Dancing with the stars : the value of design in real estate development

Abstract

This study investigates the financial performance of awarded architectural design for buildings in Manhattan, New York. Awarded design is based on the achievement of the architect and/or the architecture firm receiving prestigious awards from the industry such as the Pritzker prize, AIA Architecture Firm Award, the Architectural Innovation Award of the Wall Street Journal to name just a few. To measure financial performance, I use several datasets, Real Capital Analytics, Compstak, Walkscore and NYC public data for New York City. To identify awarded design and compare it to non-awarded design, I employ a matched-pair analysis. I find 846 building transactions with 89 awarded design transactions that are matched geographically to 757 non-awarded design transactions within a quarter mile radius over the 2000 to 2017 period. The results of the multivariate hedonic analysis suggest that, compared with buildings in the quarter-mile neighborhood, office buildings designed by awarded architects and awarded architecture firms have a statistically and economically significant transaction premium of 23.1 percent, ceteris paribus, with a model that explains just under 90 percent of the variation in transaction price. Results of this analysis are intended as way for designers to have agency in the design build development practice and for developers and investors to understand the value of engaging in awarded design effects.