Modelling rental change across key retail investment markets in Britain

Abstract

Models of the commercial property market have become increasingly sophisticated in recent years. However, the retail sector and, more specifically, analysis of retail markets at the local level, have been comparatively neglected. This paper makes inroads into this gap in property research. Retail rental change at the local level is explored, focusing on consumer expenditure as the key determinant of change. The appropriateness of proxy variables is investigated and the mechanisms of rental change are examined. This highlights issues and difficulties unique to local level analysis. Following this, the relationship between rental change and underlying changes in consumer expenditure is investigated. The stability of a panel model of rental change is examined, with differences in market functioning identified across diverse groups of key local retail investment markets. These differences highlight the re‐emergence of northern markets during both the economic decline and recovery phases of the last decade of the 20th century. Rental levels in larger and smaller markets are also seen to respond to changes in consumer expenditure to significantly different degrees, in periods of both decline and recovery.

Modelling the Commercial Property Market: An Empirical Study of the Singapore Office Market

“…• Single Equation Model (Chin 2003, Colwell and Jackson 2004, D'Arcy et al 1997a, 1999, De Wit and Van Djik 2003, Dobson and Goddard 1992, Gardiner and Henneberry 1988, Giussani et al 1993, Glascock et al 1990, Silver and Goode 1990, Sirmans and Guidry 1992) -whereby property, economic and financial variables are used to capture the interaction within the demand and supply framework (Chin 2003). The single equation model is based on the assumption that rent is to be a linear function of a series of independent variables (Stevenson and McGarth 2003).…”

A Regime‐Switching Approach to Modeling Rental Prices of U.K. Real Estate Sectors

“…The demand for retail space is largely derived from consumers’ demand for goods and services at retail shops, outlets and malls. Following Colwell and Jackson (2004), we use consumer expenditure, as proxied by the ONS time series on consumer spending, to capture the demand in the retail sector.…”

“…Because the literature on rental adjustment suggests that different sectors of the real estate market can behave differently not only in terms of their adjustment path but also with respect to the driving forces (see, e.g. , McGough and Tsolacos 1995, D’Arcy, Tsolacos and McGough 1997, Thompson and Tsolacos 1999 , Hendershott, MacGregor and Tse 2002, Colwell and Jackson 2004, Jackson and White 2005 and Hui, Yiu and Yau 2007), we illustrate our approach for the adjustment of rental prices for three different U.K. commercial sectors: industrial, office and retail.…”

Investigating retail property market dynamics through spatial accessibility measures

“…retail space occupiers) will consider latent patronage ability of retail consumers for goods and services in a local market before demanding to occupy and use the property (space) for retail purpose. Similarly, an investor will seeks to invest in retail property space on the expectation that there is occupier demand for retail space with concurrent low supply of retail space in that location (Colwell and Jackson, 2004). In other words, retail consumers' demands for retail products influence decisions of user and investment retail property markets on what, where and whether to develop, invest-in and occupy a retail property (space).…”