Academic journal article Real Estate Economics

Explaining Location Patterns of Suburban Offices

Academic journal article Real Estate Economics

Explaining Location Patterns of Suburban Offices

Article excerpt

Suburban office markets exhibit a pattern of variegated clustering that is little explained by the conventional theories of urban form based on agglomeration effects and the cost of distance. To explain the pattern, this paper introduces industry economies of scale for "Class A" offices. Empirical tests for industry economies of scale are reported, based on data from the office market of Houston, Texas. The models presented, under conditions typical of North American cities in recent decades, imply the patterns of variegated clustering that are observed. They suggest a sequence of clusters, increasing in size and distance from the central business district. Further, they imply the potential for mass movement by tenants from older clusters to new.

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The dispersed and clustered pattern of office location in today's North American city is little explained by modern urban theory, compelling questions about what is driving it. In the modern theory of cities, where spatial arrangements derive from the interaction of distance costs and agglomeration effects (Henderson 1977), clustering would reflect the influence of agglomeration. But a high sensitivity to agglomeration should imply a central city location (Vernon 1963, Goddard 1975). By contrast, empirical evidence depicts suburban office patterns as characterized by clusters in varying size and market influence as well as in varying distance from the central business district (CBD; Pivo 1990, Archer and Smith 1993, Schwartz 1993, Sivitanidou 1996, Bollinger, Ihlanfeldt and Bowes 1998, Mourouzi-Sivitanidou 2002, Dunse and Jones 2002). (1)

This paper poses an explanation of suburban office clustering based on the nature of office functions and related industry economies of scale. The second section of the paper reviews office location in the context of modern urban theory. The third section introduces distinctions among office types and pertinent types of economies of scale. The fourth section explores implications of the various types of industry economies of scale. The fifth section presents tests for the presence of industry economies of scale in a typical city where growth has been significant: Houston, Texas. Finally, a conclusion summarizes the findings and implications.

Office Location in Modern Urban Theory

The distinguishing feature of "Class A" office functions in modem urban theory is the intensity of their communication requirements (Vernon 1963, Goddard 1975, Clapp 1980). The quintessential need of office firms is taken to be face-to-face contact with other firms. Only as this requirement is relaxed, as may result due to telecommunications advances, do non-CBD locations for offices become plausible. Distinctions have been recognized between decision-making (nonroutine) and administrative/clerical (routine) functions, with the latter being regarded as less communication intensive and less agglomeration sensitive (Vemon 1963, Gad 1985, Kutay 1986). It is the administrative/clerical office functions that are candidates for decentralization in a mononuclear model, and the location of these functions presumably will be dominated by the simple interaction between transport (to clients) and commuting costs for office workers. Barring the introduction of a public or private developer agent (Wieand 1987), the result ant location pattern of decentralizing office functions would appear to be in a ring around the CBD (White 1976).

Despite the multinuclear nature of the modern city, office functions still have remained among the most centralized of urban activities, and the monocentric model provides a beginning point for their analysis.2 Important extensions from this monocentric perspective are the work of White (1976) and Wieand (1987). White extends the classical Muth--Mills model by allowing firms to relocate to a second, non-CBD export node in the residential area. The effect of the subcenter is examined with respect to urban size, land values and household utility. …

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