The Shopping Center Chronicles – Store Location
The way stores positioned themselves with respect to one another and their location within different areas of the mall are both key factors in one of the great sciences of shopping centers: spatial correlation.
The idea is that individual stores in a mall act much like businesses within a mono-centric urban area. Regional and super-regional shopping centers typically have a center where mall traffic is heaviest and stores benefitting most from positive demand externalities (and pay for them through higher rent) are located. As such, many non-anchor stores within a mall are lined-up from smallest to largest, extending outward from the mall’s center. Similarly, rent per square foot is highest at the mall’s center, and store’s rents per square foot taper off so that the lowest rents per square foot are given to non-anchor stores furthest from the center and closest to anchor stores.
The most common configuration of large centers is linear with anchor stores on each end. Other mall designs include the L shape, T design, X design, and Z design. In each of these designs, anchor stores are separated. For instance, in a linear mall with three anchors, the third anchor is normally located between the anchors on each end; in a four-anchor Z mall two anchors are located on each corner of the Z, with two located on the ends. Food courts are most often located at the center area of the mall, and tenants leasing the least square footage of any store type (food vendors) are located here.
Distances from the mall’s center are determined by meticulously measuring from the middle of the front of non-anchor stores to the mall’s center.” Regressions, using both rent per square foot and non-anchor store size in square feet as dependent variables, show store rent per square foot decreases with distance from the malls’ centers, and store size in square feet increases with distance from the center. The length of stores’ leases is typically negative with respect to rents and positive with respect to square footage. In other words, stores with longer leases receive a rent subsidy and larger stores, farther from the mall center, are more likely to have longer leases.
In a mall everything is explained in terms of inter-store externalities, and the developer is often a perfectly discriminating monopolist. Internalizing externalities definitely makes the system efficient, but saying the process is a competitive market is something wholly different. By definition the process is a private internalization of positive demand externalities, which creates an efficient outcome, where there are well-defined property rights.
This is the fifth installment in The Shopping Mall Chronicles. Visit our blog to read the other articles in this series.
