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Density-oriented versus development-oriented transit investment:

Decoding metro station location selection in Shenzhen
Jiawen Yang a,n, Junxian Chen b, Xiaohui Le b, Qin Zhang c
School of Urban Planning and Design, Shenzhen Graduate School, Peking University, Building E, Room 326, Shenzhen 518055, China
School of Urban Planning and Design, Shenzhen Graduate School, Peking University, Building E, Room 319, Shenzhen 518055, China
School of Computer Science and Engineering, South China University of Technology, Room 338, Building B3, South Campus (HEMC), Panyu District,
Guangzhou 510006, China

ar t ic l e i nf o a b s t r a c t

Article history: The transit-oriented development literature has focused on the built environment around stations in
Received 1 July 2015 operation, largely neglecting how the station location was selected. We hypothesize that city govern-
Received in revised form ments in China are likely to put stations outside established suburban centers. By putting metro stations
5 April 2016
at relatively underdeveloped places, city governments can lower right-of-way cost and gain more rev-
Accepted 8 April 2016
enue from future land transactions. Using Shenzhen as a case study, we test this hypothesis with metro
planning examples and land transaction data from 2000 to 2014. We found that metro alignment and
Keywords: station placement has bypassed the core of established communities. This planning practice is supported
Metro investment by a strong real estate market that appreciates transit accessibility, despite the high transit operation
Station location
Transit-oriented development
& 2016 Elsevier Ltd. All rights reserved.

1. Introduction boost fare box revenue and reduce operational subsidy. One par-
ticular example is the American federal government's New Start
The enormous cost involved in the establishment of a metro program. In evaluating grant proposals from various locations, the
system (above and below ground rail guided urban transit net- Federal Transit Administration uses cost-effectiveness measures,
work) justies detailed planning, which includes route alignment such as the expenditure to produce one-hour travel time saving, as
and location of metro stations (Samanta and Jha, 2008). Many major project ranking criteria (FTA, 2012). Since xed guide-way
researchers have pointed to the relatively high density land use or projects placed in relatively high density corridors can produce
high-priced properties that surround metro stations as positive relatively robust ridership and thus more travel time savings,
impact of metro operation on land development (Dorantes et al., density-oriented transit planning is typically prioritized to receive
2011; Hess and Almeida, 2007). Most literature on transit invest- federal grants. In contrast, places like Hong Kong have emphasized
ment and transit-oriented development (TOD), however, has fo- a development-oriented approach. New metro stations are placed
cused on describing the built environment surrounding stations, at places where new town development is expected to happen
but not the potential siting that planners have considered. The (Lee and Leung, 1994). One particular concern underlying Hong
existence of high-density development around metro stations Kong's approach is to support metro investment and operation
with revenue from the real estate sector.
could result from two different paths: either the station is built to
From the perspective of municipal nance, the choice between
serve pre-existing high-density areas or the station has attracted
the density-oriented approach and the development-oriented
high-density (re)development. A better conception of these alter-
approach is a tradeoff between land-sector revenue and fare-box
native development paths can help us to understand the char-
revenue, which is strongly affected by the scal environment for
acteristics of planning, design and operation associated with me-
metro investment. The American federal government which does
tro systems in different parts of the world, including those in
not receive any direct revenue from land development around
stations, has elected to prefer fare-box revenue to land-sector
When stations are placed to serve pre-existing high density
revenue. In contrast, the Hong Kong government, which owns the
areas, the advantage is relatively high ridership, which helps to land and collects revenue from land development activities, has
emphasized land development revenue. These two approaches
Corresponding author. can, of course, co-exist. For example, the US Federal Transit Ad-
E-mail address: (J. Yang). ministration's New Start program also examines land development
0967-070X/& 2016 Elsevier Ltd. All rights reserved.

