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A Simulation Analysis of the Relationship between Retail Sales and Shopping Center Rents

Author

Listed:
  • Gregory H. Chun

    () (University of Wisconsin, Madison)

  • Mark J. Eppli

    () (George Washington University)

  • James D. Shilling

    () (University of Wisconsin, Madison)

Abstract

This article examines the variation in rents per square foot among regional shopping centers in the United States in response to variation in retail sales per square foot. The analysis breaks new ground by treating base and percentage rents as endogenous functions of retail sales. The analysis further distinguishes between de facto, if not de jure, fixed and percentage leases, and between new versus existing leases. Simulation results suggest that shopping center rents can easily increase in the short-run as retail sales decrease, or they can easily decrease as retail sales increase. In addition, the results suggest that shopping center rents per square foot generally react more aggressively to an increase in retail sales per square foot over time than to a decrease in retail sales per square foot, all else equal.

Suggested Citation

  • Gregory H. Chun & Mark J. Eppli & James D. Shilling, 2001. "A Simulation Analysis of the Relationship between Retail Sales and Shopping Center Rents," Journal of Real Estate Research, American Real Estate Society, vol. 21(3), pages 163-186.
  • Handle: RePEc:jre:issued:v:21:n:3:2001:p:163-186
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    References listed on IDEAS

    as
    1. Brueckner, Jan K, 1993. "Inter-store Externalities and Space Allocation in Shopping Centers," The Journal of Real Estate Finance and Economics, Springer, vol. 7(1), pages 5-16, July.
    2. Benjamin, John D. & Boyle, Glenn W. & Sirmans, C. F., 1992. "Price discrimination in shopping center leases," Journal of Urban Economics, Elsevier, vol. 32(3), pages 299-317, November.
    3. Mark J. Eppli & James D. Shilling, 1995. "Large-Scale Shopping Center Development Opportunities," Land Economics, University of Wisconsin Press, vol. 71(1), pages 35-41.
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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