Rotterdam Brown Bag Seminars General Economics

Ioulia Ossokina (CPB, the Netherlands)
Wednesday, April 6, 2016

This paper develops a spatial model of retail clusters, describing their structure, as well as the rent and vacancy for each store. We estimate the model using data for individual stores in 300 retail clusters in the Netherlands for the period 2004-2015. This period covers the Great Recession, the subsequent decline of private consumption and the rise in online shopping. We show that rents decrease by 10 to 15% and vacancy rates increase by a factor 1.2 with each 100 meter extra distance from the retail cluster’s midpoint. Concentrated land ownership internalizes positive cross-store externalities and commands therefore higher rents. During the Great Recession retail rents declined and vacancies increased simultaneously, in particular at the edges of the retail clusters, as predicted by our model. We use the model to evaluate the land rent equivalence condition for commercial and residential use at the edges of the retail clusters. In some locations, a transfer from commercial to residential land use is profitable, in particular after the Great Recession.

Coauthors C.N. Teulings, J. Svitak