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Auckland’s Place Premium

In a recent post I graphically represented the land values throughout the Auckland city centre as a function of their “frontage value” which generated some surprising results. The exercise revealed a place premium associated with real estate located in the lower Queen Street valley. Besides being physically central, is it also highly accessible with small blocks, a concentration of intersections, a multiplicity of transport options and a topography that naturally puts people in close contact with each other, essentially, the structural ingredients of good urbanism.

Street Frontage Value: From Green (Low) to Red (High)

The low value around the motorway was something I expected since the street grid is clipped and local places are no longer connected to surrounding areas and thus have a reduced place value. Of course the physical conditions of noise and traffic also repel human activities and further contribute to lowered land values.

Most interesting to me is how severely property values drop off away from Queen Street, in particular on the western side of the city. To use the convenient collar metaphor, it looks as if the city is being strangled and oxygen is only getting to one part of the brain. Part of this is likely caused by the motorway itself, but it is compounded by the local facilitation of the motorway– essentially the mini-motorways– of Hobson, Nelson, and Fanshawe Streets (to name but a few).

Here’s a cross section look at the land values I mapped previously. Note the extremity of the values drop-off on the western side, from a high of 12 down to 4, only over three or four short city blocks. Also, note the consistent drop-off in values on the eastern side. It makes sense that if the centre maintains a real estate premium, than values would fall away further from it. It would be useful to compare this property value “fade” with other cities to determine if this is typical of a city centre this size. What if the motorway wasn’t strangling the city, would land values be higher further away from the centre?

Cross section of land values across Auckland’s city centre

There have been many ideas proposed to span the motorway via caps and bridges. Besides being excessively costly they would have to be implemented in numerous places to be effective. Also, on the perimeter we are dealing with reduced land values, mostly due to the motorway, but also since by definition edges can’t be centres, and the centre is where the highest land values are.

Below is the same diagram with a line drawn on the eastern side of the city centre to track the property value decline. This line was mirrored onto the western side. The green area, in my opinion, is the greatest opportunity. While no doubt some of the drop-off is due to the physical topography, far more is a function of an anti-urban street network and neglected public realm. The great news is that the City Centre Masterplan has proposed to remedy this situation by two-waying Hobson and Nelson Street, and by bringing  the western side of the city closer to the Queen Street valley via a green boulevard, among other things.

Comparing land values on either side of Queen St

The other massive opportunity of course is the City Rail Link (CRL). By inserting stations into low land value areas, there would be the effect of raising property values with “tent poles.” The land values of the stations would be directly influenced by their new found proximity to the most valuable land in the city.

To recap, there remains a place premium in the lower Queen St valley due to its central location and its high level of local and regional connectivity. Property values are highly influenced by proximity to this premium location as witnessed in the above charts. Public realm improvements that remove barriers of access to the centre, such as the one-way street couplet system, will raise land values by bringing parts of the city closer to the centre, and the CRL will effectively put places right next to the highest land values, thereby spreading land values across the city centre and beyond.

 

45 comments to Auckland’s Place Premium

  • Really interesting Kent. The western part of the CBD has been largely neglected for a long time which is likely to be largely due to the huge roads in the area, especially Hobson and Nelson Sts

  • Yes fascinating. I would love to see whether it was possible to take this analysis one step further and start to estimate the economic benefit of changing Nelson and Hobson Streets to something more ‘people friendly’. Would act as a counterbalance to time savings benefits being the main way of measuring transport improvement.

    • Kent Lundberg

      What I left on the editing room floor was something like: “the rise in land values would easily pay for the projects in the City Centre Masterplan through increased rates”. I would need to do some more work to make that claim. :)

    • I think the thing I’m particularly interested in is getting an understanding of how these benefits would stack up against the potential disbenefits to drivers from something like what the City Centre Master Plan proposes for Hobson & Nelson. My gut tells me they’re greater, and certainly more consistent with the vision for the city centre – but it’d be amazing to have that quantified.

