![Sample our Built Environment journals, sign in here to start your access, Latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5926/TOC-Subject-Sample-2021-Built-Environment.jpg"})
Abstract
Purpose – Redevelopment, an essential aspect of the urban regeneration process, brings positive externalities to neighbourhoods. This study evaluates the effect of the improvements of neighbourhoods, brought about by redevelopment, on nearby ground-floor retail shopping property values. This study uses a hedonic price model to determine whether there is a relationship between redevelopment work and nearby shopping property values and the influence of neighbourhood improvements on the price of shopping properties if there is such relationship. The analysis is based on three large-scale redevelopment projects, each having a commercial space ranging from 30,000 to 50,000 sq.ft. The results show that an improved neighbourhood environment brings significant value enhancement to nearby shopping properties. Potential tenants are willing to pay a sale rental price premium ranging from 13% to 34% on shops located near redeveloped areas. The results also reveal that potential shop tenants are willing to pay a premium of 0.1% more on a shop with a cockloft. These findings imply that a neighbourhood environment that has been improved through well-planned redevelopment projects adds value to nearby properties. This study contributes an indication of the amount a tenant or buyer would be willing to pay on shops near redeveloped areas and can be used as a reference for users, developers and investors.
Acknowledgements
The authors would like to gratefully acknowledge the editing and valuable comments by Dr Paul W. Fox of an earlier draft of this paper.
Notes
1. Lease terms are not incorporated in this study. Lease terms in Hong Kong normally range from 2 to 3 years, and the tenants should bear the responsibilities of rates, air-conditioning fees and maintenance of non-structural items, while the landlords are liable for government rents and the maintenance obligations from structural elements. Also, it is not easy to obtain the particulars of tenancy agreements, such as the terms and conditions. Hence, based on common practice, it is assumed that all the lease terms are more or less the same except in unique tenancy agreements. Therefore, lease terms were not included in this analysis.
2. In this study, the cockloft area was not included in the calculation of the GFA.
3. Since Tsim Sha Tsui is a relatively small district, the three projects may have positive externality effects on all the retail shop properties under investigation. Hence, the study may not be able to differentiate the ‘cumulative effects’ of the redevelopments on rental prices. For example, the estimated coefficients for the interaction terms Aft × K11 and Aft × TheOne may capture the redevelopment effects of the iSqaure project, since it may take time for the externality effects of the iSqaure project to be fully reflected in the rental prices of nearby properties. The K11 and TheONE were completed a few months after the completion of the iSquare project.