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 shoppingcenters affect rent levels, as well as the differential impact it mayexert for various goods categories and sub-categories and indifferent urban contexts. In this paper, 1,499 leases distributedamong eleven regional and super-regional shopping centers inMontreal and Quebec City, Canada, and negotiated over the2000–2003 period are considered. Unit base rents (base rent persq. ft.) are regressed on a series of descriptors that includepercentage rent rate, retail unit size (GLA), lease duration,shopping center age, as well as 31 retail categories while theHerfindahl index is used as a measure of intra-category retailconcentration. Findings suggest that while, overall, intra-categoryretail concentration affects base rent negatively, themagnitude and, eventually, direction of the impact variesdepending on the nature of the activity and the market dynamicsthat prevail for the category considered.