      • Kent Lundberg

        Something I hope to have demonstrated in these posts is that this disurban-style road design creates less valuable land. If I was a property owner along Hobson or Nelson I would be screaming for two-ways, and slowing traffic. I’m sure at some point the land owners thought having 50,000 cars a day racing past them was something valuable (related to a fraction of customers). Note on Nelson Street how some of the buildings actually have carparks in front of them. It’s an act of desperation to attract one or two customers from the flood of traffic. Meanwhile, the property owners on Queen St are breaking up their buildings into Venice-scaled storefronts to capture the 25,000 people on foot that are actually able to spend money.

        • Bryce P

          Unsurprisingly perhaps but I don’t think I have ever parked on either Hobson or Nelson St in 20 years. It always feels like you will get run down. Even more disturbing is that, if walking around, I avoid them altogether. Great analysis Kent.

  • Stu Donovan

    Fascinating stuff.

    Urban economics theory (specifically Muth’s law) predicts that land values should decrease (more or less) exponentially as you move away from the city centre. This reflects that 1) transport costs tend to increase approximately linearly with distance (costs which should be capitalised into lower land values) and 2) the area available to “use” gros as a function of pi*distance to the city centre^2 (i.e. area of a circle). So you have a linear reduction in land values from higher transport costs and a quadratic reduction in land values associated with more land being available as you move further away, which all up means that land values should decrease more rapidly than the linear function you have marked as “natural value transition”.

    The profile shown above seems consistent with this – except that (as you note) the values hold up almost linearly on the eastern side, whereas they drop off more rapidly to the west. I suspect it has something to do with University/Albert Park/Domain as well as better urban form to the east. Possibly also some historical determinism coming into play here: The east (specifically Princes Street) was where the rich people and merchants lived (and built nice houses), because it was closer to the barracks on Albert Park. The west, however, was more accessible to the port areas around Wynyard and Freemans Bay, so became more industrial. You can still see this in the nature of the old buildings that have survived in the respective locations …

    And one reason Paul Krugman won a Nobel Prize in Econmics is because he provided us with a plausible micro-economic explanation for why “history matters” to cities :). Rant over.

  • Kent Lundberg

    Thanks Stu, that’s great. How would Muth’s law deal with the motorway? Does the restriction in land availability raise values in the centre? I might have to plonk these numbers into excel to get a proper graph. Where can I learn more about Muth? “Muth’s Law” doesn’t get me anything on Google.

    • Stu Donovan

      Urban economics: http://en.wikipedia.org/wiki/Urban_economics (Mentions Muth briefly – he’s basically one of the Alonso, Mills crowd)

      But the simple answer is that Muth’s law simply describes the general form of the land value gradient, it would not capture the motorway effect. Thinking about it, the motorway would have three important effects:
      1) Increase transport costs perpendicular to the motorway, i.e. reduce land values on the periphery side
      2) reduce the ability for the city to spread, i.e. increase land values on the city centre side (in a bad way – the higher land values reflects a economic constraint, not an economic efficiency)
      3) generate externalities, i.e. reduce land values on both sides.

      My gut feeling is that Auckland’s motorways have drastically undermined the economic value of the city centre, which providing huge support to suburban land values. But research is required!

  • obi

    I’m confused about what “frontage value” means. If you want to measure land value, then a measure like price per hectare is unambiguous and easy to understand. Is the more ambiguous “frontage value” measuring the utility of real estate for retail purposes? If so, you’d expect to see a bias towards Queen St. Otherwise, I’m seeing Auckkland commercial activity move from the north-south Queen St axis to an east-west harbour-front axis. Multinationals and NZ household brand names like Vodafone, ASB, and Air NZ are moving in to Wynyard and along Fanshawe St. Stepping back away from the waterfront, the new Telecom development basically connects Fanshawe St to Queen St via an east-west route. Britomart is on the same axis, although it is more a mixed retail, commercial, and hospitality area than a dedicated commercial area. I’d expect all these areas to have excellent real estate value, but they’re not going to have frontage value if frontage value actually measures retail value.

