How does the knowledge of urban bid rents explain the substitution of urban land use from the city center to the periphery?
Land is so precious that everyone needs it for a particular purpose. Therefore the price paid for land depends on its type of land use or function. The urban land value or bid rent theory is an urban equivalent to that of Von Thunen because both theories are based on locational rent.
Bid rent refers to the price paid for land for a particular function being it commercial, industrial, residential or agricultural. The bid rent theory therefore explains the reasons for land values decreasing with an increase distance from the city center. This rate at which land values decline with distance away from the city center is called Land Value Exponential Lapse rate. This however means that the price paid for land at the city center is higher due to its high value. Therefore within an urban system there is keen competition for land from the city center to its peripheries ( outskirts ) for various functions.
The price paid for the most valuable site within the CBD is called Peak Land Value intersection and is often occupied by commercial functions and away from the CBC land becomes less competitive for commercial or retailing but now available for other functions. Land is very expensive at the city center due to:
- This is the most populated and accessible part of the city.
- Land is scared and limited in supply, hence require only those functions that can make maximum use of it and as well can afford its high rents, as represented.
The diagram above shows urban land use or bid rents within a city occupied by various functions with increasing distance from the city center to the peripheries. June 2016
As seen on the diagram above various functions occupy different locations within the city structure due to the following.
- Commercial functions like retailing, department stores, shops occupy zone one very close at the heart of the center of the city as its strong bidder and able to afford the high rents. As such the bid rents curve for this function is very steep. It is located here because of its high accessibilities and frequent make contacts with customers.
- Zone 2 is industrial; industries though cant afford the high rent for zone 1 but is relegated here because it needs enough space for accommodation, dispatch of polluted waste, as well as need for infrastructure. It is located in this zone also because of need to require cheap labor from city center.
- Residential function occupy zone 3. Further out of the city center towards the peripheries wher land values and rents have declined considerably. Land is needed here mainly for settlement and does not generate any income for huge rents to pay at the city center.
- Agricultural function is the least competitive and is found at the outskirt of the city center but at the peripheries. Agriculture needs enough land especially for extensive farming.