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The vertical city: Rent gradients, spatial structure, and agglomeration economies

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  • Liu, Crocker H.
  • Rosenthal, Stuart S.
  • Strange, William C.

Abstract

Tall commercial buildings dominate city skylines. Nevertheless, despite decades of research on commercial real estate and horizontal patterns of urban development, vertical patterns have been largely ignored. We document that high productivity companies locate higher up, with less productive offices lower down and retail at ground level. These patterns reflect tradeoffs between street access and vertical amenities. Vertical rent gradients are non-monotonic, independent of nearby employment, and large. Doubling zipcode employment is associated with a 10.7% increase in rent, consistent with the presence of agglomeration economies. Moving up one floor has the same effect on rent as adding roughly 3,500 workers to a zipcode.

Suggested Citation

  • Liu, Crocker H. & Rosenthal, Stuart S. & Strange, William C., 2018. "The vertical city: Rent gradients, spatial structure, and agglomeration economies," Journal of Urban Economics, Elsevier, vol. 106(C), pages 101-122.
  • Handle: RePEc:eee:juecon:v:106:y:2018:i:c:p:101-122
    DOI: 10.1016/j.jue.2018.04.001
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Technology of Tall (Part II): The Need for Speed
      by Jason Barr in Skynomics Blog on 2019-09-24 12:04:54
    2. The Technology of Tall (Part III): Getting to the Core
      by Jason Barr in Skynomics Blog on 2019-10-23 12:27:08

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    Cited by:

    1. Gilles Duranton & Diego Puga, 2020. "The Economics of Urban Density," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 3-26, Summer.
    2. Xu, Hangtian, 2020. "Land Price Fluctuations, Commercial-Residential Segregation, and Gentrification," MPRA Paper 98844, University Library of Munich, Germany.
    3. Cheshire, Paul & Dericks, Gerard, 2020. "Trophy architects and design as rent-seeking: quantifying deadweight losses in a tightly regulated office market," LSE Research Online Documents on Economics 103134, London School of Economics and Political Science, LSE Library.
    4. Jason Barr & Jennifer Johnson, 2020. "Skyscrapers and the Happiness of Cities," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 46(2), pages 344-377, April.
    5. Xu, Hangtian, 2019. "The burst of the real estate bubble as a promoter of gentrification in Tokyo and Osaka, 1980–2017," MPRA Paper 96803, University Library of Munich, Germany.
    6. Daniel Arribas-Bel & Miquel-Àngel Garcia-López & Elisabet Viladecans-Marsal, 2019. "Building(s and) cities: delineating urban areas with a machine learning algorithm," Working Papers 2019/10, Institut d'Economia de Barcelona (IEB).
    7. Ilir Nase & Nick van Assendelft & Hilde Remøy, 2019. "Rent Premiums and Vertical Sorting in Amsterdam’s Multi-Tenant Office Buildings," The Journal of Real Estate Finance and Economics, Springer, vol. 59(3), pages 419-460, October.
    8. Stuart S. Rosenthal & William C. Strange, 2020. "How Close Is Close? The Spatial Reach of Agglomeration Economies," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 27-49, Summer.

    More about this item

    Keywords

    Commercial real estate; Access; Amenities; Spatial structure; Rent gradient; Vertical; Agglomeration economies;

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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