    For a variety of reasons, I think we’re seeing a realignment of the Auckland CBD.

    • Kent Lundberg

      It’s nothing more than a graphic exercise to suggest that a property value is related to the street and public realm. The value of the property (color) is applied to the property’s street front.

  • Very nice work Kent, great tool to read the city.

  • Max

    Hi Kent

    Could you explain a little more how you judged the colouring? I am not faulting the overall conclusions – but I am a little unclear how, for example, the “Civic” side of Wellesley Street West has a 8, yet the opposite, northern side scores a 12. Is that based on rateable land value? I thought you had created this based on factors such as frontage amenity / transport aspects? Confused.

  • Kent Lundberg

    Hi Max,
    The values represent land value of properties (not improvements) / divided by area- basically a per metre2 rate. I sampled several individual properties to get the result, in some cases I had to interpolate values if no easy value could be determined. Its a rough exercise so there may be some anomalies on the street by street comparison. Overall, it’s the trend that’s important. The cross sections further demonstrate the place premium.

    I haven’t assessed the frontage amenity or transport connecitivity. The point is to illustrate land values and determine what, if any, relation land value has to centrality, public realm, connectivity etc. I had no idea going into this that there would be such a strong premium for property located right in the centre of the city -expensive dirt.

    The next step will be to consider how “close” places are to each other at the street level. For example, I think the Barnes Dances and short pedestrian timing signals play a big part in getting people “closer” to businesses. This effectively increases each business’s catchment, leading to things such as the emergence of micro-retail. Conversely, along Mayoral Drive and Queen St, pedestrians are made to wait a couple of minutes to cross, which functionally makes things much further apart, and I would argue devalues urban real estate.

  • Ari

    For me as a pedestrian, the steep hill of the city is a far greater obstacle for me than crossing hobson or nelson. if I work around queen st why would I want to walk up and down a 4:1 gradient unless I really had to. queen st is far more gradual than Albert st and it is along a major desire line to the transport hub. two laning hobson/nelson won’t change desire lines or remove geography. of course it won’t affect buses much. just piss off drivers. there would have to be significant political will to drive this because those one ways are one of the only things keeping cars moving.

    • Not quite sure if you are being serious, but a 4:1 gradient would require a ladder to climb.

        • Even 1:4 is extremely steep, like unwalkably steep. The grade from Queen St up to Federal/Hobson is around 1:10 to 1:12.

          I’m not sure if I agree with the sentiment anyway. The section of Queen St from Mayoral Dr to K Rd averages 1:7 and sees plenty of foot traffic, presumably because it is a fairly pleasant environment and the K Rd precinct at the top is a major pedestrian draw card. Zillions of students walk between Queen St and the University each day, and that is steeper than going up the other side of the Queen St valley. So I’m not convinced that the topography is actually an issue.

          Two laning Hobson/Nelson will change desire lines, because it would result in land use and urban form changes that make the area much more desirable. Buildings and uses will change and people will want to go there much more often.

    • Kent Lundberg

      Exactly, If you work on Queen St. and have all the services anyone could need with in easy reach (read: ped crossings), you wouldn’t ever walk to the other side unless you were picking your car up from the panel beaters. Some people however, live and work on the other side and have to do it.

    • Bryce P

      I don’t believe it will make congestion any worse. In fact it could improve the flow of vehicles as at the moment there is a lot of space wasted as cars try to get from one side of the street to the other to get to the correct on ramp or when getting off the motorway. Two laning would have drivers getting onto Nelson or Hobson depending on whether the want to go South or West.

