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Is What's Bad for the Goose (Tenant), Bad for the Gander (Landlord)? A Retail Real Estate Perspective


  • Crocker Liu

    () (Cornell University)

  • Peng Liu

    () (Cornell University)


We explore the economic dependence and financial market feedback effects among firms with economic linkages, notably landlord-tenant when shocks occur to the system. In particular, we examine 157 major tenant bankruptcy announcements of retail real estate firms over the 2000 to 2010 period. The contracting mechanism associated with retail leases provides several unique features such as percentage rents and co-tenancy clauses that are absent in other type of leases. We find that in a good economy, a tenant bankruptcy has a less negative or more positive effect on a landlord’s stock return, which is consistent with the growth option hypothesis. We also find that landlords who have properties located in markets with a highly diversified economic base are more likely to exercise the growth option given a tenant departure and thus realize higher stock returns.

Suggested Citation

  • Crocker Liu & Peng Liu, 2013. "Is What's Bad for the Goose (Tenant), Bad for the Gander (Landlord)? A Retail Real Estate Perspective," Journal of Real Estate Research, American Real Estate Society, vol. 35(3), pages 249-282.
  • Handle: RePEc:jre:issued:v:35:n:3:2013:p:249-282

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    Cited by:

    1. Joseph Williams, 2014. "Percentage Rents with Agency," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(4), pages 791-828, December.
    2. repec:kap:jrefec:v:54:y:2017:i:3:d:10.1007_s11146-016-9575-y is not listed on IDEAS
    3. Robert H. Edelstein & Peng Liu, 2016. "The Economics of Commercial Real Estate Preleasing," The Journal of Real Estate Finance and Economics, Springer, vol. 53(2), pages 200-217, August.

    More about this item

    JEL classification:

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


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