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The effect of accessibility on retail rents: testing integration value as a measure of geographic location
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.
2013 (English)In: Journal of Property Research, ISSN 0959-9916, E-ISSN 1466-4453, Vol. 30, no 1, 1-23 p.Article in journal (Refereed) Published
Abstract [en]

This article investigates cross-sectional variation in retail rents on the micro level, i.e. differences in rent for shops on street X compared to shops on street Y. Retail rents from the inner city of Stockholm are analysed. Free standing shops dominate the database (i.e. not located in malls). Differences in rent across locations is modelled with distance to the city centre, distance to sub-centres within inner city Stockholm, city part dummies and so-called integration values. Integration values have shown a strong correlation to pedestrian and other types of traffic. Loosely speaking, the integration value for a particular location in an urban area is the average number of turns a pedestrian must make to reach other locations in the city. In this study it is interpreted as a measure of accessibility. It is hypothesised that locations with high (low) integration values typically have high (low) retail rent. Integration values are found to complement the traditional location measures distance to city centre/sub-centres and city part dummies. Integration values can be calculated for urban areas that have not yet been built. They may, thus, be useful in the planning of new urban areas and for predicting retail rents.

Place, publisher, year, edition, pages
2013. Vol. 30, no 1, 1-23 p.
Keyword [en]
retail rent, space syntax, geographic distribution, hedonic, Stockholm
National Category
URN: urn:nbn:se:kth:diva-26949DOI: 10.1080/09599916.2012.713974ScopusID: 2-s2.0-84875959688OAI: diva2:373123

Updated from "Submitted" to "Published" QC 20131209

Available from: 2010-11-30 Created: 2010-11-30 Last updated: 2013-12-09Bibliographically approved
In thesis
1. Essays on lease and property valuation
Open this publication in new window or tab >>Essays on lease and property valuation
2010 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The first two papers in this dissertation discuss a fairly recently developed research field, Space Syntax, and how the findings in this field may be used to understand spatial economic patterns such as geographic distribution of market rents. Both papers use standard econometric methods to investigate the relationship between rents and the so called integration value developed within Space Syntax. The integration value may be understood as a measure of the accessibility of a certain location in a street network. The measure is constructed using tools from graph theory and uses the shape of the street network as its only input. The papers estimate hedonic models of office and retail leases from central Stockholm to test whether the integration value can help explain rents. A statistically significant effect of integration value on both office and retail rent is found. It appears as if Space Syntax adds important information to the understanding of intraurban rent patterns.

Illiquidity is a main feature of most property markets and market participants are therefore directed to property appraisals to obtain information about market values. The reliability of property appraisals is therefore an important research topic. The third paper studies the “rationality” of valuations by testing if capitalisation (cap) rates from individual discounted cash-flow (DCF) valuations are consistent with economic theory. Standard econometrics is used to study the variation in cap rates. For the most part the results support the hypothesis that appraisers are “rational” in the above mentioned sense.

Illiquidity of direct property also poses a problem when constructing property price indices.  Lack of price observations and heterogeneity among the few observations available is likely to introduce noise in price indices based on transactions. Valuations are therefore often used instead to construct indices. These indices however suffer from a bias due to so called “appraisal smoothing”. In the fourth paper it is shown that, given certain assumptions, one may filter out noise in a transaction-based price index by regressing it on a valuation-based index (contemporaneous and lagged one period). The procedure may in some circumstances improve pure valuation- or transaction-based indices.

Place, publisher, year, edition, pages
Stockholm: KTH, 2010. 13 p.
TRITA-FOB, 2010:4
rent, space syntax, valuation, index, real estate, accessibility, capitalisation rate
National Category
urn:nbn:se:kth:diva-26801 (URN)978-91-978692-1-8 (ISBN)
Public defence
2010-12-20, D2, Lindstedtsv 5 Entreplan, KTH, 09:00 (English)
QC 20101201Available from: 2010-12-01 Created: 2010-11-29 Last updated: 2010-12-09Bibliographically approved

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