Estimates of the influence of urban highway investment in deindustrialization: office property value impacts in Hong Kong, 2002-2013

Abstract

One of the world’s major trends in recent urban policies is greater public investment in transportation infrastructure for cities’ competitiveness and sustainability. Whereas several studies have shown the increased economic and environmental importance of innovative railway systems along with proactive land use policies in rapidly growing cities, limited empirical research has been conducted to grasp the changing influences of continued highway investments in progressively deindustrializing cities, like Hong Kong. Indeed, policy makers of commercially strong global cities still continue multi-billion dollar capital reinvestments in urban highway systems to meet cities’ mobility needs and mitigate negative impacts from growing traffic in unconventional ways. This study thus investigates the territorial influences of contemporary highway investments in a knowledge- and service-based society by analyzing panel data on Hong Kong’s office property transactions around urban highway interchanges from 2002 to 2013. Empirical results derived from the hedonic price models, adopting log-linear fixed-effect estimators within Hong Kong’s district council boundaries, reveal that traffic volumes are positively associated with office transaction prices in different degrees across Hong Kong Island, Kowloon, and the New Territories. The models estimated also present that the accessibility benefits of urban highway investments are totally cancelled out by the negative externalities of heavy traffic, particularly within 800 meters of highway interchanges in Hong Kong Island, wherein knowledge- and service-based business performances tend to be amenity-sensitive. On the other hand, the price influences of highway proximity on office properties are positive within 800 meters of interchanges in the New Territories, wherein the degree of deindustrialization is relatively moderate due in large part to the recent promotion of industrial parks and cross-border transactions. These empirical findings suggest the wider impacts of on-going major highway projects in the form of office price premiums are to be captured for the government’s growing capital expenditures, accompanied by land use rezoning adaptive to deindustrialization.