Working From Home and the Centrality Premium: Implications for Business Districts

This paper examines the intracity effect of Working From Home (WFH) on business districts. I develop an exogenous municipality-level WFH exposure indicator in the Paris metropolitan area and leverage on the Covid-19 crisis as a natural experiment to implement a difference-in-differences strategy. Using a unique dataset on commercial real estate, findings reveal a significant rise in office vacancy due to remote working, with effects more pronounced in areas further from the city center, with longer commuting distances and larger firms. This highlights companies' use of office property downsizing as a cost-effective strategy to relocate to central locations, which remain preferred for their superior customer and labor market access. This shift exacerbates spatial disparities, particularly disadvantaging peripheral areas. The analysis also shows that investment patterns have adjusted, with a decrease in office property transactions and prices in areas most affected by WFH. Furthermore, I document a decline in employment and number of businesses in the local retail and restaurant sectors, exposing the negative externalities of teleworking within cities.