JUE insight: Are city centers losing their appeal? Commercial real estate, urban spatial structure, and COVID-19

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.

Automated summary

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.