Radius Restrictions on Retail Chains and the Similarity of Neighboring Shopping Centers

Abstract

In Canada and the US, shopping center developers may impose ‘radius restrictions’ on tenants in their shopping centers, prohibiting tenants in a particular shopping center from opening another store within a certain radius. Whether a radius restriction is imposed on a chain will depend upon the relative bargaining positions of the chain and the developer. This paper presents an empirical analysis of regional shopping center composition in Canada, using variables that reflect the bargaining power of retail chains and shopping center developers. We find that large, well established, and growing chains are more likely to enter neighboring malls, consistent with the hypothesis that whether a chain enters neighboring malls depends upon its bargaining power. As well, we find that a chain is more likely to enter neighboring malls owned by large developers, consistent with large developers trying to keep retail chains out of the malls of small developers.