This paper is one of the first to investigate the presence of a monument premium for commercial real estate. We study a sample of offices located in monuments that were offered for rent and match them with offices without that status in the proximity. We find convincing evidence for a large premium, but only outside the Randstad area. The matching is crucial. Controlling for the age of the buildings and the treatment of service costs does not change our findings.
The absence of a monument premium in the Randstad area is a surprising finding.
The value of historic buidings
Historic buildings are an important historic urban amenity. Such amenities contribute to an attractive living environment as can be verified by comparing the vivid centers of many older European cities that attract many tourists and the CBDs of many U.S. cities that are predominantly concentrations of employment. The desire to conserve older buildings is the main reason for listing them as monuments. The fact that they are regarded by many as attractive does not necessarily safeguard them from demolition as other uses of the land on which they sit may be regarded as even more profitable. Although this may suggest that listing has a negative impact on the value of real estate, empirical studies have often found that there is a premium associated with it. The probable explanation is that for many monuments the restrictions imposed by the protected status are not binding and that the monument status signals the valuable aspects of the building that explains the listing. The latter effect may be reinforced by eligibility for subsidies or favorable tax treatment that may be associated with monument status.
Authors: drs Jan-Hylke de Jong & prof dr Jan Rouwendal