Store Location in Shopping Centers: Theory & Estimates

Abstract: This paper develops a formal theory of store location within shopping centers based on bid rent theory. The bid rent model is fully specified and solved with the objective function of profit maximization in the presence of comparative, multipurpose and impulse shopping behavior. Several hypotheses result about the optimal relationships between store types, sizes, rents, sales, and distances from the mall center. The hypotheses are tested and confirmed using data from a sample of 689 leases in eight regional and super-regional shopping centers, suggesting that a bid rent explanation is consistent with observed location patterns in malls.