Redevelopment Decisions for Commercial and Industrial Properties

The empirical work in this study serves as a test of the principle that redevelopment of a property will occur when the value of the existing bundle, plus demolition costs, is less than or equal to the price of vacant land. The probability of a commercial or industrial property being redeveloped is predicted using the difference in the estimated value of a parcel in its redeveloped state and its current use, correcting for sample selection bias. The empirical results support the hypothesis that land is redeveloped when its value in the redeveloped state is high relative to its value in the current use