How Is Retail Rents Affected by Retail Mix? Evidence from the Netherlands

Shops are important facilities that provide people with goods and services. Just like many other commercial sectors, shops are inclined to concentrate or agglomerate within a certain area. Retail mix measures the diversity of shop types in a shopping district, which is an important factor that influences the attractivity of a shopping district. A proper retail mix improve the attractivity of a shopping district to consumers and thus improve sales turnover of shops in this shopping district. According to theory, this benefit brought by retail mix is expected to be capitalized into the rents of shops in corresponding shopping districts. However, we know little empirical evidence about how retail mix is going to affect the attractivity of shopping districts and thus rents of retail properties in these districts. We estimate the relationship between retail mix and retail rents by using a dataset containing information about rents of 10,808 retail transactions spreading from 1996 to 2011 in the Netherlands. We construct shopping districts based on the job density of retail sectors year by year and use Herfindahl Index to measure the level of retail mix in a certain shopping district. Our empirical results show that retail mix has a strong positive relationship with retail rent, after controlling for other variables. This result suggests the importance of building a shopping district with more diverse shop types and choices of goods and services.