the land premium in eugene/springfield: determining the price differentials of brownfield and...

 The Land Premium in Eugene/Springfield:

Determining the price differentials of brownfield and greenfield parcels and the

impact of the enterprise zone

Ryan Bricker

Jeremy Simantel

Community Values

• Eugene seems to value infill

• Vacant buildings

• Urban Growth Boundary– Established in 1970’s to limit sprawl

Land Types

• Greenfield– Free of use, no improvements to the land

• Brownfield– Contamination Risks

• Grayfield– Not contaminated with a building on it

Enterprise Zone

• West Eugene Enterprise Zone– Very selective area of coverage

– Active years: 1987-1997 and 2005-Present• Gap is useful in determining price effects

• Springfield Enterprise Zone– Wide area of coverage

– Difficult to statistically analyze

Past Research• No relationship between contamination and vacancy rates• After remediation of known contaminated properties the price goes

back up to match comparable uncontaminated properties• Parcels of land that are known to be contaminated do sell but at a

discount to comparable properties• Study in Baltimore found that only 5% of properties didn’t sell over a

10 year study window• A general conclusion that under-used land is not being driven by

contamination but by other factors– Such as the land not fitting current use demands– Outdated infrastructure– Characteristics of the city itself detracting from redevelopment

Our study will determine the…

• Eugene/Springfield greenfield premiums

• Eugene/Springfield brownfield effect

• West Eugene Enterprise Zone's effect on market value

Statistical Analysis

• Market value through observed prices– Hedonic pricing model

• Control for characteristics of the industrial property that would influence selling price

• Price = f(characteristics of land)

Shortcomings of the Data

• 1) Time Mismatch– The data set includes historical prices

but does not include historical characteristics

– For instance a property selling in 1990 we would have the accurate selling price but that parcels characteristics would be as they are today

Data Shortcomings

• 2) Property Values and Land Values– We don’t have an accurate measure for

building characteristics so we ran two regressions to look at strictly the selling price and then the selling price proportioned to the land

– Used the improvement ratio which was the % of the improvements to the land relative to the land value

– Both measures came from data the tax assessors put together

Statistical Analysis (continued)

• Price Depends on Acreage

Intensity of development (Improvement Ratio) Distance to Eugene CenterDistance to Closest HWY On-RampDistance to Closest I-5 On-RampWest Eugene Enterprise Zone

Brownfield Greenfield Eugene City Limits

Industrial ZoningYear Sold

Two Models

• Sales price = f(characteristics of land)• Portion of sales price attributed to land

= f(characteristics of land)

• Derived by:Sales Price * (land ratio)

Main Determinants of Land Prices (Acres)

• Ln(Acres) – measures elasticity• 1% increase in acreage = coefficient % increase in price

0.0166

Main Determinants of Land Prices (Improvement Ratio)

• ln[(improvements) / (improvements + land value)] – measures elasticity of improvements

• 1% increase in improvements relative to lot value increases sales price by coefficient

Could not be Used in Land Prices Model (Endogeniety)

Main Determinants of Land Prices (Distance Variables)

• Enterprise Zone – Measures the effect of the nearest distance to Eugene City Center, Highway and I5 on ramp

0.082

Main Determinants of Land Prices (Zoning)

• Zoning Classification – Measures what, if any, industrial zoning lot is under• Depending upon the zoning of the site, the logarithm of the price will be

increase/decrease by the coefficient

0.620

Main Determinants of Land Prices (Zoning)

• Zoning Classification – Measures what, if any, industrial zoning lot is under• Depending upon the zoning of the site, the logarithm of the price will be

increase/decrease by the coefficient

0.156

Main Determinants of Land Prices (Greenfield)

• Brownfield – measures whether or not parcel experienced• If site was at one time a brownfield, the logarithm of the

price will be increase/decrease by the coefficient

Accounts for approximately 17% of the an average plot’s price

Main Determinants of Land Prices (Brownfield)

• Brownfield – measures whether or not parcel experienced contamination at one point or another

• If site was at one time a brownfield, the logarithm of the price will be increase/decrease by the coefficient

Would be -$3,250 impact on average parcel’s land’s price

Main Determinants of Land Prices (Eugene and Enterprise Zone)

• Enterprise Zone – Measures the effect of being in Eugene and the Enterprise Zone

0.105

Base Regression

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Co

eff

icie

nt

Land Price

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2005 2006

Year

Co

effi

cien

t

Future Research

• Examine more closely the “value” buildings hold in relation to the types of firms entering

• Control for historical attributes

• West Eugene Enterprise Zone’s on things other than prices

Wish List

• Historical Characteristics (Greenfield, Zoning, etc.)

• Data on building attributes (Age, Square Feet, etc.)

• Other indicators of what some would call brownfields (besides contamination data)

– Land use codes (vacant structures)

• Length of time on the market

Recap

• Enterprise Zone seems to have a negative effect

• Greenfields create premiums in land price

• Contamination’s effect is not clear in Eugene due to small amounts of recorded contamination

Questions?

• Questions/comments on anything?