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

Author

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  • 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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    Cited by:

    1. Francois Des Rosiers & Marius Theriault & Laurent Menetrier, 2005. "Spatial Versus Non-Spatial Determinants of Shopping Center Rents: Modeling Location and Neighborhood-Related Factors," Journal of Real Estate Research, American Real Estate Society, vol. 27(3), pages 293-320.
    2. Aika Monden & Katsuyoshi Takashima & Yusuke Zennyo, 2021. "Revenue‐Sharing Contracts under Demand Uncertainty in Shopping Center," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 556-573, June.
    3. Francois Des Rosiers & Marius Theriault & Catherine Lavoie, 2009. "Retail Concentration and Shopping Center Rents - A Comparison of Two Cities," Journal of Real Estate Research, American Real Estate Society, vol. 31(2), pages 165-208.

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    More about this item

    JEL classification:

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

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