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

Stuart Rosenthal (), William Strange and Joaquin Urrego ()

Journal of Urban Economics, 2022, vol. 127, issue C

Abstract: This paper estimates the value firms place on access to city centers and how this has changed with COVID-19. Pre-COVID, 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.

Keywords: COVID-19; Commercial real estate; Agglomeration; Urban spatial structure (search for similar items in EconPapers)
JEL-codes: R00 R33 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jue.2021.103381

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