Location Theory - Land Use Determination

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The projection of the bid rent curve on an area reveals the classic Residential-Commercial-Industrial (RCI) zoning model of urban planning. This example enlarges on this idea by assuming the central commercial business district is surrounded by a concentric ring of light industrial (Industrial I), then a ring of residential, then another ring of heavy industrial (Industrial II), then agricultural.

Contributed by: Roger J. Brown (March 2011)
Reproduced by permission of Academic Press from Private Real Estate Investment ©2005
Open content licensed under CC BY-NC-SA



The area devoted to each use can be easily computed by noticing that the distance from the center constitutes a radius. Subtracting the area removed from the circle of interest by the next smaller circle leaves the area in use by a particular type. There is, of course, a correlation between rent offered and how much land is committed to a particular use.

More information is available in Chapter One of Private Real Estate Investment and at mathestate.com.

R. J. Brown, Private Real Estate Investment: Data Analysis and Decision Making, Burlington, MA: Elsevier Academic Press, 2005.

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