Abstract
Does design contribute to real estate value? Practicing architects require evidence to justify both functional and aesthetic building needs within the financial ecosystem. Some buildings that become real estate assets are valued using models that consider some proxies for understanding value, but these features are abstract and may misidentify the sub-optimal differentiation that design brings. The lack of feedback between real estate valuation and building design often leads to poor design and economic outcomes. To address this miscommunication, we investigate the transaction price performance of four external architectural form features—diagonality, curvature, setbacks and podiums. Whilst controlling for drivers that are known to explain transaction price variation, we find that diagonality and podiums have a positive pricing differential of 12.4 and 9.7% more than rectilinear control buildings, respectively. Buildings with setbacks have a negative pricing differential of 10%. Furthermore, these results are also consistent for rental valuation. Results suggest that there is a significant economic impact of some architectural form interventions that differentiate commercial buildings and contribute to the role of form in design, planning and commercial real estate.
Highlights
What are the value drivers for a building? This is an important question for disciplines within the built environment associated with the design and development of buildings, as 50% of our building stock is actively traded in the real estate market
Employing Equation (1) we estimate the impact of external architectural design features upon the logarithm of building transaction prices
We examined the impact of architectural design features upon building valuation
Summary
What are the value drivers for a building? This is an important question for disciplines within the built environment associated with the design and development of buildings, as 50% of our building stock is actively traded in the real estate market. The variables generally used to measure differentiated value are crude and abstract, such as building size, age, number of stories, status of renovation, location and proximity to the Central Business District (CBD) [2], it is the basis behind appraisal analysis and asset valuation econometrics. These building and neighborhood features describe only the simplest building elements and their context, which have already been specified as guidelines prior to the design of the physical structure
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