Does a New Rail Rapid Transit Line Announcement Affect Various Commercial Property Prices Differently?

Abstract

An announcement of new rail rapid transit access to urban commercial centers may lead to greater business activity and agglomeration economies, while causing anticipation of construction disruption and resource diversion away from other infrastructure. Using a rail rapid transit line announcement in Vancouver, BC, Canada, we estimate the net capitalization effect for each individual commercial property price resulting from expected improved urban center access. We focus on 1,895 repeat sales straddling this announcement date and use a nonparametric estimation technique - Locally Weighted Regressions - to estimate how travel time changes to the Richmond, BC and Vancouver, BC central business districts, the Olympic Village, and Vancouver International Airport affect various commercial property prices differently. By differencing our estimation equation over the two periods of the repeat sales, the time-invariant variables drop out and we are left with the travel time savings and the difference in temporal fixed effects as regressors. We find travel time savings’ marginal effects on property values can be positive or negative, and patterns vary dramatically across commercial land use types and locations. Falsification and balancing tests validate our findings.

Keywords: Locally Weighted Regressions; Rail Rapid Transit; Commercial Property Values

JEL Classification: R3; R4