ECONOMICS AND CITIES - Bid-rent model

Figure 1: Bid-rent curve of Warsaw, Poland (Bertaud & Bertaud, 2000, p. 21)

Figure 2: Bid-rent curve of Sydney, Australia (Kulish, Richards, & Gillitzer, 2011, p. 19)

Analysis of bid-rent model: Warsaw and Sydney Word count: 1100

The purpose of this report is to compare the bid-rent curves of Warsaw and Sydney to analyze similarities and differences between their land use and population density. It can be observed from the bid-rent curves of both cities (see Fig. 1 and 2) that as distance from CBD increases, demand for land decreases (Rao, 2019), and hence land price also decreases (Harvey & Jowsey 2004, pg. 234).

It is important to note that the graphs consider land price and not rent values but will still be analyzed in this report as rent prices tend to be consistent with land and housing price predictions (Kulish, Richards and Gillitzer 2011, pg. 18).

1 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Warsaw and Sydney

Warsaw, Poland The current bid-rent model of Warsaw takes its shape largely under the influence of its post-war situation. After the second world war, Warsaw was rebuilt as a socialist city with a “mono-centric star-shaped spatial structure” (Niemczyk 1998, pg. 302), with residential and industrial sectors radiating out from the CBD along rail and road transport routes (Niemczyk 1998, pg. 302). As Poland is still emerging as a free-market economy after its independence, the sharply declining slope of Warsaw’s bid-rent graph (see Fig. 3) reflects the city’s monocentric nature (Bertaud & Bertaud 2000, pg. 21).

Beyond that distance, the bid-rent model deviates from its expected pattern and certain anomalies can be observed (see Fig. 3). Due to public transport investments, accessibility routes were enhanced in anomaly areas (Bertaud & Bertaud 2000, pg. 29). As a result, time and expenses to commute to the city center (Tiwari, 2019) have reduced, thus leading to an increase in land demand, and therefore, land price at these places. As land prices are determined by land use (Harvey & Jowsey 2004, pg. 238), it is essential to identify dominant land use at consecutive distances from CBD to understand Warsaw’s bid-rent graph.

Sharp decline – expected pattern

Anomaly in expected pattern – stagnant/slight increase in land price at 6, 9 km from CBD New inner ring road

New bypass

Figure 3: Anomalies in pattern of land price in Warsaw, Poland (Bertaud & Bertaud, 2000, p. 29)

2 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Warsaw and Sydney

Warsaw’s CBD is a mixed-use market-driven area with office buildings, hotels and commercial services (Bocian 2012, pg. 737). Owing to its easy accessibility, history and strategic location, it has become an important economic center in Poland (Bocian 2012, pg.

737) and has high demand in terms of residency. As distance from CBD increases, accessibility decreases, and an increasing amount of industries and green spaces can be observed (see Fig. 4), along with some low-density housing (Bertaud & Bertaud 2000, pg.

25).

This is the result of planning strategies that had developed around the time of rapid industrialization. It focused on environmental protection as compensation for industry pollution (Niemczyk 1998, pg. 302). Factories have emerged because producers with less perishable and transport-oriented goods tend to outbid other producers as distance from CBD increases (Harvey & Jowsey 2004, pg. 238). Therefore, industries, factory outlets and other such services have become the dominant land use in areas further away from the CBD (see Fig. 5).

CBD area

Figure 4: Functional zones in Warsaw, Poland (Niemczyk, 1998, pg. 309)

Figure 5: Diagrammatic representation of land use in Warsaw at consecutive distances from CBD (Chopdekar, 2019)

3 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Warsaw and Sydney

Determining land use is highly essential when it comes to analyzing and predicting population density (Bertaud & Bertaud 2000, pg. 19). Warsaw’s CBD, due to its wide array of service provisions and easy accessibility to these services, has seen large scale development of high rise buildings (see Fig. 6) that not only cater to offices but also residential apartments (Fuhrmann 2019, pg. 290). As a result, these places have developed high population density which declines rapidly up to a certain distance from CBD (see Fig. 7).

However, beyond that certain distance from the CBD, population density, while it is expected to decline as continuation of the pattern, has actually increased at specific distances (see Fig. 7), especially in areas that have been redeveloped in terms of transportation and other amenities (Bertaud & Bertaud 2000, pg. 19). With these investments, demand for land in such places, despite being far away from CBD, has increased and population density can be expected to rise, rather than drop as per the usual pattern.