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
2 J. Yang et al. / Transport Policy ()

potential around planned stations when ranking projects, albeit about land-sector revenue has affected project ranking, route de-
with a weight lower than the factor of ridership and time-saving. sign and station placement. By examining the price of transacted
The development-oriented approach in Hong Kong also targets land parcels in relation to their distance to the nearest metro
future high ridership, expecting that development around stations stations, we aim to nd out whether station placement in general
should catch up quickly, so that the subsidy required for metro has bypassed community centers.
operation will soon be reduced.
Observing how China's city governments fund metro projects,
we hypothesize that the scal environment shapes the choice of 2. Funding metro in Shenzhen
Chinese local governments and the development-oriented ap-
proach is more likely to be emphasized.. First, unlike the US metro Shenzhen is located on a southern tip of China's Guangdong
systems which are heavily subsidized by the federal government, Province and on the east bank of the Pearl River, neighboring Hong
metro construction and operation in China in general receives no Kong. Occupying 1991 square kilometers, the city had a total re-
funding from the central or provincial governments. City govern- gistered population of 10.8 million in 2014. As China's rst and one
ments fund metro projects with general revenue sources or with of the most successful special economic zones, Shenzhen has
bank loan guarantees for metro corporations. In addition, in con- grown from a tiny border town into a modern metropolis with a
trast to USs private land ownership, China's city governments re- gross foreign export value that ranks rst among all Chinese cities.
present the national state in each city and claims signicant In 2014, Shenzhen's GDP had reached 1600 billion RMB (US$
benet stemming from urban land development. A typical practice 258.06 billion), fourth among all cities in China, making it one of
for city governments to raise revenue has been to transfer multi- the most developed cities in China and one of the fastest-growing
decade land use rights to the private sector (Yang, 2006; Yang cities in the world (SZGOV, 2014).
et al., 2007). Placing transit stations in undeveloped parcels is Similar to other megacities, trafc congestion raises the need
likely to raise signicant revenue for the city government as for high capacity rapid transit systems. Following Beijing, Tianjin,
property developers tend to bid higher prices for parcels closer to Shanghai and Guangzhou, Shenzhen is the fth mainland China's
stations. city to operate a metro system. Shenzhen's metro system was
Furthermore, placing stations in a pre-existing high-density developed in three phrases (Fig. 1), with different funding ar-
area not only implies high right-of-way-costs, but also a loss of rangements for each phase (Table 1). In the rst phase, the Luobao
opportunity to boost land-sector revenue (Yang, 2006). In devel- Line and the rst part of the Longhua Line were planned in 1998
oped areas, property value appreciation stemming from metro and began operation in 2004, with a length of 22 km and an in-
operations benets the private sector more than the city govern- vestment of 11.5 billion RMB (US$ 1.85 billion). The city govern-
ment because China does not have an American-style property tax. ment funded 70% of the construction cost in cash and the re-
Property value appreciation does not lead to an increase in prop- maining 30% through bank loans.
erty tax revenue. The lack of an annual property tax, therefore, In the second phase, the network added three new lines (She-
discourages China's city governments from placing stations in pre- kou Line, Longgang Line and Huanzhong Line) and extended the
existing high-density areas. existing Luobao and Longhua Lines. These lines were completed in
This hypothesis is tested with a case study of metro planning, 2011, with a total length of 142 km and a total investment of 68.8
particularly metro station placement, in Shenzhen, the fth city in billion RMB (US$ 11.10 billion). The proportion of the construction
mainland China to operate a metro system. By examining planned cost covered by Shenzhen government's general revenue shrunk
metro lines and those in operation, we will review how concern from 70% to 50%. The remaining 50% was funded by Shenzhen

Fig. 1. Three Phases of Shenzhen Metro System.

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
J. Yang et al. / Transport Policy () 3

Table 1
Phases of metro system development and nancing.

Phase Total length (kilometers) Investment (billion RMB) Time period Government funding Source of the rest fund

Ratio Form

Phase 22 11.5 Operation began in 2004 70% Government cash Bank loan
Phase II 142 68.8 Operation began in 2011 50% Government cash Bank loan and other
Phase III 169.6 81.2 Scheduled to operate in 2016 50% Property land transfer income Self-raised

Table 2
Project ranking criteria and ranking results.

