The Need for Speed: Internet Infrastructure Location and Real Asset Values

Fast data access and flows are crucial to the competitive success of many firms as they navigate the real effects of latency in the digital economy. Using an extensive, hand-collected dataset of U.S. internet exchange points (IXPs), office property transaction data, and tenant lease information, we examine real asset pricing and tenant agglomeration effects arising from the geographic location of internet infrastructure. Estimating hedonic and spatial regression models, we document significant price premiums for office property transactions located within one-half mile of an IXP. A one standard deviation decrease in linear distance from an IXP is associated with a 13 percent decrease in sale price. Our multivariate and dynamic staggered difference-in-difference results further indicate that valuation effects occur only after the establishment of an IXP. We also provide a battery of robustness checks to confirm and sharply identify our findings. As an important demand-driven channel for our findings, we document a significant increase in demand for office space surrounding IXPs by tenants in knowledge and technology intensive (KTI) industries following IXP establishment. This collocation effect is associated with higher effective rents in properties surrounding IXPs and the magnitude of the effect is greater among KTI tenants.