and Developers strategies: a simple Theory and some Evidence," MPRA Paper 43896, University Library of Munich, Germany.
- Edwin Chan & Grace Lee, 2008. "Critical factors for improving social sustainability of urban renewal projects," Social Indicators Research, Springer, vol. 85(2), pages 243-256, January.
- Caroline A. Rodenburg & Peter Nijkamp & Henri L.F. De Groot & Erik T. Verhoef, 2008.
"Valuation Of Multi-Functional Land Use By Commercial Investors: A Case Study On The Amsterdam Zuidas Mega-Project,"
Tijdschrift voor Economische en Sociale Geografie,
Royal Dutch Geographical Society KNAG, vol. 99(4), pages 454-469, 09.
- Rodenburg, C.A. & Nijkamp, P. & Groot, H.L.F. de, 2009. "Valuation of multifunctional land use by commercial investors: a case study on the amsterdam zuidas mega-project," Serie Research Memoranda 0024, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- Gabriel M. Ahfeldt & Alexandra Mastro, 2011. "Valuing Iconic Design: Frank Lloyd Wright Architecture in Oak Park, Illinois," SERC Discussion Papers 0084, Spatial Economics Research Centre, LSE.
- James D. Shilling & Kerry D. Vandell & Ruslan Koesman & Zhenguo Lin, 2006. "How Tax Credits Have Affected the Rehabilitation of the Boston Office Market," Journal of Real Estate Research, American Real Estate Society, vol. 28(4), pages 321-348.
- Charles Ka Yui LEUNG & Wai Yip MA & Jun ZHANG, 2014. "The Market Valuation of Interior Design and Developer Strategies: A Simple Theory and Some Evidence," International Real Estate Review, Asian Real Estate Society, vol. 17(1), pages 63-107.
- Kang, Chang Deok & Cervero, Robert, 2008. "From Elevated Freeway to Linear Park: Land Price Impacts of Seoul, Korea's CGC Project," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt81r021w2, Institute of Transportation Studies, UC Berkeley.
- C.F. Sirmans & Krisandra A. Guidry, 1993. "The Determinants of Shopping Center Rents," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 107-116.
- Gabriel M. Ahlfeldt, 2010. "Architektur, Ökonomie - Architekturökonomie," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(4), pages 340-355, November.
- M. Gordon Brown, 1999. "Design and Value: Spatial Form and the Economic Failure of a Mall," Journal of Real Estate Research, American Real Estate Society, vol. 17(2), pages 189-226.
- Franz Fuerst & Patrick McAllister & Claudia Murray, 2009. "Designer Buildings: An Evaluation of the Price Impacts of Signature Architects," Real Estate & Planning Working Papers rep-wp2009-10, Henley Business School, Reading University.
- John L. Glascock & Minbo Kim & C.F. Sirmans, 1993. "An Analysis of Office Market Rents: Parameter Constancy and Unobservable Variables," Journal of Real Estate Research, American Real Estate Society, vol. 8(4), pages 625-638.
- Barrett A. Slade, 2000. "Office Rent Determinants during Market Decline and Recovery," Journal of Real Estate Research, American Real Estate Society, vol. 20(3), pages 357-380.
- Francois Des Rosiers & Marius Theriault & Catherine Lavoie, 2009. "Retail Concentration and Shopping Center Rents - A Comparison of Two Cities," Journal of Real Estate Research, American Real Estate Society, vol. 31(2), pages 165-208.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.