The Added Value of Image: A Hedonic Ofice Rent Analysis

The location choice of office firms is assumed to be primarily driven by the opportunities for face-to-face contacts; a concept strongly linked with agglomeration economies. However, it is recognised that other factors, such as prestige and image might also explain why firms prefer certain locations and buildings more than others, and are willing to pay a higher rent for office properties with specific characteristics. This article examines, in a hedonic framework, the importance of neighbourhood and building image for office firms. Drawing upon a substantial database of office lease transactions in Amsterdam, for the period 1996-2007, the relationship between rent and the characteristics of the location and building is investigated. Location characteristics and building attributes that are assumed to capture image effects were collected through various data sources and extensive fieldwork. Furthermore, varies variables relating mainly to accessibility and office employment density were included in the analysis to control for urban economies of scale effects. The results indicate that the image of location and building has a strong influence on the site and building choice of office organisations; image effects explain approximately 25 percent of the observed rent variations. However, variables relating to accessibility and density of office employment are also found of high significance and it remains difficult to separate specific effects of urban economies of scale and presentation or image effects.