WEEK 3 CPT & EBA
Central Place Theory (CPT)
Economic Base Analysis (EBA)
Urban Economics
Financial Economics
Urban Economics
Knowledge about R.E Asset Market
Knowledge about R.E Space Market
R.E is an urban phenomenon
Competition in the land market
Demand side
Supply Side
Potential Land users compete for sites
Potential site compete for users
derived demand
land only has value as it enable production or consumption of g&s
Highest best use= the use that generates the most money
Equilibrium (in a well-functioning land market)
Minimisation of aggregate transport costs
Maximisation of aggregate land value
Bid Rent Curve
Max land rent a potential user would be willing to pay for a given site. (Equals residual value)
shows how potential user's bid rent changes as a function distance from a central point
central point= point at which transport cost are minimised
Each potential use has its own bid rent curve and central point
Monocentric Cities
One central pont
everyone must commute to it
Inner city houses are able to generate higher rent in equilibrium than those at the edge of the city
closer a house is to the central point, the less one spends on transportation cost (time)
Indicate productivity of land use
Height of bid-rent at central point
Indicate sensitivity of land use to accessibility
Steepness of bid-rent rejection (gradient)
Greater density of land use
More labour & capital appealed per acre
more value of inputs & outputs per acre, most needing to be transported
greater productivity
greater sensitivity
Polycentric Cities
Real cities are poly centric not mono centric
Cities with more than 1 CBD/Centre
Factors underlying CPT
Cenralising city causation (centripetal) forces are counter balanced by opposing decentralising (centrifugal) forces
Centripetal Forces
Centrifugal Forces
- Economies of Scale
Cheaper per unit to produce more stuff at one place
- Economies of Agglomeration
productivity advantage of physical clustering
- Positive Locational Externalities
One firm benefits another firm nearby
EG: hotel near airport
EG: food court
EG: UBER
When LIKE business cluster together for eco benefit
When UNLIKE business cluster together for eco benefit
Pollution
Congestion
Crime
High rent & urban land cost
High intra-urban land costs
Balance of forces affect pop. growth & distribution from central points in urban geographies
Cenripetal > centrifugal
Centripetal < Centrifugal
lower pop. growth & great dispersion of pop.
greater pop. growth & concentration of pop.
Definition
the sources of the city's income
the engine that drives & underlies all real estate activity in a region
Export Base Theory
Service Sector & Export Multiplier
The Export Base
Definition
- Export Goods
- Local Goods
eco growth of the city or region is dependant entirely on growth in the export sector of the local economy
2 step process to forecast metro growth
produced in greater quantities than needed for local consumption
exported to other cities, country
produced in quantities equal or less than what is need for local consumption
- Identify the export base industries in the local region
- Forecast employment growth in those industries
Location Quotient
LQ = (N_mi / N_m) / (N_i / N)
N_mi= Employment in City 'm' in Industry 'i'
N_m= Total employment in City 'm' in all industries
N_i= National employment in Industry 'i'
N= Total national employment in all industries
LQ must be significantly > than 1 to indicate that the industry is part of the export sector of the local economic base
non-basic sector
serves the local pop. and export sector
basic sector
non-basic sector= service sector
jobs that are dependent on serving the local pop.
if export sector declined = less need for the service sector
expansion in export sector creates an employment multiplier effect on total local employment
Multipliers
Employment Multiplier
Net Total Employment Increase / Export Employment Increase
Population Multiplier
Net Total Population Increase / Export Employment Increase
range: 2.0-4.0
range: 2.5-9.0
multipler effect result only from changes in export base employment