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contamination but by other factors –  Such as the land not fitting current use demands –  Outdated infrastructure –  Characteristics of the city itself detracting from redevelopment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 Center Distance to Closest HWY On-Ramp Distance to Closest I-5 On-Ramp West Eugene Enterprise Zone

Brownfield Greenfield Eugene City Limits

Industrial Zoning Year 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

Variable Coefficient Significant Standard Error

-- Sales Prices -- Ln(Acres) +0.6% Yes 0.023

Ln(Acres)2 -0.05% Yes 0.016

-- Land Prices -- Ln(Acres) +0.57% Yes 0.024

Ln(Acres)2 -0.043% Yes 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

Variable Coefficient Significant Standard Error

– Sales Prices – Ln(ratio) +0.38% Yes 0.0787

Ln(ratio)2 +0.0475% Yes 0.0155

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

Variable Coefficient Significant Standard Error

– Sales Prices – Eugene Center -0.445% Yes 0.0639

Highway OnRamp +0.026% No 0.0458

I5 On Ramp +0.127% Yes 0.07439

– Land Prices – Eugene Center -0.303% Yes 0.07155

Highway OnRamp +0.053% No 0.049

I5 On Ramp +0.082% No 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

Variable Coefficient Significant Standard Error

– Sales Prices – Zoning i1 +0.45 No 0.686

Zoning i2 -0.64 No 0.665

Zoning i3 -0.65 No 0.664

– Land Prices – Zoning i1 +0.168 No 0.622

Zoning i2 -0.594 No 0.621

Zoning i3 -0.598 No 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

Variable Coefficient Significant Standard Error

– Sales Prices (2000-2006) – Zoning i1 +1.516 Yes 0.329

Zoning i2 +0.611 Yes 0.179

Zoning i3 +0.527 Yes 0.156

– Land Prices (2000-2006) – Zoning i1 +1.047 Yes 0.304

Zoning i2 +0.504 Yes 0.177

Zoning i3 +0.395 Yes 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

Variable Coefficient Significant Standard Error

– Sales Prices – Greenfield -0.998 Yes 0.0857

Accounts for approximately 62.8% of an average plot’s price

– Land Prices – Greenfield +0.16 Yes 0.07333

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

Variable Coefficient Significant Standard Error

– Sales Prices – Brownfield -0.239 No 0.385

Would be -$6,500 impact on average lot’s price

– Land Prices – Brownfield -0.199 No 0.397

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

Variable Coefficient Significant Standard Error

– Sales Prices – Eugene +0.33 No 0.67

EZ Effective -0.1995 Yes 0.0973

EZ Property +0.16 Yes 0.0988

– Land Prices – Eugene +0.496 No 0.635

EZ Effective -0.268 Yes 0.102

EZ Property +0.097 No 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

Coe

ffici

ent

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

Coe

ffici

ent

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?