Chapter 4 Urban Land Values, Transportation Costs Impact and the Urban Form

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Chapter 4Urban Land Values, Transportation
Costs Impact and the Urban Form
Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
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Major Topics

• How transportation costs and productivity affect
  land values in a city
• Why and how a freely functional competitive land
  market will lead to land being used at its
  highest and best use
• The impact of population growth, transport nodes
  and regulation on land values and density

Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
3
Urban Form

• Physical spatial characteristics of a city
• Size
• Population density
• Density variation in different parts

     
 
Value
A steep urban form with a central focus of
intense land use and value
A sprawled urban form with multiple focus points
and more even land values.
Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
4
Residual Nature of Land Value

• Four basic factors of production
• Labor, capital and raw materials are mobile
  factors
• Land is not mobile

Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
5
Transportation Costs

• A major reason for differences in land value from
  one location to another.
• Transport costs are part of mobile costs, hence
  lower transport cost higher land value
• When the highest and best use of land wins the
  site the aggregate transportation costs are
  minimized for the market as whole

Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
6
The Bid-Rent Curve

• The bid-rent is the maximum rent that a
  potential user would be willing to pay for a site
  or location

Bid-Rent Functions of Three Land Uses With
Differing Productivity Sensitivity to
Transport Cost
Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
7
Changes in Transportation Costs
Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
8
Multiple Nuclei Cities

• Real world cities are not purely monocentric,
  they have other major activity areas (MACs)
  besides the CBD.
• Large cities are sprinkled with neighborhood
  business districts (NBDs) that serve needs of
  local communities

CBD where land value is highest
Multiple clusters of economic centers
Suburban retail and office cluster
 
CBD
NBD
NBD
NBD
Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner
9
Impact of Highways on Land Values
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END
Real Estate Principles for the New Economy
Norman G. Miller and David M. Geltner