24-hour cities and commercial real estate performance

Abstract

Since the mid-1990s the real estate industry has posited that so-called 24-hourcities would provide investors superior risk-adjusted returns compared with 9-to-5 cities. This thesis examines that claim rigorously for the first time. The characteristics of the 24-hour city are related to literature in urban history, planning theory, and economic geography. Proposed attributes of 24-hour cities such as downtown housing, urban retailing, low crime, transportation access, and amenities mix are explored in the literature and through the analysis of empirical data. A criteria-set based upon such data, rather than simply verbal description, provides an operational definition of the 24-hour city.

Hypothesised groupings of 24-hour and 9-to-5 cities are studied, and those groupings subjected to evaluation by the operational definition, as well as by K-means Cluster Analysis. The 24-hour cities are found to have higher city densities, greater use of mass transit and walk-to-work commutation, higher percentages of late night automobile traffic, more 24-hour drug stores, lower crime rates, and higher measures of regional distinctiveness. Superior commercial real estate performance is observed in inflation-adjusted office rents, occupancy, and risk-adjusted return on office investment for the period 1987 – 2009, at the 0.01 level of statistical significance. That level of significance is also attained by a multivariate regression of several urban attributes on the average price per square foot of CBD office purchases by all investors for the period 2001 – 2008. Survey data and expert interviews confirm the current application of investment strategies based on superior opportunities in 24-hour cities, and provide new detail on industry desiderata.

The analysis indicates that 24-hour cities can be considered exceptions to the standard Alonso-Mills-Muth model of urban spatial evolution. The thesis proposes that an alternative anentropic model, based on complexity theory and requiring development, may better explain the phenomenon of emergent self-organisation these cities display.

Date of Award	May 2011
Original language	English
Supervisor	Alastair Adair (Supervisor), Stanley Mc Greal (Supervisor) & S Roulac (Supervisor)