Office spaces and urban costs

Abstract

This paper aims to provide insights about the role of professional businesses, which are inputs that are sourced more locally than material inputs, in shaping urban land prices. Exploiting an exogenous variation in the form of market access, I estimate how much land prices change as a response to an increase in the use of housing by professional business services. I find that a percentage increase in local office propensity increases urban land prices by 0.59%, controlling for numerous geographical and socio-economic factors. The estimated effect is twice larger when corrected for the endogeneity bias.