Rosenthal study rent gradients, spatial structure, and agglomeration economies published in JUE
Apr 26, 2018
Crocker H. Liu, Stuart S. Rosenthal & William C. Strange
Journal of Urban Economics, April 2018
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. The authors 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 percent 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.