REAL4000 Aug 31 Chap 5

REAL4000 Aug 31 Chap 5 - Market Determinants of...

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Unformatted text preview: 08/31/10 Market Determinants of Value (Chapter 5) Purpose: It is valuable to recognize the fundamental forces that create urban markets, as well as to understand what brings about change to the shape of cities. A. Where Cities Occur: 1. When primary consideration was defense 2. When primary consideration was trade 3. During industrial revolution 4. Other reasons B. Why Cities Exist: 1. Economies of Scale 2. Economies of Agglomeration 1 08/31/10 Market Determinants of Value (Chapter 5) C. Growth/Decline of Cities Weather, quality of life, and technology can all pay a part in attracting people, but job growth remains an important factor in the growth of most regions. 1. Economic Base (The engine that drives a city’s source of income) The better the growth prospects for key industries located in a particular city, the better the prospects for economic growth a. Industries in a city or region can be characterized by whether they serve the local population or distant communities • Basic activities (export activities) are those that produce goods or services for those outside the community • Non-basic activities (population serving activities) produce goods and services for use within the local community b. In principle, increases in basic employment will have a multiplier effect within a community c. The size of the multiplier depends on the amount of “leakage” from the local economy d. Growth in basic industries will have a direct impact on the demand for various types of real estate assets and the demand for other goods and services in the community e. In contrast, changes in non-basic employment have less spillover impact on the rest of the community 2. Identifying the Economic Base – The Location Quotient (LQ) The proportion of total local employment in a given industry divided by the proportion of the total national employment in the same industry The LQ for a city (m) for a given industry (i): LQmi = (Nmi / Nm) / (Ni / N) Where: Nmi = Employment in City m in industry i Nm = Total Employment in City m in all industries Ni = National Employment in Industry i Nm = Total National Employment in all industries Example Beverage Industry in Atlanta: Total U.S employment U.S. beverage industry employment Total Atlanta employment Atlanta beverage employment 130,000,000 130,000 750,000 3,000 2 08/31/10 Market Determinants of Value (Chapter 5) C. Growth/Decline of Cities 4. The Supply Side of Urban Growth: What can a city offer to the world? a. Labor Force Characteristics b. Quality of Life c. Leadership/Local Government d. Climate D. The Shape of a City 1. Bid-Rent Curves All employment and exchange is at city center Rent lot Direct access to city center a. Basic Setup b. Land Use Allocation (uses with differing productivity and sensitivity to transportation costs) c. Multiple Nuclei (multiple centers with different core activities) 3 08/31/10 Market Determinants of Value (Chapter 5) D. The Shape of a City 2. Concentric Ring Models a. Von Thunen (1826) - based on the theory of transportation costs and production Placement Use Core: Choices: City Center First Ring: Forest products Second Ring: Grazing of cattle and sheep Third Ring: Heavy or bulky field crops Fourth Ring: Hunting and trapping Fifth Ring: Vegetables and dairy products b. Burgess (1920’s) 1) Concentric Circle Model Zone 1: Downtown Zone 2: Industrial and Warehouse Zone 3: Transition Zone 4: Lower Income Households (Blue Collar) Zone 5: Higher Income Households (White Collar) Zone 6: Higher Income Households (Executive) 2) Filtering Changes in transportation system and technology may cause housing design to change, rendering older housing obsolete. Then higher-income households will tend to leave older houses allowing then to “filter down” to lower income households. 4 08/31/10 Market Determinants of Value (Chapter 5) D. The Shape of a City 3. Axial Growth (The Direction-of-Least-Resistance theory) 4. Sector Growth (Homer Hoyt) 5. Theory Meets World 5 08/31/10 Market Determinants of Value (Chapter 5) E. Technological Change & the Urban Form Urban form is the physical spatial characteristics of a city 1 Technological Changes in the 20th Century a. Urban Transportation Revolution • Populating of the automobile • Birth and advancement of the truck • Expansion of highways b. The Production Revolution • Birth of the assembly line • Effect of the telephone on decentralization c. Advances for offices and retailing • Air Conditioning • Lighting • Supermarket • Modern shopping center d. Advances in Data Processing and Communications • • 2 Telephones Computers Effects of Technological Change on Urban Form F. Central Place Theory 6 08/31/10 Name:_______________________________(please print) Student ID: _______________________________ This sheet confirms that I have downloaded the lecture outline and any associated handouts (when applicable) from the REAL 4000 web page. I also acknowledge that to receive credit for downloading this material, I must submit this page to the Professor on or before class on August 31, 2010. Signature: _____________________________________ Date:___________________ 7 ...
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