      • Ari

        I know for a fact it will make congestion worse which will increase red light running which is a lot more dangerous for pedestrians. I know this because I have a decent understanding of how traffic lights work (or don’t work) in Auckland. two laning means more phases per cycle, means more red time per cycle, means more cars sitting around waiting. I’m not saying I’m opposed to two laning, but we can’t go into this without understanding the consequences or thinking everything will be wonderful. also two laning hobson nelson will increase pedestrian delay to cross.

        all the uni students have no alternative to queen st so they have little option to walk to queen st even though it is a steep walk. plus we know they all have plenty of free time ri walk around if they want. office workers on the other hand have little spare time and little reason to walk to uni or to Vic park. I’m still convinced topography makes a huge difference to pedestrians, as much as hobson/nelson in the way.
        the land value chart could easily follow foot traffic volumes spreading from britomart.

  • Patrick Reynolds

    But look unless you are disabled or very old you ought to learn to walk up the odd hill, unless you are happy to have a short and infirm rest of life… For your own benefit, a lot cheaper and easier than going to a gym. I don’t [go to a Gym], but I always take the stairs, and that walk up to Albert Park is pure joy. The reward is so worth it. We can so make walking west a pleasure too.

    You are so certain that car users will suffer by improving Hobson/Nelson: I’m not, but further more, we know that there are more people but fewer cars in the central city now than anytime over the last thirty years and part of that improvement, which it is, is caused by restricting total auto access. So I see no problem if we do frustrated drivers a little here, in fact it would almost certainly lead to faster improvement.

    Perhaps you have missed to whole point of this blog? To advocate for the improvement of the whole city though increasing the quality and variety of accessibility. PT mode share for the centre is now 50% and increasing.

  • Bryce P

    It’s a pity it didn’t get done during the Spaghetti Junction upgrade. Then the on / off ramps could have been put in the correct places.

  • Chris Werry (@chriswerry)

    Other cities have publicly accessible escalators to deal with climbs. I though the council encouraged these at one time but they seem to have disappeared from Auckland. There used to be one through 246 that got you half the way up to Albert Park but I think that one has gone. There should be one at the end of the tunnel from Britomart to the west side of Queen St to encourage people to use it rather than jay walking.

    Wellington has built rain shelters along major routes and to protect pedestrians waiting for the lights at corners with no verandahs – a few of these wouldn’t go a miss in Auckland either.

  • Alphatron

    Another issue that potentially affects property values on the western side of the CBD is the volcanic view shaft from Mt Eden across towards the North Shore (see http://theplan.theaucklandplan.govt.nz/wp-content/uploads/2012/07/Fig-7.1.1-Thumb-Volcanic-Features-120501-FINAL.pdf). This limits building heights in parts of the western side of the city- for example the new Telecom offices on Victoria Street West.

  • That’s an interesting suggestion. I thought something like that was happening in Britomart as well. I was basically trying to figure out why waterfront property wasn’t as valuable as more inland property. I’ve concluded that it does comes down to centrality and proximity. Waterfront property, while commanding prime views, prestige, etc. is less proximate by definition, since the water is an edge. And venturing further without any evidence, I would guess that the prime real estate in NYC, Barcelona, and Paris is more likely to be central than to be on the water’s edge.

    • obi

      Darwin NT’s CBD is built on a rocky peninsula that sticks out in to their harbour. Historically it has been a reasonably low-rise place, as befitting a city of not much more than 100k people. The city council were trying to avoid a donut topography, where high rise office and apartment blocks would be sited on the peninsula waterfronts leaving low rise shopping in the middle. They succeeded for a while, till they let one development go and they couldn’t reasonably stop the rest from following. Now there are buildings ranging from 15-33 stories on the CBD edges enjoying harbour views, while the center remains low rise. It’s a little bit odd.

      I like the low rise development on Auckland’s harbour front. I think the layering makes for a dramatic look… the sort of look you get to enjoy from the Devonport Ferry. I didn’t know that a “volcanic view shaft” even existed.

  • Comment Box

    Is there any chance you could make a map that covers a larger area, such as all of what was Auckland city. The issue I have with this map is that it is focused around one high value node which then drops away to your chosen extent of the motorway. It could be that this is just due to Queen St being the centre of growth and demand never getting high enough to push out to the the motorways.

