Tag Archives: MTR

A visual survey of selected elevated rail viaducts: Part 6 – Hong Kong

Another iteration of the series on elevated rail – for more, read the prologuepart 1part 2part 3part 4 and part 5

Hong Kong: Hong Kong’s Mass Transit Railway sets the gold standard for efficient rail operations. The system operates at a profit, the governing corporation makes money not just on transportation, but on the associated real estate development. Developing areas around stations both ensures a critical mass of riders to support the line, but also provides MTR with the long-term financial benefit of owning the assets that benefit from the rail system they operate.

All of these factors make Hong Kong an interesting subject for study. Many of the newer additions to the transit system are largely elevated; and many of those lines run through urban environments with street geometries and traffic volumes not dissimilar to suburban arterial streets elsewhere.

Large portions of Hong Kong violate many of the principles for great pedestrian streets, yet still manage to serve large volumes of city dwellers. Many MTR stations include pedestrian bridges and full grade separation for adjacent roads, rails, and pedestrians:

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View near Ma On Shan MTR station in Hong Kong. Image from Google Maps.

Or, consider the massive pedestrian overpasses that traverse this large roundabout at the intersection of two highway-like arterial streets near the Tai Wai station:

Aerial of pedestrian overpasses near the Tai Wai station (top of image). Image from Google Maps.

Aerial of pedestrian overpasses near the Tai Wai station (top of image). Image from Google Maps.

The physical viaduct structures themselves make little effort to shrink into the landscape. The combination of large pre-cast concrete viaducts with high sound walls make for a fairly bulky aerial structure. This example is part of the Ma On Shan line near the Sha Tin Wai station in the Sha Tin district of Hong Kong’s New Territories.

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Elevated MTR rail near Sha Tin Wai Station, Hong Kong. Image from Google Maps.

The rail line runs alongside the roadway. The roadways themselves are hemmed in by numerous fences and barriers; in this case, a median fence prevents jaywalking while fences along the road edge protect bike parking, with a bike trail and sidewalk beyond.

Pedestrian access to Sha Tin Wai station. Image from Google Maps.

Pedestrian access to Sha Tin Wai station. Image from Google Maps.

Not all stations are surrounded with the wide roadways, but even on lower volume streets, fencing restricts ped movements to the crosswalks. In the distance, you can see a pedestrian bridge to provide ped access away from the intersection in the foreground. The pedestrian bridge ties directly into the station’s mezzanine level.

Street-facing retail spaces beneath the station mezzanine. Image from Google Maps.

Street-facing retail spaces beneath the station mezzanine. Image from Google Maps.

Towards the other end of the station, you find street-facing retail within the station building, tucked beneath the station’s mezzanine. The concept is similar to the re-use of such spaces in older systems, showing that you can make it work without the charming brick and stone viaducts. Also worth noting: the global reach of 7-Eleven knows no bounds.

This kind of in-station retail not only breaks up the facade of the station (compare it to the blank walls of a similarly designed station without the retail), but the retail revenue helps fund the system operations. Retail is not limited to street-level exterior storefronts, but also includes in-station retail.

Mezzanine level retail spaces in MTR's Kowloon Bay station. CC image from Wiki.

Mezzanine level retail spaces in MTR’s Kowloon Bay station. CC image from Wiki.

WMATA’s Silver Line stations in Tysons Corner might have similar opportunities. “Sand Box John” Cambron’s photos from the Silver Line construction shows the size of the Tyson’s Corner stations. In particular, the two stations aligned to the side of the roadway (McLean and Tysons Corner) feature massive station structures with lots of potential space for these kinds of retail uses; however, such uses will now be retrofits rather than actively planned opportunities.

The curb lanes adjacent to the station are devoted to bus operations. Bus shelters on the near side of the street (just out of the image) provide riders with a quick transfer to the rail system by ascending to the overpass and walking directly into the station mezzanine.

Stations aren’t the only opportunities for multiple uses of infrastructure; Hong Kong features several examples of development in the air rights above rail yards, such as this development above the rail yard near the Kowloon Bay station.

Air rights development above rail yard adjacent to Kowloon Bay MTR station. Image from Google Maps.

Air rights development above rail yard adjacent to Kowloon Bay MTR station. Image from Google Maps.

Air rights development over Kowloon Bay depot. CC image from Wiki.

Air rights development over Kowloon Bay depot. CC image from Wiki.

Scarcity of land and open space forces some creative uses for available space. The Chai Wan station, terminus for the MTR’s Island line, includes rooftop recreational space with a park and tennis courts:

Tennis courts built on the roof of the Chai Wan MTR station. Image from Google Maps.

Tennis courts built on the roof of the Chai Wan MTR station. Image from Google Maps.

The station includes ground level entrances and street-fronting retail (level 0), a mezzanine level with retail and ticketing (+1), the platform (+2) and rooftop recreational space (+3).

View towards Chai Wan station. Image from Google Maps.

View towards Chai Wan station. Image from Google Maps.

