THE PROPERTY MARKET AND INDUSTRIAL LOCATION
| Published date | 01 February 1989 |
| Date | 01 February 1989 |
| Author | J. A. Goddard,S. M. Dobson,J. K. Bowers |
| DOI | http://doi.org/10.1111/j.1467-9485.1989.tb01070.x |
Sconirh
Journal
of
Politicd
Economy.
Vol.
36.
No.
1.
February
1989
0
19R9
Scottish
Efonomic
Society
THE PROPERTY MARKET AND
INDUSTRIAL LOCATION
J.
K.
BOWERS,
S.
M.
DOBSON
AND
J.
A.
GODDARD
University
of
Lee&, Lancashire Polytechnic, and Dundee
Institute
of
Technology
I
INTRODUCTION
This paper argues the importance of a factor which has been largely
neglected in the literature on industrial location, namely the existence of long
term regional differentials in rates of growth
of
the values
of
industrial land
and buildings. It is divided into four sections. In Section two the evidence for
growth rate differentials is presented and assessed. Section three provides
some simple models
of
the location decision in the presence of expected
property value growth differentials. In Section
four
the predictions of these
models are derived and evaluated against the evidence of Section two.
Section five draws some conclusions and discusses policy implications.
I1
REGIONAL
VARIATIONS
IN
COMMERCIAL
AND
RESIDENTIAL
PROPERTY VALUES
Evidence concerning relative values of industrial land and buildings in
different parts
of
the country is limited. The
U.K.
government publishes only
two
series of indices
of
land values, for agricultural land and for residential
land, disaggregated to regional level only. They are unreliable as indicators
of trends in industrial land values because of the diversity of factors which
determine values of land used for different purposes.
Although no other official indices are available for land values, a number
of indices for values of alternative types of land and buildings are produced.
For residential property, the Department
of
the Environment produces an
official series for average dwelling prices based on building society returns
and disaggregated to the regional level. Many building societies also publish
their own series, often at lower levels of spatial disaggregation. For
commercial property a number of indices of rents, yields and capital values
are published based on valuers’ market assessments. One such series
produced by the London firm
of
surveyors, Hillier Parker, has been used as
the prime source of data for this paper. The Hillier Parker capital value
indices provide data on average movements
in
capital values for three classes
of commercial property (shops, offices and industrial premises) over broadly
Date
of
receipt
of
final manuscript:
11.7.88.
1
2
TABLE
1
Commercial property: average annual percentage change
in
capital values,
1972-87
J.
K.
BOWERS.
S.
M.
DOBSON AND
J.
A. GODDARD
London South East Midlands North Scotland GB
Shops
12.6 15.2
13.8
14.4 19.1 14.3
Offices
12.1
8.7
8.1
5.7
12.6
10.1
Industrial
12.2 12.8 10.2
8.0
7.3 10.3
Source:
Investors Chronicle/Hillier Parker
defined regions in Great Britain.’ The indices can be used to derive growth
rates for each region, but contain no information about absolute differences
in values between regions. In fact, because no two commercial properties are
identical
it
is extremely difficult to measure regional differences in values. To
do
so
it would be necessary to separate locational factors from all the other
influences which determine a property’s value. This is virtually impossible to
achieve in practice.*
With these caveats, annual growth rates for four types of property are
presented in Tables
1
and
2.
For residential property, regional differences
over this period are small and are not significant on a two-way (region by
year) analysis of variance test. For commercial property the data seems to
divide sharply into
two
sub-periods,
1972-77
and
1977-87.
Average growth
rates for both periods are shown in Tables
3
and
4.
In the period
1972-77
the striking feature is the performance
of
Scotland,
partly due to the influence of North Sea
Oil.
In shops capital values doubled
in
1972-3
against an average increase of
25%
elsewhere and fell only
3%
in
1973-4
against an average
25%
fall in the rest of the country. Similar
buoyancy existed in the other sectors; for example, capital values
of
offices in
Scotland increased by over
20%
in
1973-4
while they fell by an average of
23%
in
the rest
of
the country.
The period
1977-87
is
in our view probably more typical in its regional
pattern. Capital values of industrial premises showed persistently higher
growth rates in London and the South East over this period. Those for shops
fluctuated markedly and showed no consistent regional pattern. For offices
London performed significantly better than elsewhere, with Scotland achiev-
ing the next highest growth rate. Two-way analysis of variance tests for the
significance of region as a classificatory variable gave F-test statistics of
0.46
for shops,
3-37
for offices and
11.13
for industrial premises. the tests for both
offices and industrial premises are significant at the
5%
level, and the test for
industrial premises is also significant at the
1%
level
(c::2=2.63
and
’
London, the South East, the Midlands, the North and Scotland. “South East” comprises
East Anglia
and
the South East excluding London on standard regional definitions.
“Midlands” comprises East Midlands, West Midlands and South West. “North” comprises
North West, North, Yorkshire and Humbenide and Wales.
*
Even
for
relatively homogeneous types
of
property such as residential buildings, data
showing regional differences in values must be treated with caution because
of
possible
differences in the composition
of
each region’s housing stock.
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