Criteria Weight Line 4 Line 6 Line 7 Line 8 Line 9 Line 10 Line 11 Line 12

Urban trafc pressure (ridership) 0.2 8 6 2 3 1 5 4 7

Network strategy (connectivity) 0.2 8 4 2 5 3 6 1 7
Urgency 0.2 8 5 1 6 2 3 7 4
Coordinating with urban development 0.2 8 2 7 3 4 5 1 6
Operational revenue 0.1 6 3 7 5 8 4 1 1
Land-sector revenue 0.1 2 5 6 7 8 4 3 1
Weighted sum 1.0 7.2 4.2 3.7 4.6 3.6 4.6 3 5
Overall ranking 8 4 3 5 2 6 1 7

Source: SZGOV, Short-term metro system plan of Shenzhen (20112016), 2011. p. 150.

Metro Corporation (SZMC), a state-owned enterprise. SZMC tried and SZMC received sales revenue of 0.4 billion RMB (US$ 64.5
to meet the huge funding demand by applying diversied modes million) (SZMC, 2013).
of nancing (SZMC, 2015a), including collaborating with Hong The third phase includes three lines under construction (Airport
Kong Mass Transit Corporation (HKMTR) to construct the Longhua Line, Xili Line and Meilin Line), which are scheduled to begin op-
Line extension, following a build-operate-transfer (BOT) protocol eration in 2016, and another two lines in the planning stage
(Yang et al., 2014). The whole system carried 2.1 million passen- (Guangming Line and Yantian Line). These ve lines have a total
gers per day in 2013 (SZMC, 2013). length of 169.6 km, with a total investment of 81.2 billion RMB (US
In the midst of Phase II construction, the Shenzhen city gov- $ 13.10 billion) (SZMC, 2015b). Already burdened by the opera-
ernment and SZMC launched a rail property model of land tional subsidy for the system currently in use, the Shenzhen city
development, which largely follows Hong Kong's practice, but is government is committed to the rail property model to nance
tailored to Chinese regulations. In 2006, China's central govern- these lines The municipal government plans no cash appropriation
ment instituted an auction requirement for urban land transac- for Phase III projects. Instead, it has prepared 5.66 million square
tions and restrained land transfer by negotiation. Shenzhen's city meters of land for SZMC to recoup its construction cost and op-
government circumvents this regulation by transferring land eration decits (Zhao, 2013). By 2014, the total amount of land
through a restrained auction, which assures SZMC to obtain land transferred to SZMC for this purpose had reached 3.74 million
parcels through the auction process. Shenzhen city government square meters (SZMC, 2015a). The Qianhai case reported here is
then turns over the land lease revenue to its State-owned Assets representative of many more such developments that are expected
Supervision and Administration Commission (SASAC), a govern- in years to come.
ment division that manages government investment for state-
owned enterprises. After receiving this land lease payment, SASAC
transfers it back to SZMC in the form of registered capital (Li, 3. Metro planning geared toward land development revenue
2011). Fig. 2 depicts this whole process, with the land transaction
at Qianhai station as an example. In 2008, SZMC obtained the The above brief history of funding for Shenzhen's metro reveals
usage rights to this parcel (0.55 million square meters) with a a strengthened link between metro investment and land-sector
payment of 1.74 billion RMB (US$ 0.28 billion). revenue. Under this scal environment, metro planning and de-
SZMC's Division of Property Development was established in sign has shifted away from a pure transport concern.
March 2007 to undertake real estate development by working
with banks and experienced developers. Commercial housing 3.1. Project ranking drifts away from ridership concern
projects have been pushed forward along Luobao Line, Shekou Line,
Huanzhong Line and Longgang Line. For instance, the Shanhaijin According to the Shenzhen metro system construction plan in
project, which uses the air rights of the west train depot at Shekou 2007, metro lines are ranked by ve factors: urban trafc pressure
station, is a commercial housing project with one- and two-bed- (ridership), network strategy (connectivity), urgency, coordination
room condos. The condos were sold in the fourth quarter of 2013 with urban development, operational revenue and land-sector
revenue. Table 2 lists the weight assigned to each factor and the
ranking results for eight metro projects (SZGOV, 2011a). A higher
number indicates a lower priority.
With this exercise, a 10% weight is assigned to land-sector
revenue and a much higher weight is given to trafc and ridership.
The Line 4 (Longhua Line extension) is the least preferred project
according to this criterion. In reality, however, it was the rst to be
Fig. 2. Rail Property Model, Qianhai Example. built among the eight. One possible reason for this decision is its

