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Finc 475: Chaper 3
Location Basics |
Urban development refelcts basic economic forces
Highest density use demands highest rent
Space leases to those who pay highest rent
As cities grow, RE uses of similar character cluster
*Orderly pattern of land use generating greatest aggregate economic benefit*
Cities have clusters of usage |
Bid-Rent Curve |
maximum rent a potential real estate space user would be willing to pay, or bid, for a location |
Von Thumen Economic Model |
The Isolated State
Thunen Ring Model |
The Isolated State |
All that matters is transportation cost.
Most expensive land always in center |
Weaknesses of Isolated State model |
Differential transportation costs
Variations in topography
Soil fertility
Changes in demand or price of the commodity |
Concentric Circle Theory |
1920's by Ernest Burgess
CBD, transportaton zone, lower income residential, middle to upper residential |
Sector Growth Theory |
Homer Hoyt
CBD
Lower income
Heavy Industry--Light Industry
Middle Income
Upper Income--middle income again |
Multiple Nuclei Theory |
Harris and Ullman--Los Angeles
New urban centers are created within residential areas, represent satellite communities(small CBDs)
1940's
Growth Vectors |
Growth Vectors |
Growth occurs along:
Transportation lines
Gaps between major highways
Ever expanding circles around a hub of commercial activity
Clustered areas within reach of employment centers
Where money is concentrated
By Water |
Axial Growth Theory |
Developed in 1930's
Builds on the concentric growth pattern by adding transportation routes characterized by axes
CBD is most used
Travel time is key for growth
Land tends to develop along major transportation routes |
Central Place Theory |
Walter Christaller and August losch
3 Basic concepts:
Threshold population
Higher versus lower order goods and services
Trade area or range of a good or service
Rent minimization or income maximization will drive location decisions |
WL Garrison and BJ L Berry |
Expanded on Central place theory
Range of a good: distance people will travel for a good or service
Threshold: the minimum # of purchasers necessary to support a good or service from a central place
Walmart: 25000
Academy: 75000 |
Centrifugal vs. Centripetal forces |
Developed by Charles Colby in 1933 |
Centripetal |
Attract a group toward the central areas
Employment |
Centrifugal |
Move one group away from central zone to periphery
Crime, congestion, rent levels |
Linkages |
Connections between locations or relationships that require transport movement of goods or people
people to work, entertainment, school
transport industrial or retail products |
Linked Sites |
Locations between which people or things are moved |
Transfer costs |
Costs of transportation between linked sites
Explicit & Implicit |
Explicit costs |
Costs measurable in $'s |
Implicit costs |
Disutility of moving between sites |
Processing Costs |
Natural site advantages
soil fertility, climate, ect. |
Urban Development |
Patterns of usage of real estate in cities. Functional zones are not perfectly circular
Primarily an economic result
Controlled by govt. through zoning
Impacted by natural features
Transportation lines |
Market for Rental Space |
Competitive bids for best space create highest rents. Rent tends to decline as distance from 100% location increases
Overlapping of uses |