1. Transport Improvement and Commercial Office Market:
European Real Estate Society 20th Annual Conference
ERES Conference
Transport Improvement and Commercial Office Market:
How does the change in accessibility affect the performance of commercial office market? – A case of Seoul, Korea
Jae Kwang Lee
3 July 2013

2. Contents Research Context Literature Review/Research Gap
Research Purpose
Case: Seoul Office market
Data/Method

3. 1. Research Context Significant improvement in transport network
Recent years have witnessed a significant increase in transport network in urban and regional areas.
With a range of transport system newly constructed, public transport network in a city has remarkably improved.
In a consequence of such transport improvement, accessibility to jobs and customers in an urban area have dramatically improved over the last decade.
< Monorail in Sydney >
< HSR in the UK >
< Rapid bus transit in S.Korea >

4. 2. Literature Review/Research Gap
Inconclusive findings on transport improvement effects
A huge volume of studies have been emerged to investigate the effect of transport improvement projects
The majority of those studies have focused on ascertaining whether the establishment of transport infrastructure projects would cause positve price effects on residential and commercial properties in their neighborhoods (Cervero and Duncan, 2002; Weinberger, 2001; Ryan, ).
The relationship between transport improvement and property value is not conclusive
While many studies have reported the positive effect of rail transport improvement on property values, several studies have presented contradictory results (Duncan, 2011; Gatzlaff and Smith, 1993; Landis et al., 1995; Ryan, 2005).
This contrasting results have been mainly reported in commercial property studies. (Debrezion et al., 2011; Ryan, 1999).

5. 2. Literature Review/Research Gap
The failure of an accurate measurement of transport accessibility may be a main cause for the inconsistent outcome.
The existing literature have used simply distance to rail stations as a measure of transport accessibility, based on the assumption that rail stations are same in terms of transport accessibility, and (Cervero and Landis, 1997; Ahlfeldt, 2011).
The theoretical basis of transport capitalization studies is location theory (Alonso, 1964; Muth; 1969)
The ignorance of TOD features might be another reason for the contrasting results
The existing literature have overlooked location features increasingly incorporated into transport improvement projects, known as transit- oriented development, and have done little efforts to do with separating the accessibility effects from the location effects. (Duncan, 2011; 2012).

6. 3. Research Purpose Research Purpose Research Hypothesis
To investigate pure accessibility effect of transport improvement on commercial property value.
To develop an indicator measuring transport accessibility
To develop a method being able to single out accessibility effect of transport improvement on commercial property values from location effects
Research Hypothesis
To be that the pure price effect of transport improvement can be captured without employing accessibility measures considering different transport accessibilities of each rail stations and controlling development features.

7. 4. Case Study Seoul, capital of South Korea
Significant improvement in transport network
The length of metro, 150km in , 380km in 2010, 4th in the world
Dynamic commercial development along with transport improvement, and active office market
One of top global office markets in terms of transaction volumes in 2011
Rank
Market
Volume ($billion)
Size
(sq feet)
Cap rate
(%) 1
London
19.8
909
5.63 2
New York
19.4
254
6.25 3
Paris
16.7
529
5.88 4
Seoul
10.4
483
6.30 5
Tokyo
10.3
362
5.34
Source: RCA

8. 5. Data/Method
Data
Drawing upon real estate database, REPS, maintained by the largest real estate firm in South Korea
It covers almost all office buildings in Seoul from 2000 to 2013 and includes the details of office buildings such as age, floor space, stories, rentable space, number of elevator, number of parking lot, number of tenants, and vacancy rate.
Geo-coded and merged with neighborhood and location attributes, creating dataset for this empirical study
Using Geographic Information System, office building information is geo-coded based on geographical coordinates and merged with other control attributes information, which is provided by the Seoul Metropolitan Government and the Statistics of Korea, such as location attributes and neighborhood features.
Office building information
Geo-coded
Dataset for empirical analysis
Neighborhood and Location data

9. 5. Data/Method Accessibility Indicator
Gravity-type accessibility indicator is developed, taking a concept of market access into account
Considering market potential of a relative location provided by transport accessibility within transport network hierarchy
Where LAi is access to labors at building i, Li is knowledge workers residing in tract i, Tij is transport cost incurred when travelling from building i and tract j, the central point of a tract, and β is the distance decay parameter
Three measures of access to major transits are also included:
Access to international irports: access to international transport network
Access to high-speed rail stations and highway: access to inter-regional network

10. 5. Data/Method
Method
Hedonic price model is adopted to isolate price impact of transport improvement
Based on the concept that property is a composite good comprised of several features determining property value (Rosen, 1974)
Where Pit is office rent of building i, which is a function of the following vectors: Sit is structural attributes; Nitj is neighborhood attributes; Litj is location attributes; Eij is economic climate at time t; Atj is access to labor forces.
The model investigates the price effect of transport improvement over time in order to isolate true accessibility effects better (Longitudinal studies)
Recent studies have tended to be taking longitudinal approaches to overcome previous studies’ limitation that accessibility effects do not distinguished from location effects (Ahlfeldt, 2012; Gibbons and Machin, 2; McMillen and McDonald, )

11. Thank you for listening