ASSET ENHANCEMENT AND INTER-STORE EXTERNALITIES IN SHOPPING MALLS

Abstract

Retail landlords have been searching for methods to improve malls’ performance in the increasingly competitive retail landscape. Managing inter-mall/inter-store externalities is crucial to building malls’ resilience. Decanting and linkage development has been highlighted to strengthen externalities. This study aims to understand the impact of decanting anchor tenants and improving connectivity through the development of linkage between complementary malls on shopping malls’ performance. This paper answers the following question: Does the decision of the mall management to decant or develop linkage with other malls affect the malls’ performance? In this context, Gross Rent, Gross Turnover (GTO) Rent, Total Rent and Occupancy cost will reflect malls’ performance. The research question is answered through an Ordinary Least Square Regression. Specifically, a Difference-in-Difference model is adopted to study the impact. The experiment carried out on two central malls displayed significant results. Decanting has led to lower rents for tenants closer to the decanted area, while it improved the overall rents of the mall. Developing linkage between the two malls has led to lower rents for tenants closer to the linkage, while overall rents of the malls improved. The result has suggested that the AEIs have had a positive impact on overall malls’ performance. On this basis, decanting and linkage development is recommended as an AEI for landlords to improve malls’ performance and build malls’ resilience. Further research could be undertaken to understand the externalities between trade categories to allow landlords to plan for a tenant mix suitable for their mall.