Analysing the value of industrial estates

Abstract

Hedonic price modelling is widely used as a technique for the assessment of property value, estimating demand for specific attributes of housing and neighbourhoods, analysing price indexes for different types of property, etc. Although there are many studies that try to explain the value of individual property, to the best of our knowledge, hedonic price modelling has not been used to analyse the value of complete areas within the city. However, there is a widely accepted need for price indexes at a higher level of scale (see e.g. Spinney et al, 2009). In this paper, we will apply hedonic price modelling to analyse property values of a specific area within the city: the industrial estate. For each industrial estate an average property value per hectare is calculated for every year in the period 1997-2008. To find possible explanatory variables, literature on the valuation of individual (industrial) property was used, e.g. the work by Ambrose (1990), Black et al. (1997) and Fehribach et al. (1993). Based on these and other studies, two main types of explanatory variables are distinguished between: physical characteristics of industrial estates and (regional) economic characteristics. A simple OLS regression is used to test a range of hypotheses concerning these explanatory variables. We conclude that most hypotheses concerning our explanatory variables are confirmed and that performing an analysis at the level of an urban area provides similar results as analyses of individual property.