LOCATION

Location is an important factor in determining the price of land. This, factor combined with the vertical supply curve and the sometimes imperfect land market can result in rapid fluctuations or cycles in the price of land. For example, Sydney's "boom and bust" real estate market. However, in today's commercial rental market it has become apparent that the quality of the tenant is more important than location.

For example, the sale of bank leasebacks throughout Australia showed very little difference in the analyzed capitalization rate for banks in small country towns and regional centres. That is, the purchaser of a leaseback was more concerned with the fact that the rent was to be paid by a safe institution over a long period and with a high probability of lease renewal in the future rather than the location of the bank premises.

See economic rent
See land rent