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
4 J. Yang et al. / Transport Policy ()

Fig. 3. Longhua Line follows under-developed corridor.

high land development potential: it was ranked second by land passengers can transfer to the Longhua and Huanzhong lines. De-
sector revenue. This discrepancy in planning and project im- cisions on metro station location have sparked many debates. The
plementation indicates that project implementation has employed initial plan was made in 2008, and then revised in 2012. Fig. 4
a more pragmatic approach and emphasized land sector revenue, shows the metro alignment of the two plans. The locations of
which suggests a drift away from the ideal planning exercise that several stations have been adjusted. But both plans bypass den-
emphasizes ridership and trafc mitigation. sely-populated areas and run along the edge of communities.
One debate has centered on the placement of the Dalang
3.2. Metro alignment bypasses established communities community station. In the 2008 plan, the municipal government
located a Shilong metro station within Dalang community (gray dot
A detailed examination of the metro alignment or station pla- in Fig. 4). It was put there because the city governments have
cement can shed more insight on these issues. Again, we will use several empty parcels there, which implies both low right-of-way
line 4 (Longhua Line) as an example Line 4t connects the city costs before station construction and high land lease potential
center and the suburban Longhua district. It starts from the Futian following metro completion. However, residents in Dalang Com-
Checkpoint, at Hong Kong's border, and extends northward. When munity strongly opposed this plan, claiming that this alignment
the Longhua Line goes northward into the suburbs, it deliberately bypassed Dalang community's center where heavy trafc was a
turns west and bypasses Minzhi, a high-density suburban settle- daily problem. Instead, they proposed a Dalang station as a re-
ment (Fig. 3). placement, which is located in the center of Dalang community
What complicates the story a bit is the placement of the (the white dot to the east of gray dot in Fig. 4). Regardless of the
Shenzhen North Station, which is not only a transfer station be- strong opinion from the local residents, the revised plan of 2012
tween Longhua Line and Huanzhong Line, but also a high-speed did not change the station location. Ironically, it renamed Shilong
train station. It is located in Shenzhen's suburban Longhua District, station to Dalang station. The evidence presented here suggests
9.3 km from the city center. Its construction began in 2008 and that the city government's preference for land lease revenue and low
was completed in 2011. Unsurprisingly, such a complex needs a right-of-way cost leads to favorable consideration of under-developed
huge amount of funding and a big piece of land. China's Ministry of areas, at the expense of community desire.
Railway (MOR), which shoulders these capital expenditures, pre- While other factors such as geological conditions may also
ferred to locate the station at the urban periphery to minimize the matter in station placement, it is unlikely the major cause here.
cost of the right-of-way. Shenzhen Municipal Government shared The alignment alternatives and the station alternatives are only a
the same idea, hoping the transit investment would boost the land few kilometers apart. Their geological conditions are quite similar.
development around the station, thus generating more land-lease In addition, no government report or media release points to
revenue. As a result, this huge station was also put in an under- geological or morphological factors when explaining the align-
developed area. ment and station placement.
Note that this scal oriented approach for planning not only
3.3. Station placement favors land-sector revenue at expense of exists in metro planning, but also in urban road planning. For
trafc mitigation example, the densely spaced ring roads in China's megacities have
their roots in land lease revenue. Comparing two different align-
A more recent example comes from the planning for Guangmin ments of ring roads outside a pre-existing built-up area, one dis-
Line, line 6, which is a Phase III project. It mainly serves suburban tanced from the urban center by 10 km and the other by 20 km,
communities, starting from Shenzhen North Station, where the former can surely help the city government to prot more on

