Retail Concentration and Shopping Center Rents - A Comparison of Two Cities

Abstract

This study aims primarily at testing whether, and to what extent, retail concentration within regional and super-regional shopping centers affects rent levels as well as the differential impact it may exert for various goods categories and sub-categories and in different urban contexts. In this paper, 1,499 leases distributed among eleven regional and super-regional shopping centers in Montreal and Quebec City, Canada, and negotiated over the 2000-2003 period are being considered. Unit base rents (base rent per sq. ft.) are regressed on a series of descriptors that include percentage rent rate, retail unit size (GLA), lease duration, shopping center age as well as 31 retail categories while the Herfindahl index is used as a measure of intra-category retail concentration. Findings suggest that while, overall, intra-category retail concentration affects base rent negatively, the magnitude and, eventually, direction of the impact varies depending on the nature of the activity and the market dynamics that prevail for the category considered.