An Empirical Analysis of Community Center Rents

By Hardin, William G., III; Wolverton, Marvin L. et al. | The Journal of Real Estate Research, January-April 2002 | Go to article overview
Save to active project

An Empirical Analysis of Community Center Rents


Hardin, William G., III, Wolverton, Marvin L., Carr, Jon, The Journal of Real Estate Research


Abstract

This article is the winner of the Retail Real Estate manuscript prize (sponsored by the International Council of Shopping Centers) presented at the 2001 American Real Estate Society Annual Meeting.

This study empirically models the determinants of community center rent. It employs a two-stage model that estimates center vacancy in the first stage and then includes predicted vacancy in a second stage demand model investigating endogenous and exogenous determinants of community center rent. The data includes information on maximum and minimum square foot rent for 118 community centers in Atlanta, Georgia. Maximum community center rent is highly correlated with a center's predicted vacancy rate and location within the Atlanta area. Additionally, rent at both maximum and minimum levels is influenced by trade area purchasing power, property age and to a lesser extent by proximity to a regional mall, center design and neighborhood factors.

Introduction

There continues to be a need to empirically evaluate the multiple theories of retail activity. With the exception of a few studies of the determinants of retail sales activity and rental rates, much of the theory of retail behavior has not been rigorously tested. This is untenable given the variety of retail activity, including the sale of various types, levels and qualities of goods and consumer services, the emergence of new types of retail presentation, inclusive of big box tenancies and the prospect of interaction with electronic retailing. While the research presented in this article cannot address all of the retail issues needing empirical investigation, it does provide insight into the determinants of rent for one retail property type-- community centers. By empirically testing the determinants of in-line community center rent using a model consistent with existing retail theories, the structure of community center rent can be evaluated along with the applicability of central place, demand-externality and agglomeration theories. The article broadens existing empirical research on retail activity that has focused on malls and neighborhood centers. It is one of the first articles to rigorously evaluate community center rental formation.

Literature Review

Retail Theory

There has been substantive theory development related to retail activity (Eppli and Benjamin, 1994). Three related theoretical streams are evident-central place theory, agglomeration theory, and demand externality theory. Early central place theory (Losch, 1954; and Christaller, 1966) remains a foundation for retail modeling, but has been expanded and modified with additional constructs. Concurrently, Hotelling's (1929) initial agglomeration model has been expanded to include related postulates such as multipurpose shopping opportunities (Ghosh, 1986) and the possible benefits that accrue to aggregation of higher and lower tiered market participants (De Palma, Ginsburgh, Papageorgiou and Thisse, 1985). Ingene and Gosh's (1990) proposition that retail center specific attributes affect retail performance forms the basis for demand externality theory. This theory acknowledges the possibility that center specific characteristics such as tenant mix and center design impact center performance. Within an economic or investment framework, Brueckner (1993) and Miceli, Sirmans and Stake (1998) postulate that center attributes can improve center sales and that such improvement should be captured, at least in part, as rent. Taken in their totality, these theoretical constructs manifest a complex retail market where location specific attributes such as the size and purchasing power of a center's trade area, the presence of competing retail centers and a center's physical characteristics influence economic performance.

Empirical Investigations of Retail Rent

Although there have been many studies of retail activity, only limited empirical research on non-regional-mall retail rental rates is evident.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

An Empirical Analysis of Community Center Rents
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?