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
J. Yang et al. / Transport Policy () 5

Fig. 4. Guangming Line's Alignment and Dalang Station.

the basis of per-km road construction. The primary reason: the development potential. Is this true in general throughout the city?
land closer to the city center is much more expensive while the Can we see any evidence from the land market? If this is indeed
additional right-of-way cost per linear kilometer is relatively the case, one would see that metro stations were placed in areas
minor. As a result, ring roads in urban China are quite dense (Yang, with lower land prices, or at least without higher land prices. That
et al., 2007). is to say, land prices should have no station orientation, i.e., the
Also note that the plan to put metro stations at relatively un- closer to the station, the higher the land price per square meter,
derdeveloped areas in Shenzhen does not suggest that there is no before the relevant metro plan was announced.
interest in TOD by the city government. Indeed, there is an ex-
pectation that TOD should happen. For example, the city govern- 4.1. Station orientation of land prices
ment's manual of planning and design guidance awards a density
bonus to station inuence areas. It divides each station inuence The website of the Shenzhen Land and Real Estate Exchange
area into two distance bands, an inner band within 200 m of the Center records all land parcel transactions from 2000 to 2014. This
station and an outer band between 200 and 500 m. Around metro data set includes price of the parcel transaction, year of transac-
stations, oor-area-ratio (FAR) in the inner band can be as high as tion, parcel location, parcel size, planned land use type, and
160% of base FAR outside the inuence area, and those in the outer transaction mode (auction, tendering or listing). Fig. 5 shows the
band can be as high as 140% of base FAR (SZGOV, 2011b). geo-referenced parcels and the metro stations in operation today.
In order to show whether parcel price has a station orientation,
we calculated air-distance from each parcel to its nearest metro
4. Evidence from land markets station and the land transaction price per square meter. We use
air-distance rather than route distance because we are mainly
The examples described above appear to conrm our hypoth- interested in whether station-orientation exists before metro plan
esis that metro planning driven by a desire to boost land sector announcement. Many roads today around metro station might not
revenue tends to overlook ridership and emphasize land have existed at the time of the transaction. We also divide all land

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
6 J. Yang et al. / Transport Policy ()

Fig. 5. Land parcels and metro lines.

parcels into three groups according to its temporal relationship service. Group B includes land transactions happening during the
with the planning and operation of its closest metro stations. interval between plan announcement and station operation.
Group A includes land transactions happening before the plan for Among the total 640 parcels in our database, 145, 293 and 202
its nearest station was announced. Group C includes land trans- parcels fall into groups A, B and C respectively.
actions happening after the relevant metro station was put into Fig. 6 plots land price (thousand yuan per square meter) for

(before) (during) (after)

Fig. 6. Land parcels price and FAR around the nearest station. Note: land price in Shenzhen appreciate faster year by year. In order to make the graphs more readable, the
price here is already adjusted by land price index. So land transaction price in different years can be compared in a visual format. The horizontal lines are added to make it
easy for inter-graph comparison.

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
J. Yang et al. / Transport Policy () 7

