Yetunde-

This is an interesting question, not only from the perspective that you give (residential to commercial) but also in reverse (commercial to residential)? If you were to do a cost-benefit analysis, the first thing I would do would be to measure the difference in property tax receipts between the two property types. A positive gain after the conversion from commercial to residential would say a lot about the wisdom of such a conversion from a public dollar and economic development perspective. Along those same lines, the increase in sales tax receipts from this particular type of conversion would undoubtedly be another positive, since residential properties do not experience sales revenue. There will of course be costs involved...for example, the households living in the surrounding residential properties will likely experience a decrease in residential satisfaction which has a negative impact for them. Crime may go up, which also has an overall negative effect.

You might want to check out some research in Google Scholar, using the search parameters of "benefit-cost analysis of economic development". This seems like a textbook case for something of that nature.

Best of luck!

Dear Yetunde,

The main changes are:

infrastructure review (transport, sanitation, energy ..)

demographic density

type of movement of persons; zoning...

Maybe the links will help:

http://www.stlucieco.gov/pdfs/2010_res_to_com.pdf

http://www.lowesforpros.com/Construction-and-Contractors/Converting-Residential-Homes-into-Commercial-Buildings

Best Regards,

Vanessa

I am sort of amazed at the different perspectives that emerge in these question and answer threads. 

Unless you have a regulatory environment like Dublin where you get an essentially flat commercial area, the conversion of residential to commercial involves demolition and construction of higher rise structures. Smaller parcels must be assembled into larger parcels. This has implications for the land price-size relationship. It is the reverse of the relationship to be found on the urban periphery where large agricultural parcels are subdivided into smaller residential parcels. So for peripheral development to take place the price - size function must increase at a decreasing rate. In contrast, for interior redevelopment to take place, the price - size function must increase at an increasing rate. You might want to look at: Colwell and Munneke, “Land Prices and Land Assembly in the CBD,” The Journal of Real Estate Finance and Economics, 1999, 18:2, 163-180.

There are also issues associated with delay in when the redevelopment option will be exercised because of the irreversability of the exercise.