Cheap Commercial Land in Manhattan

I started off this morning reading through the new material sent me by Wiley Interscience journals. I subscribe to email alerts for new papers from a bunch of journals–one of the few ways that email has actually improved my life–and a paper in Real Estate Economics caught my eye for a couple reasons:

Wheaton, W. C., M. S. Baranski and C. A. Templeton. 2009. “100 Years of Commercial Real Estate Prices in Manhattan.” Real Estate Economics. 37 (1): 69 – 83.DOI: 10.1111/j.1540-6229.2009.00235

I always pick up stuff from William Wheaton because he’s my academic grandfather–my advisor’s advisor–though we’ve never met. He’s also somebody whose work I’ve followed since before I went back for my PhD.

This is a particularly interesting manuscript. The abstract is short enough to include:

This article is able to put together a database of 86 repeat-sales transactions for office properties in lower and midtown Manhattan spanning the years from 1899 to 1999. Using this very limited database, decade-interval changes in real property prices are estimated—with varying degrees of precision. Our conclusions are two fold. First, adjusting for inflation, commercial office property values were 30% lower in 1999 than they were in 1899. Second, within any decade values often rise and fall by 20–50% in real terms. With these results, the long-term historic return to New York commercial property must mostly comprise yield with capital gains limited to general inflation. Other historical studies consistent with this conclusion are reviewed.

A perfect paper for an intro to urban economics or a class on urban sprawl, for it would be very counterintuitive for students, particularly planning students, who think New York is the poster child for a metro area that has not decentralized.

Those MIT peoples are smart.