I focus on the question: do urban characteristics of the areas in which firms are located influence the effect of firms' corporate real estate holdings on their stock returns? Tüzel (2010) argued that the proportion of real estate held by firms has a significant positive effect on the cross-section of expected stock returns. She explains this positive effect through the slow rate of depreciation for real estate holdings. Accordingly, she argues that firms with more real estate holdings are more vulnerable to bad productivity shocks and they are more risky, which leads them to have higher expected stock returns. In this paper, I explore this causal relationship by considering location characteristics. I examine whether this positive impact of real estate holdings on stock returns is affected by adding into the equation the potential density increase of the area in which the focal firm is located. I show that the positive effect of real estate ratio on firm’s excess stock returns is washed out, and turns to be significantly negative after considering the effect of potential density increase.