Does Design Matter? An Analysis of the Economics of Design and Design Rankings

Norm G. Miller and Xudong An

ERES from European Real Estate Society (ERES)

Abstract: Marque and iconic architects get to design museums and other great public buildings often with generous budgets and few design constraints. In the private sector design constraints are significant. Since there are not enough unlimited public projects to fulfill the ambitions of most well-known architects most must also work in the private sector. Here private sector office rents are used as one market measurement to help determine the benefits of using signature architects along with controls for several other design features. One could directly ask about the design quality of each building, but from what set of judges? This paper reveals an investigation into the economics of design examined in the private sector using commercial office properties. Top ranked design firms do seem to add to the marginal rent achievable in the office market, on average at plus 7% in this national US based study, even when we include a number of design related controls. At the same time the potential gross revenue on top ranked designer buildings tends to be lower, simply as a result of more open and common space within the building. Rents for well-known design firms are higher but such buildings also have less rentable space relative to the gross building area, offsetting some of the benefit.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2016-01-01
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