A drop in demand makes shops transform into other use | Netherlands




This study was done in collaboration with 26 middle large Dutch municipalities.

A prolongued decrease in retail demand leads to transformations of retail properties into other use, mostly at the edge of the shopping areas. This mechanism helps reduce structural vacancy when demand is falling. During the Great Recession (2010-2015) some 2% of retail properties was transformed in this way. Further transformation potential is estimated to be another 2%.

These findings are based on a model of competition between the retail and the residential land use, which we estimated on Dutch data (see figure above).

Larger shopping areas tend to have one pronounced centre where the number of visitors (footfall) and the rents are the highest. The footfall and the rents fall 15% with every 100 meter distance from this centre. At a certain distance, retail land becomes less productive than the competing residential land. This is the natural radius of a shopping area (see left panel).

The Great Recession and the upswing of online shopping reduced the number of visitors and the yields in many shopping areas. The radius of the shopping area moved inwards and the retail land at the edge became unproductive, leading to vacancy there (see middle panel).

If the fall in demand is prolongued, competing residential land use may take vacant space over, reducing structural vacancy, see right panel. This model allows to calculate the future transformation potential.


June 2017


Publications:

- Teulings, C.N., Ossokina, I.V. and Svitak,J. , 2017, The urban economics of retail, CPB Discussion Paper (352).

- Ossokina,I.V., Svitak,J. and C.N. Teulings, 2017, Leegstand en transformatie van winkelvastgoed. (in Dutch), Real Estate Research Quarterly (16).

- Ossokina,I.V. ,Jan Svitak, C.N.Teulings and Zwanenveld, P., 2016, Winkelleegstand na de crisis. (in Dutch), Policy Brief of CPB Netherlands Bureau for Economic Policy Analysis (2016/04).



Awards and policy papers:

- November 2017: Award VOGON-2017 for the paper 'Leegstand en transformatie van winkelvastgoed'. VOGON is a Dutch association of researchers in real estate.

- January 2017: The above model is used in the Guideline for real estate transformations in shopping areas (pp.12-14), published by the Retailagenda, a collaboration between the Ministry of Economic affairs and 50 middle large municipalities.