Real estate value and quality design in commercial office properties

Purpose: The purpose of this paper is to assess the impact of urban design quality on the real estate value of commercial office property. Empirical evidence based on quantitative research into the added value of quality design on real estate performance has seen little advancement during the past two decades. Office sector hedonic analysis has been predominantly characterised by a piecemeal approach focusing on specific attributes and lacking a holistic approach to the effects of design quality on real estate value. This paper brings forward new empirical evidence to assess the added value of quality design based on quantitative analysis of office sector performance in the historic urban core of a UK city. 

Design/methodology/approach: Using a unique dataset of 279 Belfast City Centre office properties rented during the period 1995-2009, this study employs regression analysis to estimate a hedonic pricing model based on a composite range of variables. The contribution of this study is the complementary utilisation of quantitative and qualitative methods to generate variables incorporating a holistic approach to design quality at three different levels of investigation: interior; exterior/architectural; and urban scale. 

Findings: The key findings show that higher design quality specifications in the three levels (interior, exterior and urban scale) can generate rent premiums. Aspects of quality design that include connectivity and building facade distinctiveness enhance corporate image; and material quality appropriateness adds to real estate value whereas the lack of preference for tall buildings and high-end interior quality specifications in historic cores reflect market reactions to economic trends. 

Practical implications: This paper provides investors and developers with insights about those aspects of quality design that are highly valued by office tenants in historic urban cores. This is especially significant in the downturn of the property cycle with investment priorities playing a crucial role in a project's economic viability. 

Originality/value: This study bridges a significant gap in the literature concerning hedonic investigation of the added value of quality design on real estate performance. This holistic approach using quantitative and qualitative methods and incorporating urban design variables constitutes a unique approach to quantifying quality impacts on real estate value.