Developers’ vertical price premium behavior in residential tall buildings
Even though both the number and the size of tall building developments are increasing, tall building economics remain understudied. The goal of the research is to study developer behavior regarding height premiums in residential tall buildings. Literature offers little knowledge on developers’ behavior when it comes to height premiums in the residential sector. Previous findings on the demand side of height premiums indicate that willingness to pay for height benefits depends user preferences, but all signal that higher floors offer characteristics that can be priced by developers. Contextually relevant height benefits in the residential sector are categorized as views and perception of social power. This research employs data from fifteen residential tall buildings in Rotterdam and analyzes the relation between developer unit prices, floor levels and height benefits. Results display a 0.5% increase in developer unit prices per floor level, ceteris paribus. However, a deeper analysis shows that height premiums display inter-building and intra-building differences, which is interpreted as evidence for heterogenous vertical price premium behavior amongst developers. The floor level premiums were found to be substantially impacted by height-induced view effects. The results further show that developers place a price on status aspects related to height. Penthouses premiums were found to be larger when placed on a greater vertical location and some developers seem to put a price label on the concept of being located on top of others. These novel insights can help various stakeholders to better understand developer vertical price premium behavior.