Location
Choices, Land Values & City Form
ŌLocation, location, location!Ķ goes the old saying about real-estate value. Yet a detailed understanding of what constitutes general market value for a particular location remains curiously unclear. Which types of streets are better suited for retailers? Why do commercial clusters form at certain locations? Why are corner lots often preferred by shops and restaurants? Location values derive from a myriad of factors as related to urban form and spatial cognition as they are to savings in transportation costs and access to economic opportunities. The purpose of this dissertation is to investigate how the form of a city affects land rents and location choices of commercial establishments.
Conventional study of land rent and location choices creates an abstract and experientially unfamiliar perspective of the environmental characteristics of location. J. Von ThnenÕs model of 1826, was one of the first to propose that the distribution of land uses is a result of a bid-rent competition, where farmers of different produce compete for proximity to a central marketplace (Thnen, 1826). Alonso adapted the model to a modern monocentric city, using proximity to the central business district (CBD) instead of the marketplace as the basis for bid-rent competition amongst businesses and residents (Alonso, 1964). A common simplifying assumption in both models, as well as later polycentric models, reduces the city to a featureless plain with no streets or boundaries, where location is simply measured as a straight line distance to important activity centers. Rent for a unit of land is seen as equivalent to the savings in transportation costs that a location provides with respect to a center, thus diminishing as distance from a center increases. The theory works well at large, but falls short when applied to a single neighborhood, since the approximate equidistance of neighboring parcels from the city center leaves large residual land values unexplained. The theoryÕs aversion of environmental detail, renders specific intra-neighborhood inquiries of location choice irrelevant.
Newer property assessment techniques, informed by the unevenness of building density, land use, and polycentricism that characterize most modern cities, have found that in addition to the distance from important employment centers, land rent also depends on the relative accessibility of a location to various distributed economic opportunities. An accessibility index typically evaluates the amount of jobs, homes, services and other potentially desirable establishments within a fixed radius, or distance decay field from a parcel (Bhat et al., 2002). In case of retail establishments, rent also depends on purchase power in a market area, price competition and the proximity of competing establishments (Christaller and Baskin, 1966, DiPasquale and Wheaton, 1996, Lsch, 1954). Neo-classical theory implies that retail location is further affected by inter-store externalities and lease types (Eppli and Shilling, 1996, Hotelling, 1929, Isard, 1956). However, accessibility, in both classical and neo-classical theories, remains approximated by the distance or time cost to reach a location, overshadowing a more subtle, yet equally important cognitive attributes of location that are conditioned by the geometry of city form.
Cognitive attributes of location describe the mental ease of access to a location, and can be characterized by measures such as the amount of turns taken, intersections crossed, or complimentary businesses passed to reach a location. Kevin LynchÕs work on mental mapping, and numerous empirical studies have corroborated the importance of such attributes for location value (Hillier, 1999, Knos, 1962, Lynch, 1960, Lynch, 1984, Wyatt, 1997, Hurd, 1903). Hillier and HansonÕs research on topological connectivity of street networks has particularly demonstrated that distance is not the only, and often not the primary determinant of route choice (Hillier and Hanson, 1984). Other researchers have found that morphological properties of city form, such as the geometric typology of parcels and streets can also incentivize location choices of businesses (Anderson, 1993, Mathema, 2002). Yet urban form remains missing from economic geography, contributing to a perception that urban design has little effect on economic development.
In my dissertation I plan to address this shortcoming by focusing on the form-based characteristics of location choices of retail and service establishments. The latter are particularly relevant as the success of a retailer depends largely upon his spatial accessibility and exposure. Patronage and revenues at retail establishments are directly related to location choices (DiPasquale and Wheaton, 1996). Using data on spatial characteristics of the built environment, and network analysis in GIS, I intend to build computational tools to describe morphological characteristics of individual streets and parcels. These include a typological classification of parcels and streets, metric and cognitive measures of accessibility to surrounding land uses, including detailed route characteristics, and transit access. Having derived the spatial characteristics for each parcel, I will test the effects of location in a hedonic model of land values for retail and service establishments . A series of traditional control factors known to influence land value (market area, neighborhood income, proximity to competitors, area, frontage, age, distance to major employment centers, tax rate, zoning, neighborhood density etc.), will be also be added to the model.
