The Economics of Development: Integrating Land Economics and Portfolio Analysis

This study integrates situs theory as defined by Andrews (1971) into comparative investment analysis, approaching a single use development from the perspective of modern investment theory and a potential mixed use development on the same site as a portfolio of uses generating portfolio risk and return trade-offs. The theoretical integration of situs theory, rent theory and portfolio/investment economics is tested against a statistically significant number of development proposal case studies, conducted during distinct economic phases (over time). The research objective extends the perspectives observed in the literature of development choices as the exercise of a real option by quantifying the risk-return patterns associated with the array of development options possible on a given site as supported by the situs process. The empirical documentation is achieved using multiple observations over distinct economic regimes. The inquiry as structured enables specification of the economic nature of a proposed developmentís returns (as either an economic rent, transfer earning or combination of both) and the risk-return combinations that can be used to characterize any given development strategy.