Figure 6: 3D Spatial structure of Warsaw, Poland (Bertaud & Bertaud 2000, pg. 16)

High rise apartments close to CBD – rapidly declining population density up to red point

Areas of anomaly – population density rises instead of drops Area too far from CBD – less amenities – less population density

Figure 7: Conceptual graph of population density vs distance from CBD in Warsaw, Poland (Chopdekar, 2019)

4 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Warsaw and Sydney

Sydney, Australia The current bid-rent model of Sydney takes its shape under the influence of “increasing migration”, “fragmented governance” and consequent “urban sprawl” (Vogel, et al 2018, pg. 4) which has occurred over time, leading to poor accessibility and distribution of resources across particular areas located away from CBD. As a result, these areas will have distinctly low land demand, and hence low land price. Areas close to CBD could be in higher demand because they house more than half the total percentage of employment services (Vogel, et al 2018, pg. 10). The demand for land is more here as a result of better accessibility, and thus lesser transportation costs incurred to travel to CBD. With regards to the anomaly that can be observed in the graph, areas located at a distance of approximately 40-55 km from CBD (see Fig. 8) show a slight increase in land price.

Higher demand for land in these areas could be due to their easy accessibility via metro from CBD (Moskow, 2019) and also because some of these places are popular tourist spots due to their scenic landscapes (Destination NSW, 2019). Once again, it can be observed how land use determines the land prices at different locations in and from the CBD. Hence, determining Sydney’s land use pattern becomes essential in understanding its bid-rent model.

Sharply declining curve – expected pattern

Anomaly in expected pattern – slight increase in land price between 40-55 km from CBD

Figure 8: Anomalies in pattern of land price in Sydney, Australia (Kulish, Richards, & Gillitzer, 2011, p. 19)

5 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Warsaw and Sydney

Sydney shows a slightly different trend to Warsaw, with its CBD supporting only commercial land use. The dominant use is financial and insurance services followed by professional, scientific and technical sectors (Vogel, et al 2018, pg. 18). This could be due to the city’s early post-industrial identity as a “trade and commerce city” (Vogel, et al 2018, pg. 24). However, there is a higher amount of available green space for public recreation (City of Sydney 2016, pg. 9) which could imply the government’s policies on parks, green spaces and open areas that thus influence the overall economy of the CBD (Harvey & Jowsey 2004, pg. 242).

As distance from CBD increases, land use changes to cater to residential population, with services ranging from healthcare, social assistance, education to retail trade (see Fig. 10). A significant part of land is used for manufacturing, mining and agriculture, which tend to be located in the Greater West region (Vogel, et al 2018, pg. 28), far away from CBD (see Fig. 9). This bears similarity to the case of Warsaw, where due to these services producing less perishable and transport-oriented goods, they tend to be located far away from city center.

Figure 9: Sub-regions of Sydney, Australia (Vogel, et. al, 2018, pg. 18)

Figure 10: Diagrammatic representation of land use in Sydney at consecutive distances from CBD (Chopdekar, 2019)

6 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Warsaw and Sydney

Sydney’s land use has highly impacted its population density and this is evident in its spatial structure (see Fig. 11). Similar to Warsaw, areas close to Sydney’s CBD contains high rise buildings which support a highly dense population due to easy accessibility to employment, education and other amenities. This population density that particularly pertains to employment decreases rapidly as distance from CBD increases.

However, in the area of anomaly (see Fig. 12) that supports tourism and may have undergone substantial development in terms of transport and other facilities, population density is expected to increase and this is evident through the increase in land demand and thus land prices in these areas. Beyond these areas of anomaly, population density would reduce to its minimum due to uneven distribution of resources which put these areas at a disadvantage (Vogel, et al 2018, pg. 4).

Figure 11: 3D Spatial structure of Sydney, Australia (cgtrader 2019)

Highest population density at a lower value than Warsaw’s – to indicate purely commercial land use of Sydney’s CBD High rise apartments close to CBD – high land demand and population density Population density reduces as distance from CBD increases Area of anomaly – population density rises instead of drops Area too far from CBD – less amenities – less population density

Figure 12: Conceptual graph of population density vs distance from CBD in Sydney, Australia (Chopdekar, 2019)

7 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Warsaw and Sydney

While both Sydney and Warsaw show similar trends in their bid-rent models, including the anomalies that have arisen due to land use development in particular areas, they differ in terms of their historical and economic context that has contributed to their bid-rent chart development. This shows that while the standard bid-rent model is a good indicator of the relationship between density and distance, sophistications need to be added to this model in order to produce an accurate bid-rent chart for city-specific detailed analysis.

References Bertaud, A., & Bertaud, M. A. (2000). The Spatial Development of Warsaw Metropolitan Area. Washington DC: The World Bank.

