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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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    6. Ahlfeldt, Gabriel M. & Barr, Jason, 2020. "The economics of skyscrapers: a synthesis," LSE Research Online Documents on Economics 108469, London School of Economics and Political Science, LSE Library.
    7. Liu, Crocker H. & Rosenthal, Stuart S. & Strange, William C., 2020. "Employment density and agglomeration economies in tall buildings," Regional Science and Urban Economics, Elsevier, vol. 84(C).
    8. 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.
    9. Leonid V. Azarnert, 2021. "Population Sorting and Human Capital Accumulation," CESifo Working Paper Series 9338, CESifo.
    10. 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.
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    More about this item

    Keywords

    Commercial real estate; Access; Amenities; Spatial structure; Rent gradient; Vertical; Agglomeration economies;
    All these keywords.

    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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