Chai Wan station. Image from Google Maps.

Chai Wan station. Image from Google Maps.

The station’s tail tracks weave under and through buildings and over narrow streets:

Chai Wan station tail tracks. Image from Google Maps.

Chai Wan station tail tracks. Image from Google Maps.

Table of contents:

Exporting success from Hong Kong’s MTR – rail transit plus development

Hong Kong at night. CC image from Diliff via Wikimedia Commons.

Hong Kong at night. CC image from Diliff via Wikimedia Commons.

If you were to pick a rail transit system to envy, it would be hard to pick one better than Hong Kong’s MTR. The system is known for extraordinary operating efficiency; both in terms of on-time performance (99.9%) and farebox recovery (186%). Intense development around rapid transit stations both provides a market of potential rail users and an investment opportunity for the MTR’s parent corporation.

The MTR corporation, in turn, is looking to export their expertise in efficient transit operations around the world. An article in the Wall Street Journal profiles MTR’s ambitions:

Hong Kong’s MTR Corp. 0066.HK -1.15% is taking its high standards abroad, bidding to run subways in Europe, Asia and Australia. If it wins just a few of the bids, it will become the biggest operator of metro systems in the world. Led by a New Yorker, the company is also considering other projects, including in Germany, another place that puts a high value on efficiency.

“MTR in Hong Kong is probably the best-run metro in the world, and that brand is what they bring with them,” said Nigel Harris, managing director at the Railway Consultancy Ltd., a U.K.-based firm.

The train operator, which exports even its trademark door chimes and train-service announcements, already runs lines in the Chinese cities of Beijing, Shenzhen and Hangzhou, as well as in Melbourne, London and Stockholm. It has been shortlisted to run a train line in Sydney and three more lines in London, including Crossrail, one of the biggest rail projects in the city in decades.

Just how exportable is MTR’s success? Purely operational measures (on-time performance) seem to present the strongest case, particularly with such inefficient operations elsewhere in the world. Financial measures (whether simple metrics like farebox recovery or broader measures of profitability of the entire corporation) depend on the context of the system – not all cities have Hong Kong’s kind of density to support efficient transit. Planning metrics depend on key governance and financial attributes; legal matters complicate things further.

Operations: There is clearly a case for MTR’s ability to make existing operations improve efficiency; the Wall Street Journal article notes that London’s Overground went from 88.4% on-time to 96.7% after a few years of MTR-led operations. Clearly, you can export the expertise to make the trains run on time.

The rail network itself is not particularly expansive – 108 miles of heavy rail, 84 stations, first operating in 1979; not all that different in scope from DC’s Metrorail system of 106 miles and 86 stations (prior to the opening of the Silver Line) first operating in 1976. Yet the MTR sees 4.5 million daily riders, compared to Metro’s modest 780,000.

The Checkerboard Hill blog (named for the old visual marker on the nasty approach to the old Kai Tak airport) provides a nice overview of the MTR system, complete with a link to a track diagram.

Finances: MTR Corporation operates the rail system, owns and develops real estate around stations, and contracts with other entities to build and operate transit systems around the world. The corporation is 76% owned by the Hong Kong government, with shareholders owning an increased share of the company since an IPO in 2000.

Popular myth holds that MTR is only profitable due to real estate investment, but that is easily dispatched with a quick glance at a financial statement shows operating profits on transit operations (the aforementioned 186% farebox recovery ratio) as well as real estate.

An exported version of MTR can directly control operations and make the trains run on time, but they won’t always have direct control over adjacent development. Nonetheless, it’s worthwhile to look at their success. Even without profits from real estate development, MTR’s development plans serve the key role of ensuring transportation investments are paired with supportive land uses. The Atlantic puts it this way:

Like no other system in the world, the MTR understands the monetary value of urban density—in other words, what economists call “agglomeration.” Hong Kong is one of the world’s densest cities, and businesses depend on the metro to ferry customers from one side of the territory to another. As a result, the MTR strikes a bargain with shop owners: In exchange for transporting customers, the transit agency receives a cut of the mall’s profit, signs a co-ownership agreement, or accepts a percentage of property development fees. In many cases, the MTR owns the entire mall itself. The Hong Kong metro essentially functions as part of a vertically integrated business that, through a “rail plus property” model,  controls both the means of transit and the places passengers visit upon departure.  Two of the tallest skyscrapers in Hong Kong are MTR properties, as are many of the offices, malls, and residences next to every transit station (some of which even have direct underground connections to the train). Not to mention, all of the retail within subway stations, which themselves double as large shopping complexes, is leased from MTR.

Payton Chung digs into the numbers on MTR’s retail-heavy revenues:

55.4% of MTR’s total 2012 profits stemmed from property and in-station commerce: 36.1% from rents and management income and 19.3% in for-sale development. Profit margins on the property businesses are certainly healthy: 81.6% on investment property and 89.2% on in-station commercial, vs. 46.1% on Hong Kong transport and just 4.7% on the emerging international transport businesses. A near-90% margin practically qualifies as minting money. (In fact, it’s much better than minting money: the U.S. Mint cleared only 21% seigniorage on circulating currency in 2012.)

