Retail vacancy in Dutch city centers: How can differences in retail vacancy between cities be explained?

In the last few years, city centres in The Netherlands have suffered from an increase in store vacancy. Between 2007 and 2012 demand for store space will approximately decrease with 7% to 9%, leading to even more vacancy. Although the current economic crisis and increased e-shopping is mentioned many times as an explanation, many other factors play a role as well. Cities can get into a negative spiral, as higher vacancy leads to a less attractive city center. These city centers attract fewer visitors, which increases vacancy. Cities need to prevent getting into this negative spiral. However, there are differences in vacancy rates between cities, which indicate that not every city suffers similarly from vacancy. Why does city A suffer less than city B? How can these differences be explained? This thesis tries to answer these questions by answering the main research question of the thesis: Which factors influence vacancy in city centers and how can possible differences be explained? Vacancy can be seen as the non-let situation of an available real estate property. Based on several classifications of scholars on vacancy, it can be said that there are two main categories of retail vacancy: less-harmful vacancy which consists of initial and frictional vacancy, and harmful vacancy, which consists of structural, functional and technical vacancy. To understand retail vacancy in the Netherlands, the retail real estate market needs to be understood as well as trends in supply and demand of consumer goods. The retail real estate market is a complex market as general rules of supply and demand are not always applicable. As demand rises compared to supply, prices in general will rise. However due to the absolute importance of location this is not always true for real estate objects. Demand for retail real estate is influenced by retailers who see location as the most important factor. Objects can be vacant in a street towards the main street while there is a waiting list for the main street, showing that the general rule of supply and demand not always holds. Looking at the supply side, real estate developers influence vacancy by their increased supply in retail floor space. In the last 10 years the floor space in the Netherlands has increased with 62,5%, while the population only grew with 7,84%. The municipality also influences vacancy by investing in the attractiveness of the city, as an attractive city attracts more visitors than others. Consumers have changed over the years as well, leading to new store concepts and ideas. Due to the internet e-shopping became available, which causes people to visit the city center less. The shopping goals of people have changed as well. On the one hand there are more two-person households which mean there is less time available to do shopping, leading to an increased demand of one-stop shopping. On the other hand people see shopping more and more as a leisure activity, which leads to fun shopping. The two-person household also changed the demand of opening hours of stores, as these people became more limited in shopping during office hours, leading to a demand of opening hours in the evening and on Sundays. A change in composition of the population (people are living longer, more ethnic diversity and more one person households) also changed the demand for goods. Retails want to attract as many consumers as possible and have therefore tried to anticipate on these developments. Experience shopping is a new form of shopping, which allows consumers to try products before they buy the product. Out-of-town shopping is shopping at peripheral malls which offer one-stop-shopping and opening hours have become more flexible over the years, although the Dutch government is currently looking at decreasing this flexibility again. Vacancy does not just occur in a city. Vacancy is a derivative of other factors, as vacancy arises as a consequence of changes in the retail sector. The changes which have been researched most by scholars are the attractiveness of a city, location decision factors of a retailer and at determinants of retail rent. Factors explaining these three changes therefore also influence vacancy. Research showed that factors can be either influenced by retailers or municipalities (endogenous factors) or they cannot be altered or influenced by these parties (exogenous factors). Several scholars have created an overview of factors explaining these changes, other scholars have focused on a single factor. The table below gives an overview of factors found and described.