The Effects of Technology on Retail Sales, Commercial Property Values and Percentage Rents

By Baen, John S. | Journal of Real Estate Portfolio Management, April-June 2000 | Go to article overview

The Effects of Technology on Retail Sales, Commercial Property Values and Percentage Rents


Baen, John S., Journal of Real Estate Portfolio Management


Executive Summary. This study examines the impact of e-commerce and the effect of technology on traditional retail sales, commercial property values and percentage rents. This study analyzes standard retail Leases and seeks evidence of retailers shifting on-site sales to off site e-commerce and catalog operations. The results indicate that of those surveyed, most shopping center owners, managers and leases contain no provisions for these sales, which have value implications to owners. In addition, this study presents both theoretical concepts and empirical results that suggest commercial leases need to be altered to account for online and catalog sales. Alternative uses for vacant bank buildings and retail spaces are suggested as well as specific recommendations to owners l tenants to reduce the threat of e-commerce to retail centers.

Introduction

E-commerce is causing a leakage of retail sales at traditional retail locations. That is, many ecommerce sales are occurring at traditional retail locations and are recorded as catalog sales or computer sales for next day pickup or delivery directly to customers' homes. The sales information is often logged off site at the tenant's national data center, although the physical retail center was the procuring cause or point of contact for the sale. The results are loss of on-site sales information, reduced tabulation of gross sales per square foot reported to the property management company/owners and potential loss of percentage rents.

The potential effects of e-commerce on traditional retail property values could eventually be profound and be a result of two primary aspects: (1) more off site retail sales resulting in less foot traffic, lower impulse sales by non-anchor tenants, lower profit margins due to comparative web shopping, greater competition, lower profit margins for tenants and eventually higher vacancies; and (2) more on-site retail sales that are accounted for as off site or catalog sales or computer orders.

It can be assumed that every Internet sale equates to a loss of gross sales revenue reported to or attributed to traditional retail property and/or a reduction of catalog sales. This assumes that at any given time, there is only a finite amount of retail sales or catalog sales and disposable income per household and that traditional retail sales can only be maintained if the economy expands at an increasing rate, faster than the growth of ecommerce.

Literature Review

The implications of technology and the predicted downsizing of the various commercial and residential real estate professions (Baen and Guttery, 1997) have not noticeably occurred except in the lending/banking and title insurance areas (Power, 1998). Mergers and technological efficiencies have contributed greatly to increasing vacant branch bank facilities either within malls or on pad sites within the immediate area of major retail properties. Alternative uses of vacant retail centers and bank buildings have become common topics in the main stream press (Brown, 1998) and has become a priority topic for funded research (ICSC Priority Research Topic 1999).

Major national retailers are either closing stores and moving to the Internet (Halkias, 1999) or making major moves to begin or expand online sales within existing retail operations (J. C. Penney, Wal-mart, Radio Shack, etc.).

While the trend is occurring faster than the traditional academic journal articles can be published, the main stream press is full of references that are causing real concern to shopping center owners, retail leasing agents and property managers. Examples are:

1. REIT Interest-Will the Internet Kill All the Shopping Centers? (Martinez, 1999).

2. Rural Residents Find Internet Closer Than Malls (Associated Press, 1998).

3. Price War! Dozens of New Web Sites Want to Help Online Shoppers Compare Prices-Much to the Irritation of Retails (Woolley, 1998).

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.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
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.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Effects of Technology on Retail Sales, Commercial Property Values and Percentage 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?

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.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

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.