Public Transportation and Industrial Location Patterns in California

Public transit investments are a large and growing share of all transportation investments in the state of California, and such critical investments should be evaluated partly on their economic benefits. Taking such benefits into account could alter investment, service, and service restructuring decisions taken by transit agencies in the state. The relationship of public transportation to economic productivity, and spatial patterns of industrial location, is understudied. This project investigated how changes in rail transit service in California metropolitan areas (Los Angeles, the San Francisco Bay Area, and San Diego) are associated with firm clustering by industry and with commercial property values. A mixed methods approach was used. One strand of the research involved first, describing location patterns by industry according to transit access, and second, quantitatively modeling the relationship between transit access and (a) employment densification by industry and (b) commercial property values, using instrumental variables techniques with dynamic panel modeling in order to better infer causal relationships. The second strand consisted of interviews and other qualitative research aimed at finding possible explanations for firm location and expansion, and firm productivity. The quantitative research found that rail development generally promotes employment agglomeration and increased land value, but the magnitude of such effects differs across regions. San Francisco County had the highest employment densification and land value associated with rail proximity, while the LA region also had a relatively strong relationship between rail access and both employment density and property value. Rail access in the southern part of the San Francisco Bay Area, where Silicon Valley is situated, had a small relationship with employment densification but a positive effect on land values. On the contrary, rail development in the San Diego region was positively associated with employment density, but negatively associated with land value appreciation. Our interviews were consistent with these quantitative findings, and suggested that the differences between regions are due to differences in historical land development and use patterns as well as urban land regulations. In the San Francisco Bay Area, developers and real estate brokers report that rail transit plays the greatest role in the City of San Francisco, with relatively weak importance in Silicon Valley due to higher parking provisions and employer-provided transportation amenities such as shuttles. In the Los Angeles metropolitan area, rail transit is most highly valued in the dense downtown Los Angeles area, and is perceived to be playing an increasingly important role across the region as in places where traffic congestion is high and increasing.