    • I been poking around a bit outside the city centre and it striking how much more valuable the city centre is. For example, Newmarket would rate a 2-3 on the above chart, and Manukau City Centre would be a 0.7

      There is a big land value difference between urban land and city fringe/suburban land- like measuring land by metre in the cbd and by the hectare in the burbs. I think if i drew a cross section further out it would just be flat-lining. .

  • Comment Box

    So really, even if there were no motorway it could very well look just the same.

    • Yes, but at least you’d have 300 meters around the cbd with rateable value and perhaps a better likelihood that New Market and Eden Terrace, etc, would be higher as well. I will do a cross section across the motorway. Been asked to do that.

    • Comment Box

      Of course the other inevitable question would be, if it were not for the motorway would the value of Queen St be as high as it is today.
      If you take Manhattan island as an example, this was ringed with ferry terminals which although looked like a dump then and more so today is what brought people to and from the city. Added to that the city was built on a grid of roads not too different to Hobson and Nelson Street.

      Looking back at a 1940′s Auckland one does wonder how the city would have grown had the built the Western Ring Route back then. At the time it would have appeared to be a huge waste of money as it bypassed the one place people wanted to go however it would have likely resulted in Auckland growing much further to the west than what it has today.

  • Kent Lundberg

    Yes, of course it would. It would be served by proper transport, boulevards, and the neighbourhoods that were demolished (grafton, K rd). Manhattan was built on its subway.

    • Comment Box

      Yes had they not built the motorway but instead built an underground railway system or some extensive surface transport system then the chances are it would still be about as high value as it is today, although that said the section of the CBD that’s had rail access for over 100 years is hardly the flashiest part of the city and has only recently been developed into anything of note.

      What cities in the world do we know of however that have a Manhattan style CBD that is only feed by two-lane two-way roads, ignoring the fact we have the countries largest shipping terminal next to ours?

      I’m not too sure about Manhattan being built on its subway, Manhattan has been round for about 300 years and the subway only the last 100 of them.

      • Kent Lundberg

        Vancouver, . And you’re right, Manhattan was built on it’s transport, not just the subway. The subway just allowed it to have a dense, vertical history.

  • Comment Box

    I take it your not talking about the Vancouver in Canada as that one has a massive roading network feeding into the downtown area. A number of the roads are 8 lanes wide and the ones that make the grid are similarly large compared to what we have in Auckland.

  • Kent Lundberg

    Please note where these 8 lane roads end in relation to downtown. Can you let us know the distance.

    • Comment Box

      It looks to be they all end about 1 to 1.5km from the most highly developed area. You then have a grid of 6 lane roads running all through it.

  • Luke C

    Vancouver only has 1 3 lane highway serving the CBD, and this is 5km from the CBD.
    Compare this with how many of traffic Auckland has feeding the CBD, and note Vancouver metro population is twice Aucklands.
    And their city, and CBD is very vibrant and successful. Sounds like they are doing something right.

    • Comment Box

      Although their orange line on the map is much further away than ours is, if you look at the actual roads you will not that all of theirs are roughly twice the size of what we have. Could you imagine what it would be like if Auckland had of 2 million people living in it and the only roads we could drive on were the likes of Manukau and Remuera Road, if it were not for the motorway none of these roads could have stayed as small as they are today.

  • Wanna see a city centre made by/for motorways: http://transportblog.co.nz/2012/11/07/how-do-you-solve-a-problem-like-manukau/

    Build place on the motorway model and that’s what you get. Vancouver rejected the urban motorway in the 1970s as our Wellington based agencies were forcing the appalling CMJ on Auckland. We live with the consequences, but we are now slowly improving the city again. There are already some encouraging successes,

    Would be good if the professions involved could acknowledge that their predecessors got it wrong so we could all focus on fixing up the mess.

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