Microeconomic Determinants Of Shopping Centers Shops Rent And Tenant Combination Of Empirical Research

Due to the difficulties of data collection, there were only few empirical studies of retail rent of shopping centers before 1990s, but nowadays, it draws more and more academic attention worldwide. As the rapid economic development and urbanization, shopping centers are booming in almost all the main cities of China, and they become a hot spot for local real estate development. The essential issue of shopping centers investment and development is the maximization of profit, which is dependent on the retail rental income. Therefore, how to discern the determinants and mechanism of retail rent scientifically, and how to guide the investment, development and management of shopping centers becomes a necessary and meaningful research theme.Based on a comprehensive literature review of related research, considering the actual commercial environment of China, this dissertation uses quantitative analysis to discern the micro-determinants and mechanism of retail rent of shopping centers in Yangtze Delta and Pearl River Delta, where the businesses are the most flourishing in China. The main content of this dissertation includes three parts:First, this dissertation builds a hedonic model of shopping centers' retail rent which contains 4 characteristics, including location, building, tenant and lease. The empirical results identify the micro-determinants of retail rent of shopping centers, and then figure out the hedonic price and marginal price for each characteristics.Second, this dissertation discusses the optimal tenant mix among the different kinds of store categories (divided into anchor store, subanchor store and nonanchor store) from the retail rent's perspective, and discovers the changing rule of retail rent.Third, this dissertation focuses on the retail types for nonanchor stores, investigates the optimal tenant mix among the diverse retail types, and discovers the changing rule of retail rent.By the literature review and practical investigation, this dissertation constructs an empirical model of the determinants of shopping center rent, and proposes the hypotheses. Using 457 samples from 6 shopping center in 5 cities of Yangtze Delta and Pearl River Delta from 5 to 8, 2008, this dissertation empirically tests the hypotheses by multiple regression analysis method.The main conclusions of this dissertation are as follows:(1) All the characteristics of location, building, tenant and lease are the important determinants of shopping centers' retail rent. This dissertation found that all the four kinds of characteristics are the key determinants of shopping centers' retail rent. Moreover, location characteristic is the most important relatively, just as the recipe for business, "location, location, location". Consistent with previous findings, the effective purchasing power of the trade area, visibility and accessibility of shopping center have a positive effect on retail rent. And in the location characteristic, the effective purchasing power of the trade area is most important, since its marginal price reachs 2.781. Because of leasing economics of scale, a negative correlation is found between the retail rent and the store size. This dissertation further states that this conclusion can be proved both between store categories and in each of them. This dissertation adds the floor variable according to that most of Chinese shopping centers have multi-story structure. The results indicate that less with the higher floor the less of passenger flow, so that the tenants in higher floors pay lower rent.In contrast to previous findings, we found that the older shopping center could charge higher retail rent, which is different with the conclusion of Sirmans and Guidry (1993) and Gatzlaff, Sirmans and Diskin (1994) et al. The reason may lie in that most of the shopping centers in China Mainland have been built for just several years (the average time of samples is March, 2005), and the older shopping centers have lower uncertainty and higher popularity. Meanwhile, the shopping centers which are more accessible and visible would charge higher retail rent premium. The exploratory researches in this dissertation find that the earlier the tenants contract the more rent discount they could gain. This dissertation still discovered that the lease term has negative effects on rent, but the type of lease contract only have a little extent of effects.(2) Anchor store, subanchor store and nonanchor stores are heterogeneous store categoriesThe dissertation found that anchor store, subanchor store and nonanchor store are different store categories. The rental rate of both anchor store and subanchor store are lower than that of nonanchor store because of the economics of scale. Some authors stated that anchor stores have an externality, so that the rents for these stores are especially low. Based on the business environment of Chinese cities, this dissertation found that anchor stores are the main destination for most customers who came to the shopping centers, so the majority rents for different places are not signified. And it is also found that if the subanchor store locates at lower floor or near the main exit, there will be more customers, so it need to pay for a rent premium for that. While the site of a nonanchor store lacate is serious for its rent. And for nonanchor stores only, it is found that the ones which is located at both roadsides of the main pedestrian street in shopping center, or which is near the supermarket or department store need to pay for a much higher rent premium. It supports the view that anchor store has an externality to nonanchor stores. Besides, if the subanchor stores are agglomerated other than dispersive, there will be a much higher rental rate for them.(3) The retail types of nonanchor stores are heterogeneousThe retail type in the same store category is more comparable than between different store categories, so this dissertation analyzed the retail types of nonanchor stores. The result of empirical research show that the retail types such as women clothing, men clothing, leather goods, jewelry, gifts, sports and food retails, and so on are all contributed to the profitability of the shopping center. It means that most of the nonanchor stores in shopping center should be these retail types. And it makes up for the anchor stores' low rent. Moreover, we found that the site of nonanchor stores is more important than the retail type to rental rate, and in which floor is the most important ones at all the positional variables.The main academic contributions of this dissertation could be stated as follows:First, this dissertation expands the territorial scale of the determinants for shopping center's retail rent. Although the determinants for shopping center's retail rent has been one of the hot topics abroad nearly for 10 years, the researches mainly analyzed the retail rent of the U.S.A, just excepted for Tay et al. (1999) did in Hong Kong. This research expands the territorial scale to China (main land). And based on large sample data, this dissertation collected first-hand information for analyzing the store rent of shopping center in different Chinese cities. The empirical analysis showed that some conclusions of precious studies are supported, and some not.Second, this dissertation constructs and empirically tests the "four dimensionalities" hedonic price model for the determinants of shopping center's store rent. Hedonic price method is one of the most popular methods frequently used by foreign scholars in the real estate researches. But there is only few researchs on retail rent of shopping centers. This dissertation formed a four-dimensionalities hedonic price model depend on the location, building, tenants and lease. Besides, there are variables such as the floor and the time of signing lease which are appropriate for Chinese shopping centers. And then the hedonic price and marginal price based on characteristics of stores are calculated. Third, this dissertation discusses the tenant mix between different store categories in shopping center. On one hand, this study based on the concept of major space users advanced by Downie et al. (2000) and Yuo et al. (2004), and distinguished the different store categories which are anchor stores, unanchored stores(refers to the major space users) and nonanchor stores. And it is more appropriate with the actual conditions in China. On the other hand, as previous researches on tenant mix are only stated the agglomeration of retailers and service providers, this research added the tenants' site variables, which has expanded the concept of tenant mix.Fourth, this dissertation analyzes the tenant mix of different retail types of nonanchor store in shopping center. The rent charges from nonanchor stores is one of the major sources for rental income in shopping center. According to the actual situation of China, there are 15 retail types for nonanchor stores which includes women clothing, men clothing, jewelry and accessories and so on. The concept of tenant mix in nonanchor stores is expanded by added the space variables such as site. The positive externality of anchor store in the shopping center for nonanchor stores is supported. And these findings are useful to previous research which analyzed the retail types of nonanchor stores.Due to the limitation of data, time and the author's capacity, this research is only an elementary exploration, there are many problems need to be overcome by the further study. First of all, the micro-determinants of the store rent in shopping center need to be constructed perfectly. Secondly, the interaction effect between different tenants mix needs to be discussed. Thirdly, the different types of shopping center need to be distinguished from size and design. Fourthly, the rental rate of the entire shopping center needs to be discussed too.