The Value of Design in Real Estate Asset Pricing
Name
buildings-10-00178.pdf
Size
1.68 MB
Format
Adobe PDF
Checksum (MD5)
2fd2e1601f2d3428d24d4e8ffc2cafa3
Author(s)
Rong, Helena Hang
Yang, Juncheng
Kang, Minkoo
Chegut, Andrea Marie
Date Issued
October 2020
Journal
Buildings
Publisher
MDPI AG
Citation
Rong, Helena Hang et al. "The Value of Design in Real Estate Asset Pricing." Buildings 10, 10 (October 2020): 178 © 2020 The Authors
Version
Final published version
Abstract
Does design contribute to real estate value? Practicing architects require evidence to justify both functional and aesthetic building needs within the financial ecosystem. Some buildings that become real estate assets are valued using models that consider some proxies for understanding value, but these features are abstract and may misidentify the sub-optimal differentiation that design brings. The lack of feedback between real estate valuation and building design often leads to poor design and economic outcomes. To address this miscommunication, we investigate the transaction price performance of four external architectural form features—diagonality, curvature, setbacks and podiums. Whilst controlling for drivers that are known to explain transaction price variation, we find that diagonality and podiums have a positive pricing differential of 12.4 and 9.7% more than rectilinear control buildings, respectively. Buildings with setbacks have a negative pricing differential of 10%. Furthermore, these results are also consistent for rental valuation. Results suggest that there is a significant economic impact of some architectural form interventions that differentiate commercial buildings and contribute to the role of form in design, planning and commercial real estate.
MIT Department
Massachusetts Institute of Technology. Center for Real Estate
Terms of Use
Creative Commons Attribution
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.3390/buildings10100178