Bocian, A. (2012). MORPHOLOGY OF CENTRAL BUSINESS DISTRICT IN WARSAW. International Journal of Arts & Sciences, 5(6), 737–750. Retrieved from http://universitypublications.net/ijas/0506/pdf/VIE306.pdf City of Sydney. (2016). Planning Proposal: Central Sydney. Retrieved from https://www.cityofsydney.nsw.gov.au/__data/assets/pdf_file/0013/311035/ATTACHMENT-B-CENTRALSYDNEY-PLANNING-PROPOSAL.pdf Destination NSW. (2019). Austinmer Beach. Retrieved from https://www.visitnsw.com/destinations/southcoast/wollongong-and-surrounds/thirroul/attractions/austinmer-beach Fuhrmann, M. (2019). Spatial, social and economical dynamic of contemporary Warsaw – City profile.

Cities, 94, 286-295. Retrieved from https://app.lms.unimelb.edu.au/bbcswebdav/pid-7612816-dt-content-rid65393665_2/courses/PROP10001_2019_SM2/Warsaw_City%20Profile_2019.pdf Harvey, J & Jowsey, E. (2004). ‘Land Use and Land Values’, in Urban land economics, Palgrave Macmillan.

Kulish, M., Richards, A., & Gillitzer, C. (2011). Urban Structure and Housing Prices: Some Evidence from Australian Cities. Reserve Bank of Australia.

Moskow, N. (2019). List of Sydney Suburbs by Distance & Direction from CBD. Retrieved from https://www.digitaladvocates.com.au/list-of-sydney-suburbs/ Niemczyk, M. (1998). City Profile: Warsaw (Warszawa). Cities, 15(4), 301–311. Retrieved from https://app.lms.unimelb.edu.au/bbcswebdav/pid-7612816-dt-content-rid65393664_2/courses/PROP10001_2019_SM2/Warsaw_City%20Profile_1998.pdf Rao, J. (2019). PROP1001: Economics and Cities, week 4, lecture notes [PowerPoint slides]. Retrieved from https://app.lms.unimelb.edu.au/webapps/blackboard/content/listContent.jsp?course_id=_392865_1&content _id=_7567389_1&mode=reset

8 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Sydney and Warsaw

Tiwari, P. (2019). PROP1001: Economics and Cities, week 1, lecture notes [PowerPoint slides]. Retrieved from https://app.lms.unimelb.edu.au/webapps/blackboard/content/listContent.jsp?course_id=_392865_1&content_i d=_7567389_1&mode=reset Vogel, R.K., et al. (2018). Global city Sydney. Progress in Planning. Retrieved from https://doi.org/10.1016/j.progress.2018.09.002

Image sources Figure 1. Bertaud, A., & Bertaud, M. A. (2000). Warsaw - land price profile in Built-up areas.

Washington DC: The World Bank.

Figure 2. Kulish, M., Richards, A., & Gillitzer, C. (2011). Sydney Land Prices - 2010. Reserve Bank of Australia.

Figure 3. Bertaud, A., & Bertaud, M. A. (2000). Anomalies in pattern of land price in Warsaw, Poland.

Washington DC: The World Bank.

Figure 4. Niemczyk, M. (1998). Functional zones in Warsaw, Poland . Retrieved from https://app.lms.unimelb.edu.au/bbcswebdav/pid-7612816-dt-content-rid65393664_2/courses/PROP10001_2019_SM2/Warsaw_City%20Profile_1998.pdf Figure 5. Chopdekar, M. (2019). Diagrammatic representation of land use in Warsaw at consecutive distances from CBD. Referred to Harvey, J & Jowsey, E. (2004). ‘The Pattern of Urban Land Use’, in Urban land economics, Palgrave Macmillan UK, pp. 253.

Figure 6. Bertaud, A., & Bertaud, M. A. (2000). 3D Spatial structure of Warsaw, Poland .Washington DC: The World Bank.

Figure 7. Chopdekar, M. (2019). Conceptual graph of population density vs distance from CBD in Warsaw, Poland.

Figure 8. Kulish, M., Richards, A., & Gillitzer, C. (2011). Anomalies in pattern of land price in Sydney, Australia. Reserve Bank of Australia.

Figure 9. Vogel, R.K., et al. (2018). Sub-regions of Sydney, Australia . Retrieved from https://doi.org/10.1016/j.progress.2018.09.002 Figure 10. Chopdekar, M. (2019). Diagrammatic representation of land use in Sydney at consecutive distances from CBD. Referred to Harvey, J & Jowsey, E. (2004). ‘The Pattern of Urban Land Use’, in Urban land economics, Palgrave Macmillan UK, pp. 253.

Figure 11. cgtrader. (2019). 3D Spatial structure of Sydney. Retrieved from https://www.cgtrader.com/3dmodels/exterior/cityscape/Sydney-city-and-suburbs Figure 12. Chopdekar, M. (2019). Conceptual graph of population density vs distance from CBD in Sydney, Australia

9 Manasi Chopdekar (935401) Economics and Cities (PROP10001) Assignment 1: Bid-rent model – Sydney and Warsaw