Is the Sky the Limit? An Analysis of High-Rise Office Buildings

Time: 2011, Tuesday September 6, 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Hans Koster (VU University Amsterdam)

Discussant: Ioulia Ossokina (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject: 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 investigate the impact of building height on commercial office rents using detailed data, aiming to test the relevance of this model. The results show that firms are willing to pay about 4 percent for a building that is 10 meters taller, which we interpret as the sum of an agglomeration and 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 percent of the rent for a building that is 6 times the average height. We only find evidence of local within-building interactions, and not of between-building interactions.

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