Valuing design and designing value : the financial impact of daylight and views in office building real estate

Abstract

Architecture and finance both contribute to the conception and production of the built environment. Their agendas for buildings are sometimes in agreement and other times at odds. In this dissertation, I examine the intersection of architecture and finance by quantitatively assessing the economic value of design. Specifically, I measure the premium of two visual attributes--daylight and views--in office spaces in the borough of Manhattan in New York. Combining computational building performance analysis with empirical commercial rent data, I evaluate offices simultaneously as designed spaces and as property. First, I simulate spatially-distributed daylight and views in 5,154 offices. In the case of views, the hybrid performance-finance approach informs a new method for view modeling in an urban context. Second, using a hedonic pricing regression, I measure the premium for daylight and views in office rent prices. The results show that spaces with high levels of daylight have a 5 to 6% premium over spaces with low daylight; and spaces with high access to views have a 6% premium over spaces with low access to views. The combined value of spaces with both high daylight and view access, similarly, is 6%, indicating that the impact of daylight and views together is significant but is not additive. The identified premiums reflect how much more tenants are willing to pay for these attributes, holding all other building, neighborhood, and lease contract characteristics constant. At a moment when the affordability and sustainability of the urban built environment are in question, identifying the financial value of spatial characteristics can inform the production and regulation of properties. Architectural design and the flow of real estate capital are among a multitude of factors that collectively impact the creation of buildings. Combining methods of building performance analysis and financial modeling, this dissertation presents a new lens through which to understand how spatial design relates to economic forces governing our built world.