What can office rents tell us about the agglomeration effect?

Jana Hochel is a Lucy Cavendish College Land Economy finalist. The past two years, she has spent all the breaks working as an intern at HB Reavis, an exciting office development firm. They are going to deliver one of the most futuristic projects in London - the first completely net-zero carbon property Worship Square in Clerkenwell and Elizabeth House in Waterloo resembling Gaudi’s architecture. Before coming to Cambridge, Jana had 2 gap years: She worked for a year in London in a digital marketing startup (Inonda), and she worked for a year for an NGO (Xeracion in Ferrol, Spain).

Jana submitted a blog entry about her research for the 2022 College Research Day Blog Competition, you can read it below.

The determinants of the office rental price, and the effect of COVID-19

By Jana Hochel

What is your research about?
The increasing number of online business and personal interactions boosts the probability of the spatial barriers becoming obsolete; the so-called “death of distance” scenario. This would eradicate the urban premium in the 21st century. The commercial rent metric is used to measure the agglomeration effect. It represents the prospect of earning a turnover/salary premium for being located in the city centre which further justifies the rent premium. The COVID-19 pandemic has turbulently accelerated digitisation. In light of the current events, my dissertation theoretically explores and empirically tests the hypothesis of whether the agglomeration effect could have become weaker following up on the study of Drennan and Kelly (2011). The methodology is based on the distance decay model of office rents comparing the shape of distribution across different decades in the London metropolitan area between 1980 and 2022.

Can you describe your research in one sentence?
What can office rents tell us about the agglomeration effect - has it become weaker due to digitization and COVID-19?

Does your research relate to any of the UN Sustainable Development Goals?

*Goal 4 (Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all). Given the continuously changing pandemic situation and governments’ response to it, we cannot leave out the possibility of a subsequent return to virtual (or hybrid) learning. I suppose, thus, that growing research efforts in my research area (technologically mediated classroom interactions) can support effective teaching and learning in virtual environments and thus help bring flexibility and resilience to the current education systems across the world during and after the COVID-19 crisis.