DO RENTS INTERNALIZE INTER-STORE EXTERNALITIES IN SHOPPING CENTRES?

Abstract

The determinants of rent are of fundamental importance to real estate researchers and practitioners. In shopping centres, retail stores benefit from the positive externalities of other stores. Some retailers provide greater benefits to other retailers than others for example: departmental stores. In a nutshell, these positive externalities can be captured through rental variations when managing a shopping centre. This dissertation explores the determinants of rent for Singapore prime and suburban shopping centres. The dataset contains characteristics of eight shopping centres; of which contains information of 178 individual tenant records. In addition, market conditions of Singapore economy are included in the analysis. These data are analyzed to offer information on the characteristics of shopping centres and retailers to determine its impact on rent. Multiple regression method and ANOVA are the methodology adopted to analyze the data. The study displays mixed results with regards to traditional retailing literature. The results indicate that rent levels respond to various factors as expected: size and trade of tenants, location of shopping centre, trade concentration and general economic conditions. However, findings also show contrasting results like: age of shopping centre and parking cost per shopping trip and chain strength of retailers.