Features of the Central Business District

By Matt Burdett, 17 March 2019

On this page, we look at the features of the Central Business District.

  • The Central Business District (CBD) of Melbourne, Australia. Most CBDs share common characteristics including tall buildings, high building density, and high-order service provision. Source: By the author.

Features of the CBD

The Central Business District is often the most centrally located point in the city and is the easiest to access thanks to the excellent transport links it has to the rest of the city. This is because the CBD is often the oldest part of the city. Sometimes the historic city centre is found next to the CBD, and is located here because it shares the advantages of the central location of the CBD, but has been able to develop more freely because it is not constrained by narrow streets and old buildings.

Modern CBDs tend to be the commercial heart of the city, especially for retail. Commercial relates to all profit making activities including service such as lawyers and accountants, but retail refers specifically to shops that sell goods to individual consumers. (Shops that provide goods for other shops are known as ‘trade’ stores.)

Typical features of a modern CBD include:

  • The most expensive land in the city – this is called the ‘Peak Land Value Intersection’ or PLVI
  • Tall buildings (to maximise the rent for the land)
  • High density of shops and offices
  • Internationally recognised brands on offer
  • High pedestrian ‘footfall’
  • Traffic congestion and traffic calming measures, including pedestrianised streets
  • Important administrative and cultural buildings such as government offices and concert halls
  • Public transport points such as bus stops, metro stations and taxi ranks

The similarity between CBDs in many countries has been called the ‘homogenisation’ of urban landscapes. ‘Homogenous’ means to be the same. This is an aspect of globalisation, as cities seek to learn from each other and copy the best ideas. The typical metro (underground / subway / mass transit network) map is a good example. First developed for London, the idea of showing stations at regular intervals along the map route is now used by almost all cities to help people navigate their public transport networks. The use of English and other languages alongside local languages is also an indication of the homogenisation of urban landscapes. However, it’s not always like this and every CBD is unique!

Why the CBD has developed in this way

The initial site of an settlement was determined usually for physical reasons to do with the site, as discussed on the page on this site called ‘Characteristics of urban places’. The CBD is today at the centre of a much larger settlement, which has contributed to its development. This is part of a positive multiplier effect, or a cycle of cumulative causation, as it is both the cause and consequence of the Peak Land Value Intersection:

Easy to access…

…therefore highest land values at the PVLI…

…and therefore high bid-rent…

…and therefore high-order services and retail…

…and therefore need to maximise profits…

…and therefore internal zoning (clustering)…

…and therefore the development of a core and frame…

…which we put into the Core Frame Model, shown later on this page.

Bid rent

Bid rent refers to the price of land. The more the land is desirable, the more competition there is. More competition means businesses have to bid more money to beat the others.

Retail makes more money per square meter of land than the other land uses; therefore they can pay more rent, and can afford to beat the competition for the land in the CBD, which is attractive because it is the easiest to access for customers from across the urban area.

Bid rent is usually shown using a diagram like the one below. This can be modified to show bid rent only in the CBD, as discussed in the ‘Peak Land Value Intersection’ part later on this page.


As settlements grow, they often do so outwards from the centre. As all transport routes radiate from this central point, the CBD was historically the most accessible point of the city. Modern infrastructure (highways and railways especially) has changed this, but the CBD has retained its important position as the commercial centre.

Today, transport is often a problem for CBDs. The historically narrow streets and the large numbers of people wanting to access the CBD leads to traffic congestion. This has contributed to the decline of the CBD, as outlined later on this page.

Functional grouping and agglomeration

Despite the difficulty of transport to the CBD due to traffic congestion, there are still many benefits for commerce (shops and offices) to be located in the CBD. Two main issues are retail agglomeration and functional grouping.

Retail agglomeration

Retail agglomeration can occur anywhere in the city, but is very noticable in city centres. Retail agglomeration occurs when retail outlets of a similar type are found in the same location. For example, sports clothing stores are often found in the same part of a CBD, such as on the same street, or the same floor in a shopping mall. Bars and restaurants are also often located close to one another. This is because by opening close to one another, they can hope to take customers from their competition. This can result in better prices for the customer (as shops are forced to lower their prices to compete). Meanwhile, the concentration of shops also means that a part of the CBD will become well known for a specific type of activity, and attract more shoppers. Furthermore, outlets that sell the same kinds of products are likely to have the same needs. For example, jewellery shops need large windows facing the street to entice passing shoppers so they will be found where the shopping environment permits this; and major clothes stores need large shop floors so they will be located in parts of town that have the right kinds of building. In many CBDs, major global brands such as Primark, H&M and Zara are often found in the same location for this reason.

Functional grouping

Another reason why the CBD continues to be important is functional grouping. This means that related economic activities group together to be near to each other. For example, sandwich shops might be located near their customers in lawyer’s offices; lawyers offices are often located near to the courthouse; the courthouse is often located near the headquarters of the city authorities. The result is a chain of associated businesses that rely on one another. Another example is recreational activities, especially nightlife. Nightclubs are often located near bars because the clientele will move on to the nightclub after drinking in the bars.


SyntaxError55, 2008. Bid rent. https://commons.wikimedia.org/wiki/File:Bid_rent1.svg Accessed 11 March 2019.

Features of the Central Business District: Learning activities


  1. Identify six features of a CBD. [2]
  2. Draw an annotated diagram to explain the variation of bid rent across a typical city. [6]
  3. Explain the role of transport in determining the location of a CBD. [4]
  4. Suggest why business of the same type often locate near to each other. [3]

Other tasks

Take a photograph of your local CBD. Annotate it to explain the features on the photo. Do you think your CBD is typical?

© Matthew Burdett, 2019. All rights reserved.

All secondary material on this site is clearly referenced and may be subject to copyright restrictions by the original authors. All original material on this page is subject to copyright.