Conversion or redevelopment? Effects of revitalization of old industrial buildings on property values

Abstract

The revitalization programmes, which are meant to transform the neighbourhood community for better living, are presumed to bring positive value enhancements to the living environment of the city, while allocating limited land resources effectively to the highest and best use. By employing two hedonic price models and based on two sets of residential transaction data obtained from a former industrial-hub, Kwun Tong, in Hong Kong, the study investigated whether different modes of revitalization (redevelopment or wholesale-conversion) bring different externalities to the value of the neighbourhood properties in the city. Surprisingly, the findings suggest that revitalization programmes, irrespective of the mode, did not generate positive externalities to the property values in the vicinity. More precisely, neither redevelopment nor wholesale-conversion, in general, has brought significant positive value enhancements to the nearby properties. Though this finding is against the intuition that positive externalities generated by revitalization are capitalized into nearby property values, this also reinforces the intuition that the economic benefit of a single building revitalization is less apparent than an area based revitalization approach. Results, however, indicate that, although revitalization has not brought as much positive benefits expected, there are some positive indications that property values may be enhanced in the future. The results also revealed that the geographic scope of the influence for properties is apparent only within 200-m radius.