From Book to Bubble: How Finance Built the New Chicago. Rachel Weber. The University of Chicago Press, 296 pages, 2015.Early in the 2000s, Chicago, like a number of cities, was experiencing a commercial real estate boom. At the time, the common wisdom was that lenders had learned the lessons of the office bubble of the 1980s and that supply and demand would be kept in balance. This proved to be optimistic, not only in Chicago, but in cities across the country. Rachel Weber's From Boom to Bubble explains why.Weber begins with two questions: why did office developers in Chicago add approximately 15% more square footage to the existing supply at a time when the number of new office jobs dropped 8.3%; and what does this fact tells us about the gap between economic theory and what actually happens in real estate markets? Ambitious in scope, the book offers a new explanation (i.e., theory) of real estate development and it explains anew not only the mechanics of the real estate process and how Chicago ended up with a field of skyscrapers downtown, but also, and perhaps more importantly for readers of this journal, why we continue to overbuild.At its core, the book is an argument that the supply of real estate is not determined solely (or, in the case of Chicago, substantially) by demand for new space. Instead it is the result of active participants in the market, including agents, appraisers, and brokers; sources of capital; and local governments-whether mayors, economic development officers, or planners-who all rely on a steady stream of transactions to maintain and build their wealth or, in the case of public officials, their career. In the absence of a sudden jump in hiring, she shows, demand for new buildings must be created by brokers who impress on clients both the shortcomings of their existing space and the merits of the new.Methodologically, Weber is a successor to Anthony Downs: well-connected to industry sources, well-schooled in the theories of real estate, and able to take the broad view of what is happening in the industry and lucidly present it to the reading public. She is also a kind of successor to Susan Fainstein, author of The City Builders, who has written at great length about both the mechanics of real estate development and its public policy implications. Weber's alternative way of understanding bubbles is based on years of interviews and data gathering among Chicago's real estate developers, and, like Homer Hoyt, she uses it to develop a richer understanding of the operation of real estate markets and the strengths and shortcomings of the real estate literature.The book is divided into three parts. In the first, Weber brings together a wide range of sources to rethink what we know about the development of real estate. Her analysis draws from the academic and trade literature and across a wide ranging set of (normally academically-distinct) specializations. She weighs conflicting explanations for how, when, and why real estate development occurs, and in the process offers an explanation that deepens our understanding of the fundamentals of real estate: the real estate cycle, how real estate investment works, and the role of the intermediaries who facilitate real estate development and sales.Having created a framework for understanding development, Weber turns to Chicago in the second part of the book, and the overbuilding of skyscrapers there during what she terms the Millennial Boom. During this period ''over two hundred large-scale development projects were erected'' (p. 124), many of which were residential, with 2 million square feet of office space built, or roughly an additional 15% of stock (a modest amount of overbuilding compared to cities like Phoenix and Atlanta). Weber offers a detailed retelling of the boom and bubble there, with attention to all of the parties discussed in the first part of the book. In a final part, Weber broaches the question of whether there are policy alternatives that might limit future bubbles. …
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