Academic journal article The Journal of Real Estate Research

Chain Affiliation, Store Prestige, and Shopping Center Rents

Academic journal article The Journal of Real Estate Research

Chain Affiliation, Store Prestige, and Shopping Center Rents

Article excerpt

While a substantial body of literature has developed on shopping centers since the mid-1980s, several issues still remain unsettled. In this study, which is a follow-up of a previous paper by Des Rosiers, Thériault, and Gagné(2008), we examine whether, and to what extent, chain affiliation within regional and super-regional shopping centers affects store base rent levels. The impact of store prestige on rents is also assessed, in light of previous research on the impact of micro-market attributes on retail rent rates (Hardin and Wolverton, 2000, 2001; Hardin, Wolverton, and Carr, 2002; Hardin and Carr, 2006). Chain-affiliated stores can be assumed to exert a greater attraction on customers than independent stores. Moreover, it also reasonable to assume that the higher the level of chain affiliation, the more pronounced the impact on rents. Yet, it is not clear whether such an impact, if any, should be positive or negative. On the one hand, a greater attractiveness could provide chain-affiliated stores with some bargaining power, thereby leading to lower unit rents. On the other hand, the desirability of a prime location within a major shopping mall could possibly drive store owners to rent space at a premium.

In this paper, based on the hedonic methodology, international, national, provincial as well as local chains are considered together with independent stores. Following a literature review on the determinants of shopping center rents, the database is described in detail and the analytical approach developed. Main regression findings are then presented and discussed. A conclusion ends the paper.

Literature Review

Over the past decades, several authors have studied the determinants of shopping center rents with respect to a large array of issues (Benjamin, Boyle, and Sirmans, 1990; Sirmans and Guidry, 1993; Gatzlaff, Sirmans, and Diskin, 1994; Mejia and Benjamin, 2002; Hardin and Wolverton, 2000, 2001; Hardin, Wolverton, and Carr, 2002; Des Rosiers and Thériault, 2004; Yuo, Crosby, Lizieri, and McCann, 2004; Des Rosiers, Thériault, and Ménétrier, 2005; Hardin and Carr, 2006). So far, very few studies have focused on the impact of chain affiliation on rent levels.

The academic literature on shopping centers has mainly evolved around the concepts of agglomeration economies and externalities derived from the presence of anchor tenants (Eppli and Benjamin, 1994; Pashigan and Gould, 1998; Mejia and Benjamin, 2002) whose bargaining power results in their negotiating lower rents with shopping center owners (Anderson, 1985). Consumer traffic levels (Sirmans and Guidry, 1993) and customers' fidelity have also been investigated as rent determinants in relation with shopping center age (Tay, Lau, and Leung, 1991). Des Rosiers and Thériault (2004), Yuo, Crosby, Lizieri, and McCann (2004), and Des Rosiers, Thériault, and Lavoie (2009) are among the few who have looked at retail concentration and its impact on shopping center rents. More recently, Yuo and Lizieri (2013) have addressed tenant placement strategies within multi-level, large-scale shopping centers. They argue that retail establishments located in high-density urban areas, such as those found in most Asian cities, tend to display spatial layouts that are more complex than the ones that typically apply to North American malls. The authors find that, in order for agglomeration economies, and the retail concentration effects that feed them, to be maximized, optimal placement strategies do not solely depend of the physical configuration of individual levels but should account for a center's spatial features taken as a whole.

The impact of micro-market attributes on retail rent rates has been investigated with respect to neighborhood (Hardin and Wolverton, 2000, 2001) and community (Hardin, Wolverton, and Carr, 2002) shopping centers. Among other things, the findings suggest that primary trade area purchasing power does exert a positive, and highly significant, influence on rent levels while the hypothesized multipurpose shopping effect of nearby higher-order shopping nodes is also confirmed. …

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