each parcel in relation to its distance to the closest metro station. city center's Civic Center Station. It serves as a measure of acces-
We also plot (FAR) in relation to distance to the nearest metro sibility to the city's peak land value. While D1 is air-distance, both
station. FAR is calculated as the ratio of the maximum allowed D2 and D3 are distances along the metro lines.
oor area to parcel size. Observation suggests that operating metro Second, regarding the time points when transactions happen in
stations have noticeable impacts on parcel price within a 1 km relation to station planning and construction, we consider three
radius. We double that threshold distance and include all cases variables: groups A, B and C, as dened above. A large number of
within 2 km of their nearest stations for detailed analysis. This is studies have demonstrated that impacts on land price may be-
to make sure that a station orientation of land price or FAR can be come noticeable following metro plan announcement and metro
observed, if it indeed exists. We exclude parcels beyond 2 km operation (Bae et al., 2003; Grimes and Young, 2013; Knaap et al.,
because they may not be particularly useful for our analysis, which 2011). Here, we are more interested in knowing what had hap-
centers on the development situation at station proximity. pened before station location was announced.
Fig. 6 indeed demonstrates a strong station orientation for land Third, we added variables relevant to other amenities, such as
transaction happening after station construction (group C in distance to nearest hospitals, schools, parks, and shopping malls.
Fig. 6), which indicates a market appreciation of transit accessi- We have data in GIS format, showing the location of those points
bility. This is no surprise and is consistent with many empirical of interest. Fourth, land price is always affected by land use type. In
studies of housing and land prices in China (Feng et al., 2011; Gu China, residential and commercial land parcels are typically priced
and Zheng, 2010; Pan and Zhong, 2008; Zhang et al., 2012). Im- higher than industrial use. We use a dummy variable to indicate
portant to this study, we nd a much weaker or even no station- each of the three land use categories. Fifth, transaction modes may
orientation for parcels transacted before metro plan announce- also affect land price. Dummy variables are used to indicate the
ment (group A in Fig. 6), indicating that station placement might mode used for each parcel transaction (auction, tendering and
have bypassed community centers. Since many other factors also listing). Listing is widely recognized as the least competitive
affect price, we have to control for other variables in further transaction mode, as it allows transaction to happen when there is
analysis. only one bidder.
Since land parcels located close to each other share the char-
4.2. Spatial econometric models acteristics of the nearby area, the transaction prices are inevitably
spatially dependent. Moran's I can be used to detect whether there
Our regression models use a hedonic approach. The dependent is spatial autocorrelation among the regression residuals (Anselin,
variable used in our models is the logarithm of the land parcels 1995). After testing that, we developed both spatial lag and spatial
transaction price (per sq meter), and the explanatory variables error models to address the issue of spatial dependence. Models
include the distance attributes, time attributes, land use types, are estimated with GeoDa. The robust Lagrange multipliers of
transaction types and access to amenities (Table 3). Various studies spatial lag models are higher than those of spatial error models.
have concluded that attributes like land use type (Cervero and For example, model 2's Lagrange multiplier is 5.87 for spatial lag
Landis, 1993), land transaction mode (Li and Wu, 2010), and ac- model but only 1.00 for the spatial error models. Table 4 thus lists
cessibility to other amenities such as hospitals, schools and service only results of spatial lag models. All three models use log-trans-
facilities (Linneman, 1980) strongly inuence real estate price and formed price as the dependent variable. Different models are es-
should be included as explanatory variables. timated with different data records or different combination of
First, we include three distance variables. We dene variable independent variables.
D1 as the distance from the land parcel to its nearest metro sta- Regression model:
tion. We add variable D2, which is the distance from the nearest 3 2 3
station to the nearest transfer stations, as proximity to the transfer LnP = P 0 + di Di + ti GroupPi + i LDi
station implies higher convenience when travelling by metro. i=1 i=1 i=1
When D2 equals zero, the closest metro station is a transfer sta- 2 5
tion. Shenzhen has 13 transfer stations in total. We also include a + mi TRi + Pi POIi + W ln P +
variable D3, which is the distance from the nearest station to the i=1 i=1

Table 3
Specication of variables.

