Impacts of the Hiawatha Light Rail Line on Commercial and Industrial Property Values in

Minneapolis

Kate Ko and Xinyu (Jason) Cao

Hennepin-University PartnershipJan. 2010

Introduction

The Light Rail Transit improves the accessibility of the Hiawatha corridor.

Central question How has the Hiawatha LRT affected commercial and industrial

property sales prices?

Introduction

Why commercial and industrial properties? Local governments and state legislators

anticipate higher property and sales tax revenue as part of their returns on this investment (tax increment financing).

Any impacts on businesses will guide local economic development of other LRT lines.

It provides quantitative evidence for continuous federal support under FTA New Start.

Hedonic Pricing Function

A property is a bundle of the following 5 aspects: Structural: building age, lot size, gross building

square footage, number of stories Transportation network accessibility: distance to

LRT stations and highway on-ramps Economic agglomeration: distance to CBD, Mall of

America, number of workers, land uses Prestige of location (socioeconomic): household

income, owner-occupied housing value, portion of African American

Labor pool accessibility: number of working residents

Hypotheses

Pre and post LRT matters: the opening of LRT generates positive externality

Proximity matters: property premium is driven by accessibility of LRT

Data and Estimation

2000-2008 parcel data from Metropolitan Council and City's Assessors Office

2000 block group level data from Census 2002-2006 Census Longitudinal Employment

and Household Dynamics

Regress transaction prices on 5 types of attributes

Study Region

Results – Sub-region

Property prices in both periods are mainly driven by structural characteristics. Lot size Gross building area

Agglomeration economy is a factor. Number of workers

We did not find the impacts of access to LRT and highways on property values. Firms benefit from LRT locally.

Results – Station Area

Prices are driven by structural characteristics as before in sub-region. Lot size Gross building area Number of story

Economic agglomeration plays a role. Number of workers

Positive accessibility effect exists only after opening of LRT, but the effect is non-linear. Distance to LRT stations Distance to LRT stations squared

Accessibility Effect - Station Area

Conclusions

The findings confirm our hypotheses: Proximity to LRT is a primary force in driving

higher property values. The positive impact of LRT's accessibility

extends to 1400 m away from stations.