Journal
JOURNAL OF URBAN ECONOMICS
Volume 127, Issue -, Pages -Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.jue.2021.103381
Keywords
COVID-19; Commercial real estate; Agglomeration; Urban spatial structure
Categories
Funding
- Social Sciences and Humanities Research Council of Canada
- Center for Real Estate at the Rotman School of Management
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This study estimates the value that firms place on access to city centers and investigates the impact of COVID-19 on this value. The results show that in transit cities, the commercial rent gradient and the premium for proximity to transit stops have both decreased, while car-oriented cities did not experience a similar decline.
This paper estimates the value firms place on access to city centers and how this has changed with COVID-19. PreCOVID, across 89 U.S. urban areas, commercial rent on newly executed long-term leases declines 2.3% per mile from the city center and increases 8.4% 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% in transit cities, and the premium for proximity to transit stops also falls. We 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.
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