Variable Name Denition Form Maximum Minimum Average

Dependent Ln(P) Land parcels transaction prices Logarithm 12.73 3.17 8.63
Distance attributes D1 Distance from land parcel to its nearest metro station. Continuous (km) 1.99 0 0.73
D2 Distance along the metro lines from land parcel's nearest Continuous (km) 24.78 0 4.01
station to its nearest transfer station.
D3 Distance along the metro lines from land parcel's nearest Continuous (km) 37.08 0 16.54
station to the city center.
Time attributes: (Reference: Group B Transaction after plan announcement, but before operation Dummy (1 if yes,0 if 1 0 0.35
Group A) (during) no)
Group C (after) Transaction after operation Dummy 1 0 0.32
Land use types (Reference: COM_LD Commercial land Dummy 1 0 0.30
others) RES_LD Residential land Dummy 1 0 0.28
IND_LD Industrial land Dummy 1 0 0.25
Transaction types (Reference: AUC Auction Dummy 1 0 0.07
listing) TEN Tendering Dummy 1 0 0.03
POI HOSP Hospital within 1 km Dummy 1 0 0.35
PARK Park within 1 km Dummy 1 0 0.20
PRIM Primary school within 1 km Dummy 1 0 0.66
MIDD Middle school within 1 km Dummy 1 0 0.61
COLL College within 2 km Dummy 1 0 0.25

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
8 J. Yang et al. / Transport Policy ()

