An empirical study of the impact of railway extensions on rentals of office properties: a case study of East Rail Line extension

Abstract

The study empirically examines the effects of railway extensions on office rental prices, with a specific focus on the East Rail Line Cross-Harbour extension. Two hypotheses are established to guide the research, with the objectives of investigating the impact of railway extension on office rental prices within districts and the potential disparity in effects between CBD and non-CBD areas. To test these hypotheses, the study analyses the Exhibition Centre and Hung Hom as the areas of interest in the context of the East Rail Line extension. Sheung Wan and Kwun Tong are included as control areas to provide a basis for comparison. A hedonic price model is employed, analysing a dataset comprising 556 leasing transactions of office properties over a three-year period in these study areas. A series of independent variables are incorporated into the model to isolate the effects of various attributes of office properties on their rental prices. Additionally, two interactive independent variables are included to represent the combined effects of railway extensions and spatial attributes on rental prices. The results of the analysis support both hypotheses. First, the introduction of a new railway line in a district has a positive and significant impact on office rental prices within that district. Second, the effect of a railway extension on office rental prices is more pronounced in CBD areas compared to non-CBD areas. The study contributes to a deeper understanding of the relationship between railway improvements and the office submarket and offers insights for urban planning and commercial property valuation.