Bid rent theory

The bid rent idea is the geographical economic view that forwarded to how the price & demand for real estate change as the distance from the central institution district CBD increases. It states that different land users will compete with one another for landto the city centre. This is based upon the idea that retail establishments wish to maximize their profitability, so they are much more willing to pay more for landto the CBD & less for land further away from this area. This theory is based upon the reasoning that the more accessible an area i.e., the greater the concentration of customers, the more profitable.

Bid rent theory in the central business district

Land users, whether they be retail, office, or residential, any compete for the near accessible land within the central business district CBD. The amount they are willing to pay is called bid rent. This can generally be featured in a "bid rent curve", based on the reasoning that the almost accessible land, generally in the centre, is the most expensive land.

Commerce in particular large department stores and chain stores is willing to pay the greatest rent in order to be located in the inner core. The inner core is very valuable for these users because it is traditionally the most accessible location for a large population. This large population is essential for department stores, which require a considerable turnover. As a result, they are willing and able to pay a very high land rent value. They maximize the potential of their site by building many stories. As one travels farther from the inner core, the amount that commerce is willing to pay declines rapidly.

Industry, however, is willing to pay to be in the outer core. There is more land usable for factories, but it still has many of the benefits of the inner core, such(a) as a marketplace and proceeds transportation linkages.

As one goes farther out, the land becomes less appealing to industry because of the reducing transportation linkages and a decreasing marketplace. Because householders work not rely heavily on these factors and can administer the reduced costs compared with those in the inner and outer core, they can purchase land here. The farther from the inner core, the cheaper the land. This is why inner-city areas are very densely populated with, e.g., terraces, flats, and high rises, while suburbs and rural areas are more sparsely populated with semi-detached and detached houses.