Retail Real Estate Research Articles

Coping with Technological Change: The Case of Retail

Functional obsolescence in real estate occurs because of technological change. A theoretical model suggests that the early years of building life are characterized by functional obsolescence that is undiminished by reinvestment (“cures” in appraisal terminology). Later, observable functional obsolescence is eliminated by cures. A national, proprietary data set consisting of department store sales is utilized to test these propositions. The test is structured within a hedonic model in which the effect of age represents functional obsolescence and technological change, while other variables control for physical condition and location quality. The empirical results do not permit the rejection of the hypotheses developed from the theory. The measured rate of techological change in retail real estate is 1.7 percent per annum.

The Impact of E-commerce on Retail Real Estate in the U.K.

Executive Summary. This article summarizes the main research findings from the first of a series of annual surveys conducted for the British Council of Shopping Centres. The study examines the changing pattern of retailing in the United Kingdom and provides an overview of key research from previous studies in both the U.K. and the United States. The main findings are then presented, including an examination of the impact of e-commerce on sales and rental values and on the future space and ownership / leasing requirements of U.K. retailers for 2000-2005. The impact on a shopping center in a case study town in the U.K. is also considered. The difficulties of isolating the impact of e-commerce from other forces for change in retailing are highlighted. In contrast to other viewpoints, the results show that e-commerce will not mean the death of conventional store-based U.K. retailing, although further benchmark research is needed.

An Empirical Analysis of Community Center Rents

This article is the winner of the Retail Real Estate manuscript prize (sponsored by the International Council of Shopping Centers) presented at the 2001 American Real Estate Society Annual Meeting.This study empirically models the determinants of community center rent. It employs a two-stage model that estimates center vacancy in the first stage and then includes predicted vacancy in a second stage demand model investigating endogenous and exogenous determinants of community center rent. The data includes information on maximum and minimum square foot rent for 118 community centers in Atlanta, Georgia. Maximum community center rent is highly correlated with a center's predicted vacancy rate and location within the Atlanta area. Additionally, rent at both maximum and minimum levels is influenced by trade area purchasing power, property age and to a lesser extent by proximity to a regional mall, center design and neighborhood factors.

Book review

Since 1998, Singapore has had an Electronic Road Pricing (ERP) system set up with a network of toll gantries to tax vehicles entering designated areas in the city center during peak hours. Using the congestion rate hike with effect from November 1, 2010 as an exogenous shock, we test the effects of the ERP rate hike on retail, office and residential real estate prices. The results show that the November 2010 congestion toll rate increases cause a 19% drop in retail real estate prices within the cordon ERP areas relative to retail real estate prices outside the cordon ERP areas. The results are statistically and economically significant. However, the toll rate hike has no significant impact private office and residential real estate within cordoned ERP areas. The robustness and falsification tests could not reject the negative effects associated with the toll rate hike on retail real estate prices.

What Moves Retail Property Returns at the Metropolitan Level

In this article the determinants of metropolitan-level appraisal-based retail property returns are examined by estimating a six-equation model of retail construction starts, retail sales, stock-market returns, commercial mortgage rates, inflation, and the logarithm of stock-market volatility. Residuals from these equations are then used to explain actual movements in retail real estate returns. Our empirical procedure looks at both unadjusted and unsmoothed appraisal-based retail real estate returns. The general finding is that unsmoothed appraisal-based retail real estate returns lag significantly behind market conditions. Furthermore, the results suggest that very little of the variation in metropolitan-level appraisal-based retail real estate returns can be explained by macroeconomic news events.

A case-based reasoning approach to the selection of comparable evidence for retail rent determination

Case-based reasoning is an artificial intelligence technique which utilizes past experience to solve current problems and in this respect it mirrors the process involved in real estate appraisal. This paper investigates its application as a computer-assisted valuation tool to the specific domain of retail rent determination. As property appraisal is goal orientated, it is essential that the most appropriate examples of previous rent determinations are selected. 1n exploring a case-based reasoning approach to the retail real estate domain five models are built namely; pure inductive, inductive (Q-model), inductive (prototype), inductive (Q-model and prototype) and nearest neighbour.

A Descriptive Analysis of the Retail Real Estate Markets at the Metropolitan Level

Gross Leasable Area (GLA) per capita is a commonly used measure to compare the retail market potential across different retail real estate markets. This study uses GLA per capita to assess the supply of the retail space across fifty-eight metropolitan areas in the United States. After a detailed descriptive analysis of the supply of retail space, we estimate GLA per capita for each metropolitan area using a modified version of the stock adjustment model. Initial findings indicate that the retail construction boom of the 1980s was not a boom at all and that GLA per capita can be predicted using a multi-factor model.

Retail Stocks, Retail REITs and Retail Real Estate

This study examines the relationship between retail REITs, retail stocks and retail real estate during the period 1983 through 1991. Evidence of a positive contemporaneous relationship between retail stocks and retail REITs, even after controlling for the market return, is found. However, no positive evidence is found for a relationship between retail real estate and either retail REITs or retail stocks. Some evidence of a negative relationship between office and R&D office real estate and lagged retail REIT and lagged retail stock returns is found, although these results are very weak. The evidence for the contemporaneous relationship between retail REITs and retail stocks suggests the presence of some shared fundamental factor (or factors) in addition to the market return. The presence of this factor(s) may be partly accounted for by overage rents. However, the lack of a relationship between retail real estate and either retail REITs or retail stocks places the significance of such factors in some doubt.

Retail Real Estate in the 21st Century: Information Technology + Time Consciousness + Unintelligent Stores = Intelligent Shopping? NOT!

The confluence of demographic forces, technological advances, and aggressive retailer strategies are transforming retailing — and concurrently introducing a new paradigm for the physical space that supports retailing activities. Over the last several decades retail patterns have evolved markedly, yet many retail properties are generally ill equipped to respond to dynamic change. A proliferation of substitute commodities, embracing a plethora of innovative retailing concepts and technological advances, is redefining the retailing process and the physical settings in which retailing occurs. In this paper important trends and issues redefining the retailing process are identified, their sources and consequences explored, and the strategic issues that merit consideration by those involved in retail real estate are noted.