Econometric Modelling of Brownfield Redevelopment

Bruce R. Weber

ERES from European Real Estate Society (ERES)

Abstract: "An estimate of the market value of a large brownfield, thought to be economically ready for redevelopment, is complicated by a lack of comparables. This problem is magnified when use of the property has been found responsible for an environmental risk, typically from contamination of drinking water by its previous occupants. Contrary to the verbiage of professional standards in the US, no ""recognized methods and techniques"" were found for valuing groundwatercontaminated acreage with, for the most part, functionally-obsolete improvements. A comparable sale cannot predict how long it will take to remediate this property to the satisfaction of local health officials or the feasibility of its redevelopment. Capitalization rates in the local market are not a reliable indicator of income growth rates for estimating reversionary value. They were shown to have often been wrong in predicting income changes in many U.S. markets. A theoretical model was developed for stigma in the 1990s, but it was not implemented as a mathematical model. RICS guidance was found to most useful in creating a model for valuing such property in a scientific framework, in accordance with the desires of the US Supreme Court. An integration of econometric, statistical and developmental analyses are suggested as a method for best quantifying the value of such brownfields while accounting for the loss in value attributable to stigma from contamination. "

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2005-01-01
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