ARE RETAIL OWNERS REALLY BENEFITING FROM NEARBY MRT DEVELOPMENTS? EVIDENCE FROM DOWNTOWN LINE MRT

Abstract

Singapore’s Mass Rapid Transit (MRT) has rapidly developed over the years, with more MRT lines and extensions added, creating greater interconnectivity between MRT stations. As MRT is the main mode of transportation to retail areas, the MRT expansion will potentially fuel a proliferation of retail shops island wide. It is generally perceived that MRT developments will positively affect retail owners because of greater accessibility. However, with increasing rail density, it can lead to greater competition and substitution effects between retail areas in proximity as the new MRT lines may redirect customers away. This raises the research question of whether increasing rail density in Singapore will impact retail rents positively. Using the Downtown Line (DTL) MRT stations in the Central Area, a total of 1040 observations were obtained based on 29 subzones in a time span of 10 years from Q1 2010 to Q4 2019. The study utilises a Difference-in-Differences (DID) estimator, with results underscoring complementary effects associated with improved MRT connectivity. The results show that on average, positive rental premiums of at least significantly 13.3% were observed for retail areas located near to an operating DTL MRT and on average, the premium increases substantially to significantly 23.4% for retail areas accessible to both an operating DTL and Existing MRT line. However, the results do not affirm possible substitution effects between retail areas. This suggests that substitution effects do not necessarily dominate the patronage effect, as DTL MRT connects to established retail locations, making them resilient in the face of competition.