Developing an understanding of settlement: Bid-rent Theory

The concept of bid rent is vital to models of land use and as such, it is important to have an understanding of it to know how urban areas may grow. Bid rent is the value of land for different purposes. As I have mentioned in previous posts, the land at the centre of the city is the most expensive due to its accessibility (by public transport) and the small amount of land actually available (hence the high-rise buildings). As such, land prices tend to decrease away from the CBD, although there are peaks in particularly desirable areas (near main road intersects). This type of land-use is also recognised in Burgess’ model.

The graph below (from s-cool) is one of the best representations of bid-rent theory I’ve seen. It clearly depicts what the various land users are willing to pay for land.

The graph clearly shows that commerce is willing to pay the largest amount in rent to be located in the CBD. Department stores and national chains are willing to pay the high rent, to get the footfall (and as such, turnover) that only the highly accessible CBD can offer. Many stores in the CBD maximise their square footage by building plenty of levels (stories) to their store. The rent that commerce is willing to pay is the steepest line on the graph - which means the amount of rent commerce is willing to pay declines quicker per kilometre out of town, than any of the other land uses.

Industry needs land available to build factories and as such, they are not willing to pay the high prices for the land within the CBD. As long as Industry sites are within easy distance of the CBD, to make use of the communication and market place, they are willing to pay to be on outskirts of the CBD.

Area 3 is unattractive to commerce and industry and as such residential building does not get priced out of the running for land. Without the competition from industry and commerce, the land is cheaper and so it is possible to build larger houses with gardens.

It is possible to see the connections between bid-rent and Christaller’s hierarchy and threshold within Central Place Theory. Clearly, with the building of out of town shopping centres and main roads this pattern does not always work, but it is a good model to aid understanding. The diagram below (page 273, from Nagle, 2001) shows the variations in bid-rent with accessibility. I think the two diagrams shown in this blog would be really good diagrams to analyse as a class (or to start with, individually) as part of a KS5 lesson.