Hedonic price modelling is a widely used technique to explain the value of different types of properties. Following the notion that city areas may suffer from devaluation, poses the question of what would be the factors that influence the value of urban areas. For this paper, hedonic price analysis was used to answer this question for a specific type of urban area: the industrial site.
The average property value per hectare was used to represent the value of an industrial site. Although there are many studies on the value of individual property, only a small amount of research has focused on the aggregated value of industrial sites. This paper distinguishes between three types of explanatory variables: the physical characteristics of the industrial site, the regional economic characteristics and the general economic trends. Results show that sites with a ‘mixed use’ – which make up a third of all industrial sites in the Netherlands – have the lowest average property values. If the firms located on the same industrial site are of a comparable nature, this appears to have a positive influence on the average property value of their site; for example, combinations of ‘transport’ and ‘consumer services’ show significantly higher average property values. Furthermore, factors such as visibility from motorways and the particular region in which the industrial site is located (the economic core region Randstad showing the highest average values) also have a significant influence on the value of an industrial site. Although the overall explanatory value of our model appears to be modest, compared to existing hedonic pricing studies on individual property values, results show that most explanatory variables in our model have the expected coefficients and signs, indicating that this method may be applied in a meaningful way to gain insight into the valuation of urban areas.
PBL working paper 10