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The Value of Design in Real Estate Asset Pricing

Real Estate Innovation Lab, Center for Real Estate, Massachusetts Institute of Technology, Cambridge, MA 02139, USA
Author to whom correspondence should be addressed.
Buildings 2020, 10(10), 178;
Received: 21 September 2020 / Revised: 2 October 2020 / Accepted: 5 October 2020 / Published: 9 October 2020
(This article belongs to the Section Architectural Design, Urban Science, and Real Estate)
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. View Full-Text
Keywords: architecture; design; built environment; finance/financialization; valuation; asset pricing architecture; design; built environment; finance/financialization; valuation; asset pricing
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MDPI and ACS Style

Rong, H.H.; Yang, J.; Kang, M.; Chegut, A. The Value of Design in Real Estate Asset Pricing. Buildings 2020, 10, 178.

AMA Style

Rong HH, Yang J, Kang M, Chegut A. The Value of Design in Real Estate Asset Pricing. Buildings. 2020; 10(10):178.

Chicago/Turabian Style

Rong, Helena Hang, Juncheng Yang, Minkoo Kang, and Andrea Chegut. 2020. "The Value of Design in Real Estate Asset Pricing" Buildings 10, no. 10: 178.

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