Since the spring, Donjek has been providing tax base and economic impact analysis for the City of Minneapolis, working with a team examining a number of sites with potential for conversion to open space (partners include the Smitten Group, Hoisington Koegler, Minneapolis Park and Recreation Board, the University’s Metropolitan Design Center, and the Trust for Public Land). Donjek is charged with addressing the public finance aspects of the project, including a look at how a downtown park could be financed and the impact of a park conversion on tax base.
Scholars in the academic world have for a number of years been active undertaking and publishing studies of the economic impact of neighborhood parks. With the powers provided by modern GIS tools combined with the large sets of housing sale data, researchers use regression analysis to separate the influence of a park from other housing characteristics such as number of bedrooms and lot size. Once isolated, the value attributed to the park can be viewed in relationship to other homes in the area. The “proximity principle” is the way economists describe the results of most of these studies, meaning that with the exception of those homes “too close for comfort” to parks, the closer your home to the open space, the more value your home will accrue from this proximity. Or, more simply, people pay to be near the park.
A comparable analysis in an environment dominated by commercial, industrial and office space is a more difficult prospect. First, the relationship of prices to rents (capitalization rate) changes throughout the real estate market cycle, making it challenging to draw conclusions from data collected in multiple years. Particularly in downtowns, the varying age of buildings means everything from floor plans to ceiling heights can be different for each building (or even each floor within the building). Where data for single-family homes is readily available and fairly standardized (for example, what qualifies as a two-bedroom versus three-bedroom home), data for downtown office buildings are neither. What’s more, leasing rates and characteristics are in many cases proprietary.
Still, a number of comprehensive studies support the intuitive conclusion that office space near urban parks are more valuable than like property otherwise located. A short Donjek summary of examples of urban parks and academic and practitioner literature related to commercial space conveys the range of research in this area. What’s the nature of the discussion around downtown parks in your city? If a study of urban parks has been published in your area, do let me kn0w – I may not yet have seen it.
Stay tuned for an interview of Dr. John Crompton of Texas A&M University, who has been a leader in documenting the proximity principle and its relationship to public decision making. Next week, I will enjoy the opportunity to discuss these and related issues with Professor Crompton.