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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.

Suggested Citation

  • Hans R. A. Koster & Piet Rietveld & Jos N. van Ommerren, 2011. "Is the Sky the Limit? An Analysis of High-Rise Office Buildings," SERC Discussion Papers 0086, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0086
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Clouds in Your Coffee? Skyscrapers and their Symbolic Heights
      by Jason Barr in Skynomics Blog on 2021-01-20 13:17:39
    2. The World’s Tallest Skyscraper
      by Michael Fuenfzig in The ISET Economist on 2012-02-10 14:21:47

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    1. Nathan, Max & Overman, Henry G., 2011. "What we know (and don't know) about the links between planning and economic performance," LSE Research Online Documents on Economics 59232, London School of Economics and Political Science, LSE Library.
    2. Grant Mosey & Brian Deal, 2020. "Multivariate Optimization in Large-Scale Building Problems: An Architectural and Urban Design Approach for Balancing Social, Environmental, and Economic Sustainability," Sustainability, MDPI, vol. 12(23), pages 1-22, December.
    3. 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.
    4. ., 2014. "Planning and economic performance," Chapters, in: Urban Economics and Urban Policy, chapter 5, pages 104-126, Edward Elgar Publishing.

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    More about this item

    Keywords

    commercial buildings; building height; landmarks; reputation effect; semiparametric regression; agglomeration effect;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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