Note that in-station commercial offers the richest margins; over half of this business unit’s revenues come from in-station retail, with the rest from advertising and telecom fees within stations. MTR collected US$276.4 million on 608,729 square feet of in-station retail, for an unbelievable-for-the-US (but not for HK) average rental rate of $454/foot, well over twice the rents garnered per foot of investment property above the stations. Averaged across MTR’s 84 heavy-rail stations, that’s 7,247 square feet of retail per station.

This kind of in-station retail isn’t dependent on the kind of development rights seen elsewhere in the MTR system (though other cities might will certainly struggle to meet that ‘unbelievable for the US’ rent without Hong Kong-like density). Some in-station retail isn’t that different from examples around the world; making better use of empty spaces fronting streets in stations and under viaducts.

Street-facing retail spaces beneath the station mezzanine. Image from Google Maps.

Street-facing retail spaces beneath the station mezzanine. Image from Google Maps.

Other examples are internal to the station, and not different in concept from small-scale retail you’ll find in a shopping mall or at an airport:

Mezzanine level retail spaces in MTR's Kowloon Bay station. CC image from Wiki.

Mezzanine level retail spaces in MTR’s Kowloon Bay station. CC image from Wiki.

MTR’s practice of intense and extensive development around stations ensures maximum linkage between the investment in high-capacity transit and the land use to support that investment. Land is leased to MTR at pre-rail values (all land is owned by the government). This extends beyond just TOD; it represents the full integration of transit planning and development. The corporation both captures value created by the transit system, but also earns a long-term source of revenue to augment the system’s operational revenues.

Current US practice for TOD and joint development is barely integrated by comparison. Too often, the transportation-only focus (and a healthy dose of auto bias) leads to extensive park and ride lots rather than dense development around stations. Where dense development does happen, the transit agency isn’t always a direct beneficiary. Speaking to an audience at Harvard’s Kennedy School (as reported by Capital New York), MTR CEO Jay Walder put it in terms of financial sustainability:

“If the infrastructure is not self-sustaining, then the reality is that it cannot rely on public funding always being there,” Walder said Thursday, at Harvard’s Kennedy School. “At some point politics simply diverts the money elsewhere. And you might say it doesn’t have to be that way, but that’s just the reality of the case.”

In Hong Kong, the independently run MTR Corp. buys the land adjacent to future rail lines from the government at pre-development prices and then, once the line is built and the land alongside developed, captures the growth in value of that land and uses it to fund rail operations.

“In that way, the increase in the value of the property becomes a proxy for the broader public benefit and aligns the financial basis with the societal benefit that is being created,” said Walder. “And it also ensures that subject to normal business risk … that the corporation has the proper resources not just to be able to build a rail line, but also to be able to operate it, maintain it and renew the systems and equipment over time.”

Speaking of New York’s Second Ave Subway, Walder has no doubt it “will create a tremendous amount of value,” but that within the current financing scheme “we don’t have any mechanism to capture that back.”

Proxies for such integrated transit and development might include models we see in the US already, such as TIF or other special assessments to finance new infrastructure with development revenues. Yonah Freemark argues there might be a “residual fear” of urban renewal in allowing a public agency to directly develop real estate. Likewise, backlash against the use of eminent domain for economic development might torpedo integrated TOD before it gets started. It’s one thing to re-develop existing parking lots or air rights above key rail yards and other infrastructure, but the politics of land development and property rights will be difficult in the US.

Governance: Other elements of the MTR model (transit plus development) aren’t anything new to the US. Plenty of transit operators in the US also historically developed land to provide riders to their systems (or, on the other side of the coin, built transit to improve the access to their land). Privatized transit operations isn’t a new idea either. However, the current US system of public agencies and authorities operating transit isn’t set up to take advantage of land development around stations.

There are plenty of examples of successful land use intensification around stations; Metro’s Orange Line in Arlington, VA stands out. However, Metro did not develop any of that land. Joint development agreements for private sector developers to make use of WMATA land returns marginal rent to the system, despite huge increases in value from the presence of the system.

MTR’s corporate structure allows the company the autonomy to build a development team capable of delivering world-class real estate projects; current transit authorities would not have the expertise to develop real estate. While the government owns a majority of the corporation, it is publicly traded and has access to capital markets for both real estate and transit projects often unavailable to existing authorities.

As noted in the discussion of finances and land use, none of this is new for transit in the US. However, associating that kind of development with government agencies or public authorities would be new ground.

Planning: Emulating MTR’s operations is one thing; it still doesn’t guarantee the kind of ridership success seen on the MTR system. Hong Kong’s geography is well suited to efficient transit; high-density, compact development built among a series of geographic choke points (mountains, water bodies) that offer an opportunity for transit to gain an edge on other transport modes. These same principles apply elsewhere, but likely to a lesser degree.