Table 4 though the metro stations were placed in relatively under-devel-

Spatial lag model estimation. oped areas.
Other control variables have meaningful parameters. For ex-
Model Model 1 Model 2 Model 3
ample, commercial parcels have higher prices than residential
Data Group A, All groups, All groups, parcels, and industrial land has the lowest prices. Whereas D2 is
within 2 km within 2 km within 1 km not signicant in the models, probably indicating that hub stations
Distance D1  0.21  0. 16 0.32
in Shenzhen have no noticeable advantage over other stations
attributes D2 0.03 0.02 0.02
D3  0.05***  0.04*  0.04***
when attracting development. In addition to the estimated para-
Time Group B 0.97*** 1.12*** meters, the models have robust goodness of t measures. The
(during) resulting Moran's I indicators show that the spatial lag models
Attributes Group C 1.60*** 1.65*** have successfully addressed the spatial autocorrelation issue.
Land use types COM_LD 1.59*** 2.33*** 2.52***
RES_LD 1.02* 1.07*** 1.11***
IND_LD 0.55 0.26 0.26 5. Development around stations
Transaction types AUC  0.26 0.12  0.01
TEN 0.45 0.87 0.84
Qualitative and quantitative analysis both indicate that
POI HOSP  0.24  0.11  0.03
PARK 0.22 0.28 0.25 Shenzhen's metro placement tends to bypass the core of estab-
PRIM 0.71*** 0.36 0.52* lished communities, behind which is a desire of the city govern-
MIDD  0.37  0.37*  0.35 ment to boost land development around metro stations and collect
COLL 0.29 0.25 0.25 land development revenue. This linkage between land develop-
Intercept CONS 5.40*** 5.56*** 6.16***
Spatial W_LnP 0.24* 0.19** 0.07
ment revenue and government planning decisions has been re-
dependence ported in China's housing and land development literature (Tian
Statistic values AIC 286.90 1134.82 893.15 and Ma, 2009; Lin and Yi, 2011). In the decision-making for metro
Log  128.45  550.41  429.57 planning, this desire for land development revenue is supported
by the market appreciation of transit proximity. Parcels closer to
Moran's I 0.005  0.001  0.008
Number 103 314 236 metro stations appreciate much faster than those more distant.
Behind this planning practice is an assumption that fast de-
(*) for pr 0.05, (**) for pr 0.01, (***) for p r 0.001. velopment will happen around planned metro stations. This
build-it-and-they-will-come philosophy sometimes proves itself
Of central interest, model 1 indicates that land transaction price quickly, but sometimes it does not. In Shenzhen, it worked much
before metro plan announcement has no station-orientation Even better for the Longgang and Longhua Lines with a radial orienta-
though land price decreases as distance to the city center in- tion, but much slower for the Huanzhong Line. What makes the
creases, it does NOT decrease as distance to the metro station in- difference, perhaps, is that the former two both have terminals in
creases. The lack of a station-orientation suggests that metro the urban core. Improved access to the urban core brings fast
placement indeed has bypassed the core areas of established development around the suburban stations. When the Longgang
communities, where land price tends to be higher. Note that our Line was rst opened in 2011, the trains were almost empty.
conclusion here is not inconsistent with studies that tend to sug- Starting from 2014, however, it has been badly congested at peak
gest positive or negative impacts of metro operation (Cervero and periods in the peak direction.
Kang, 2011; Cervero et al., 2011; Pan and Zhang, 2008; RICS, 2002; When development fails to catch up, the expense is low transit
Ryan, 1999; Debrezion et al., 2006; Pennington et al., 1990). Model ridership, a high operating subsidy and possible public criticism
1 here includes only land transaction happening before metro plan about government investment policies. The Shekou Line in
announcement. It reects government's locational choice of metro Shenzhen, for example, was planned to foster land development
stations, rather than the impacts of metro investment. and most stations were outside densely populated area. As a re-
We can of course reproduce regression results similar to ex- sult, ridership did not meet expectations and its operational decit
isting studies. We developed model 2 and model 3 by adding the reached 481 million RMB (US$ 77.58 million) since its operation
two time attribute variables. Note that model 3 uses a subset of began in 2011 (Peng, 2014).
model 2's data, those transactions within 1 km of metro stations. This development-oriented practice for metro planning is not
With model 2, using Group A (transaction before metro plan an- unique to Shenzhen. It is also observable in other Chinese cities
nouncement) as the benchmark, price becomes 2.64(exp(0.97) such as Hangzhou, Wuxi, Nanning and Chengdu (Lin, 2011; Lv,
2.64) times higher after metro plan announcement and further 2012). Despite affordable transit fares, low ridership and huge
becomes 4.95 (exp(1.60) 4.95) times higher following metro decits have been reported in these cities. Taking Shenzhen's
operation. With model 3, following metro plan announcement, Hangzhou's Line 1 as an example, the average annual operating
parcel price within 1 km of metro stations becomes 3.06 times cost was 578 million RMB (US$ 93.2 million), while the fare-box
(exp(1.12) 3.06) higher, compared to 2.64 in model 2. Following revenues in 2013 amounted to only 304 million RMB (US$ 49.0
metro operation, price becomes 5.21 (exp(1.65) 5.21) times million), resulting in a decit of 274 million RMB (US$ 44.2 mil-
higher, compared to 4.95 in model 2. A comparison of these two lion). According to local news sources, the low ridership has causes
models thus shows a faster price increase at station proximity. in metro alignment and station location selection. Line 1 was
The signicance of time attributes is consistent with ndings planned to connect the city center and the inner suburbs. Driven
from other studies. For example, Grimes and Young, who used by a desire to leverage more development and more land lease
Auckland Western Line as a case, found a noticeable increase in revenue, the municipal government revised the plan and extended
land prices after the announcement of a metro upgrade strategy the line to Xianghu Station, which was still largely rural (Lv, 2012).
(Grimes and Young, 2013). Similarly, parcels within 1 km of the
metro station had 3040% higher prices after the publication of 6. Conclusions and discussion
MAX light rail's plan in Portland, Oregon (Knaap et al., 2011).
Detection of similar impacts of metro investment in Shenzhen The co-location of transit stations and relatively high-density
points out that land markets indeed produce positive returns, even clusters is generally praised as an ideal practice to attain higher

Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),
J. Yang et al. / Transport Policy () 9

transit ridership and stable fare box revenue. When planning for Acknowledgement
metro projects in China, many local governments, however, have
put metro stations at relatively under-developed places, with an This research was funded by China's National Natural Science
expectation that development will quickly follow once station Foundation Grant 41371168 and the Shenzhen Overseas High-Ca-
locations are announced and the metro is in operation. Behind this liber Personnel Grant KQCX20130628093909157.
development-oriented approach, is a pressure to fund metro
projects with land lease revenue, in addition to lowering right-of-
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Please cite this article as: Yang, J., et al., Density-oriented versus development-oriented transit investment: Decoding metro station
location selection in Shenzhen. Transport Policy (2016),