Document Type

Article

Language

eng

Publication Date

1-2016

Publisher

Elsevier

Source Publication

Regional Science and Urban Economics

Source ISSN

0166-0462

Original Item ID

DOI: 10.1016/j.regsciurbeco.2015.10.003

Abstract

Urban economists have long understood the theoretical importance of transportation infrastructure and accessibility on the location choice of households and firms. We utilize a readily available data set of transaction rents in the Chicago metropolitan area to investigate the determinants of industrial property rents. Among the factors considered are proximity to transportation infrastructure, characteristics of the property, the term structure of lease agreements, and local attributes of the neighborhood. Empirical results suggest property, lease, and local demographics play important roles in determining rents. Despite the fact that industrial property tends to locate very close to rail lines and interstate highways, transportation infrastructure has much less influence. There is evidence that there is an upward sloping lease term structure premium and that the premium varies over time. The model is also used to develop a constant quality rent index for the Chicago commercial property market. Compared to average rents and asking rents, the estimated constant quality index shows a smaller run up in rents from 2003 through 2008 and a larger drop off in rents through the end of 2011.

Comments

Accepted version. Regional Science and Urban Economics, Vol. 56 (January 2016): 34-45. DOI. © 2015 Elsevier. Used with permission

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