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Determinants of industrial land prices

Determinants of industrial land prices. Huub Ploegmakers Erwin van der Krabben ERES Conference, 15-18 June 2011, Eindhoven. “Location which the land-use plan deems suitable for activities in the branches of commerce, manufacturing, commercial services and industry”. Theories of Land Prices.

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Determinants of industrial land prices

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  1. Determinants of industrial land prices Huub Ploegmakers Erwin van der Krabben ERES Conference, 15-18 June 2011, Eindhoven

  2. “Location which the land-use plan deems suitable for activities in the branches of commerce, manufacturing, commercial services and industry”

  3. Theories of Land Prices • Alonso-Muth model • Little attention to the influence of developer behavior in the determination of land prices • “While market outcomes such as prices are always central to the discussion, there is generally comparative neglect of the detailed rules and mechanisms through which prices are formed” (Hodgson, 2008, p. 252)

  4. A Partial Theory of Land Prices • Restricted in explanatory properties • “This article presents an attempt to explain land prices in the particular case of the Netherlands (…) where land is supplied publicly”(Needham, 1992: p. 670)

  5. Average maximum price per square meter in 2008 3,00 – 72,00 72,00 – 117,00 117,00 – 165,00 165,00 – 222,00 222,00 – 325,00 325,00 – 565,00 25,00 – 70,00 70,00 – 108,00 108,00 – 160,00 160,00 – 215,00 215,00 – 300,00 300,00 – 407,00

  6. Economic principles Maximum prices: • The price at which other municipalities in the region sell building plots; • The residual value of the land Minimum prices: • Total development costs

  7. Political Decisions • Building plots ‘on tap’; • Chosen mix of land uses; • Quality of land servicing; • The amount of land supplied

  8. Quantitative modelling In Old Institutional economics: • The analysis does not start by building mathematical models: it starts from theoretical conjectures concerning causal mechanisms. • Mathematical and statistical techniques servants of, rather than the essence of, economic theory.

  9. Model Specification Land Price • average regional land prices, • regional competition, • land use type, =(

  10. Source: Jasper Beekmans

  11. Model Specification Land Price • average regional land prices, • regional competition, • land use type, • accessibility, • urban agglomeration) =(

  12. Conclusions • Land prices explained by regional average land prices, site and locational characteristics • Model improvement: • Measurement of regional average prices • Measurement of accessibility • Appropriateness of OLS?

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