Working as a research assistant in the MIT – Portugal transportation and Land Use research program in the past academic year, I have gathered the necessary data for this study for Lisbon and Cambridge/Somerville. The data includes parcel-level land use information, a detailed description of the built environment (parcels, buildings, roads, public transit, topography etc.), legal attributes, and financial measurements of real-estate values (assessments, as well as actual market transactions and asking prices). I plan to use both cities in a comparative case study, in order to investigate whether commercial location choices are driven by similar spatial preferences in both cultural contexts, and assess the generalizability of the findings. Finally, in order to verify the hypotheses, I also plan to conduct a qualitative survey of business owners and business patrons in both cities. The surveys will focus on the business owners preferences for location with respect to city form, and individualsÕ preference of route choice and business patronage. Following a tradition of Lynchian mapping, the survey will include a spatial representation of the environment under study.
The findings are meant to contribute to both theory and practice of planning and land policy. At the theoretical level, the research will contribute to a longstanding debate on the socio-economic effects of the built environment, specifically on the social influence of urban design. From a practical viewpoint, a fine grain understanding of commercial location choices could inform planners and policy makers of the economic suitability of newly proposed urban design projects, and develop a new methodology and toolset for better explaining variation in urban land rent.
References:
Alonso, W. (1964) Location and Land Use, Cambridge, MA, Harvard University Press.
Anderson, S. (1993) Savannah and the Issue of Precedent: City Plan as Resource. IN BENNETT, R. (Ed.) Settlements in the Americas : cross-cultural perspectives. Newark
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Bhat, C., Handy, S., Kockelman, K., Mahmassani, H., Weston, L., Gopal, A. & Srour, I. (2002) Development of an Urban Accessibility Index. IN NSF (Ed. Project 0-4938: Development of and Urban Accessibility Index. Austin, TX, Center for Transportation Research. The University of Texas at Austin.
Christaller, W. & Baskin, C. W. (1966) Central places in southern Germany, Englewood Cliffs, N.J.,, Prentice-Hall.
Dipasquale, D. & Wheaton, W. C. (1996) Urban economics and real estate markets, Englewood Cliffs, NJ, Prentice Hall.
Eppli, M. J. & Shilling, J. D. (1996) How Critical Is a Good Location to a Regional Shopping Center. The Journal of Real Estate Research, 12.
Hillier, B. (1999) Centrality as a process: accounting for attraction inequalities in deformed grids. Urban Design, 4, 107-127.
Hillier, B. & Hanson, J. (1984) The Social Logic of Space, Cambridge, Cambridge University Press.
Hotelling, H. (1929) Stability in Competition. Economic Journal, 39, 41-57.
Hurd, R. (1903) Principles of City Land Values, New York, Record & Guide.
Isard, W. (1956) Location and space-economy; a general theory relating to industrial location, market areas, land use, trade, and urban structure, [Cambridge], Published jointly by the Technology Press of Massachusetts Institute of Technology and Wiley.
Knos, D. S. (1962) The Distribution of Land Values in Topeka, Kansas. Spatial Analysis, B.
Lsch, A. (1954) The economics of location, New Haven,, Yale University Press.
Lynch, K. (1960) The image of the city, Cambridge [Mass.], Technology Press.
Lynch, K. (1984) Good city form, Cambridge, Mass., MIT Press.
Mathema, K. (2002) Transit Usage & Urban Form. Department of Urban Studies and Planning. Cambridge, Massachusetts Institute of Technology.
Thnen, J.-H. V. (1826) The Isolated State.
Wyatt, P. (1997) Using a Geographical Information System for Property Valuation. Brighton, Department of Geography, Surveying and Construction; University of Brighton.