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Is the Sky the Limit? An Analysis of High-Rise Office Buildings

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  • Hans R. A. Koster
  • Piet Rietveld
  • Jos N. van Ommerren

Abstract

Modern central business districts are characterised by high-rise office buildings. Helsley and Strange (2008) argue that skyscrapers are caused by agglomeration economies and a prize for being the tallest, so a reputation effect. We aim to test the relevance of this model by investigating the impact of building height on commercial office rents. The results show that firms are willing to pay about 4 percent more for a building that is 10 meters taller, which we interpret as the sum of a within-building agglomeration effect and a reputation effect. Using semiparametric techniques, we disentangle reputation effects from agglomeration effects and demonstrate that the reputation effect is substantial for tall buildings. For example, it is at least 17.5 percent of the rent for a building that is 6 times the average height.

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Bibliographic Info

Paper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0086.

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Date of creation: Jul 2011
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Handle: RePEc:cep:sercdp:0086

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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

Related research

Keywords: commercial buildings; building height; landmarks; reputation effect; semiparametric regression; agglomeration effect;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The World’s Tallest Skyscraper
    by Michael Fuenfzig in The ISET Economist on 2012-02-10 08:21:47
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Cited by:
  1. Paul Cheshire & Gerard Dericks, 2013. "Regulation, Rents and ?Iconic Design?: rent acquisition by design in the tightly constrained London office market," ERSA conference papers ersa13p1071, European Regional Science Association.
  2. Max Nathan & Henry G. Overman, 2011. "What We Know (and Don't Know) About the Links between Planning and Economic Performance," SERC Policy Papers 010, Spatial Economics Research Centre, LSE.

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