Store Location in Shopping Centers: Theory and Estimates

By Carter, Charles C.; Vandell, Kerry D. | The Journal of Real Estate Research, July-September 2005 | Go to article overview

Store Location in Shopping Centers: Theory and Estimates


Carter, Charles C., Vandell, Kerry D., The Journal of Real Estate Research


Abstract

This paper develops a formal theory of store location within shopping centers based on bid rent theory. The bid rent model is fully specified and solved with the objective function of profit maximization in the presence of comparative, multipurpose and impulse shopping behavior. Several hypotheses result about the optimal relationships between store types, sizes, rents, sales, and distances from the mall center. The hypotheses are tested and confirmed using data from a sample of 689 leases in eight regional and super-regional shopping centers, suggesting that a bid rent explanation is consistent with observed location patterns in malls.

Since 1990 some interesting non-location studies on shopping centers have explored the microeconomic foundations of lease price discrimination and store space allocation (Benjamin, Boyle and Sirmans, 1992; Brueckner, 1993; and Pashigan and Gould, 1998). All of these studies are based on the concept of interstore externalities; thus, any expansion of these studies to include location aspects would necessarily be based on agglomeration economies.

During the same timeframe, two applied circulation studies on customer traffic in shopping centers suggested use of bid rent theory to explain the locational characteristics of stores (Sim and Way, 1989; and Brown, 1991). Both articles suggested that a bid rent-style model would appropriately describe customer circulation in a regional or super-regional shopping center. A seminal working paper in the economics tradition also suggested a bid rent foundation be used to explain store location in shopping centers (Fisher and Yezer, 1993).

The current paper deals with the spatial aspects of shopping centers using bid rent theory, leaving the more difficult aspects of agglomeration economies for others. ' What is important and novel is the treatment of inter-store location in the shopping center in the context of urban spatial structure.

Pashigan and Gould (1998) suggest that the failure or inability to internalize externalities contributed to the decline of the central business district (CBD) and the rise of shopping centers. So shopping centers are worthy of study generally if for no other reason than for the dramatic way they have reshaped retailing. PostWorld-War II suburbanization, economic growth and mass ownership of the automobile were necessary before shopping centers could thrive. But shopping centers experienced a sudden dramatic rise in growth when developers became convinced of the success of the enclosed mall concept in the late 1950s and early 1960s. By 1989, shopping centers captured 55.2% of all non-automotive retail sales in the United States.

The goals of this article are to provide economic explanations for location patterns of non-anchor stores in regional and non-regional shopping centers, relying on bid rent theory to explain optimal store location. Several issues were immediately recognized as complicating factors that needed to be dealt with. These included (1) the fact that Alonso's bid rent model operates only in perfectly competitive markets and (2) the transportation costs of the bid rent model are absent in the context of shopping centers.

This article proceeds as follows. First, the background literature on the shopping center industry is presented, which is followed by a discussion of the formal bid rent model as modified for a shopping center context. Next, testable hypotheses regarding relative locations of stores by type, size, rent, and sales are proposed for mall tenants that maximize profits for both tenants and the mall developer. Hedonic equations based on Rosen (1974) are then estimated to determine the economic impact of mall centers on store rent. The empirical tests employ a shopping center database containing 849 observations. The empirical results then provide strong support for the theory that stores' location and size follow Alonso's basic bid rent pattern.

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

Store Location in Shopping Centers: Theory and Estimates
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.