Highway investment in deindustrialization: A territorial analysis of office property transactions in Hong Kong, 2002-2013

Transportation investment continues to grow in aid of economic competitiveness and environmental sustainability worldwide, but limited empirical research has been conducted on the changing value of highway investment in deindustrializing economies. This study examines the influences of highway proximity and traffic on office values in Hong Kong using hedonic price analysis on 13,670 transactions around highway interchanges for 2002-2013. Our hedonic regressions, controlling for unobservable district effects and incorporating instrumental variables, reveal that the associations of highway proximity and traffic with office prices appear to exhibit mixed results across Hong Kong's three territorial divisions. The negative externalities generated by excess traffic cancel out the accessibility benefits of highway proximity on Hong Kong Island, where densely built-up office districts are suited for amenity-sensitive knowledge businesses that tend to create value-added services through face-to-face communications. By contrast, highway proximity uplifts the value of office properties with lower transportation costs and higher market accessibility in Kowloon and the New Territories, where spacious workplaces near hub-port and logistics facilities are advantageous for mobility-driven trade and transportation businesses that tend to increase value-added throughput in cross-border relations with mainland China. These territorial findings are of particular importance for progressive policymakers to deploy the strategic applications of underground bypasses, greenway creation, interchange improvement, congestion charges, and smart technology to manage mobility and alleviate disamenity, accompanied by supportive public transit services and adaptive land-use rezoning, in the dynamic and complex process of deindustrialization.