Rosenthal paper on commercial real estate, urban spatial structure, and COVID-19 published in JUE

Jun 24, 2021

Are City Centers Losing Their Appeal? Commercial Real Estate, Urban Spatial Structure, and COVID-19

Stuart S. Rosenthal, William C. Strange & Joaquin A. Urrego

Journal of Urban Economics, June 2021

Stuart Rosenthal

Economics Department

Aging Studies Institute

Center for Policy Research

COVID-19

Journal of Urban Economics

Stuart Rosenthal

This paper estimates the value firms place on access to city centers and how this has changed with COVID-19. Pre-COVID, across 89 U.S. urban areas, commercial rent on newly executed long-term leases declines 2.3 percent per mile from the city center and increases 8.4 percent with a doubling of zipcode employment density. These relationships are stronger for large, dense “transit cities” that rely heavily on subway and light rail. Post-COVID, the commercial rent gradient falls by roughly 15 percent in transit cities, and the premium for proximity to transit stops also falls. The authors do not see a corresponding decline in the commercial rent gradient in more car-oriented cities, but for all cities the rent premium associated with employment density declines sharply following the COVID-19 shock.