Rent Capitalization of Access to Rail Transit Stations: Spatial Hedonic Models of Office Rent in Bangkok

Abstract

We examined the rent capitalization of access to rail transit station in Bangkok. Because office rents are spatially autocorrelated, OLS estimation of hedonic models yields biased and inconsistent results. Therefore, we used the spatial econometric technique to remedy this problem. We measured access to rail transit stations by street-network distances from property to station. The distances were also the basis on which spatial relations among office rents were defined, and from which spatial weights matrices were constructed. We estimated spatial hedonic regressions from a sample of 85 office properties in Bangkok, using spatial lag and spatial error model structures. The results reveal that the monthly rent premium of being located nearer to a transit station by one kilometer is approximately 19 Baht per square meter, and the elasticity of rent with respect to the distance is -0.06.