THE INFLUENCE OF MASS RAPID TRANSIT (MRT) ON THE RENTAL STRUCTURE OF OFFICE PROPERTIES

Abstract

Inter-relationships between transportation systems, property values and urban forms have been a topic which is well-established theoretically, yet not much empirical testing was done to prove rigorously the nature of this relationship. This dissertation attempts to address this relatively vacuum region by focusing on one aspect of this relationship, that of the impact of the provision of a comprehensive transportation system on office rental values. The case of Singapore is used for analysis, as the country has a wellestablished transportation network and well-developed urban forms. The study will first use average rental data of office buildings within a 400 meter radius of each MRT station. Office rentals before, during and after construction of the MRT were also consolidated and analysed in order to gain an insight into the sensitivity of office rentals to increased (expected) accessibility. The research will use the Difference in Means test to establish the significance of the relationship statistically. A Bid-Rent Curve will also be plotted to examine the behaviour of office rents as they are sited away from the Central Business District (CBD) in greater detail. The findings of this paper proved that for both analytical methods, that there is a strong tendency for office rentals in the Central Business District to command a much higher rent that those sited in the suburban areas This is true for offices in most regions as the gradients of bid rent curves were increasing in these regions even after the opening of the MRT system which increases the accessibility of suburban areas to the city center. The second hypothesis will address the notion that the proximity to nodes of increased accessibility will positively affect the rental values of office buildings. In other words, properties sited nearer to the MRT station will enjoy a rental premium compared to properties that are sited away from the station. In order to address this problem, the Chi-Square Test is used for analysis. Descriptive statistics are also utilized to describe the trends more specifically. It was found that office rentals that were nearer to the MRT station are higher than office properties that are located over 525 meters from the station. Offices that are located in the vicinity of MRT stations can gain as much as 16.14% rental premiums in the CBD region and 15.25% rental premiums in the non-CBD region.