Is the sky the limit? High-rise buildings and office rents

Modern central business districts are characterized by high-rise office buildings, but their presence cannot be explained by standard urban economic models only. We aim to explore the impact of other forces that explain the presence of tall buildings, by examining the existence of a building height premium. We find that Dutch firms are willing to pay on average about 4% more for a building that is 10m taller, implying a substantial premium associated with tall buildings. This premium is thought to be due to a combination of a within-building agglomeration economies, a landmark and a view effect. Given functional form assumptions on the agglomeration effect, the results suggest that the sum of the landmark and view effect is about 2.8-5.5% of the rent for a building that is five times the average height. © The Author (2013). Published by Oxford University Press. All rights reserved.