Bid-Rent Theory

Bid-Rent Theory

Graphically shows what various land-users are prepared and able to pay for good access to the CBD

Analysis

It can be seen that commerce (in particular large department stores/chain stores) is willing to pay the greatest rent to be located in the CBD.

The CBD is very valuable for them because it is traditionally the most accessible location for a large population.

This large population is essential for department stores, which require a considerable turnover.

As a result, they are willing and able to pay a very high land rent value.

They maximise the potential of their site by building many storeys, resulting in skyscrapers in CBDs.

Analysis Their willingness to pay declines rapidly.

Industry is, however, willing to pay to be on the outskirts of the CBD.

There is more land available for their factories, but they still have many of the benefits of the CBD, such as a market place and good communications.

As you move further out, the land becomes less attractive to industry and the household is able to purchase land.

The further you go from the CBD, the cheaper the land.

This is why inner city areas are very densely populated (terraces, flats and high-rise buildings), whilst the suburbs and rural areas are sparsely populated (semi and detached houses with gardens).

This bid-rent theory explains one pattern of urban land-use that is also identified by Burgess' concentric ring model.

The pattern is never as simple in reality. Today, out-of-town shopping centres and industrial sites have influenced the pattern.

Limitations & Criticisms

Cannot explain exceptions eg residential areas within CBD

Assumes monocentric perception

Land and property markets constrained by regulatory and fiscal controls by intervention of special interest groups like preservationists and tenants’ associations

Lack of dynamic component

Not all phenomenon can be explained by economics eg environmental concerns, perceptions