There has been a significant increase in the number and size of retail shopping centres situated in, or close to, residential properties in the South African retail landscape over the past few decades.
Shopping centres have a potential to generate both positive and negative reactions but, at the same time, may have a positive effect on residential property prices.
On the negative side, owning property near a shopping centre can result in having to deal with noise pollution, increased traffic congestion, increased localised pollution, light intrusion and the potential for increased crime.
On the positive side, the existence of shopping centres increase convenience for homeowners and substantial time-savings can be enjoyed by being situated within close proximity to the shops. Reducing vehicle trips would also reduce the need for road widening in the community and nearby residents may also value having commercial amenities within walking distance.
Considering that the majority of wealth that most working South Africans accumulate over their lifetime comprises of home ownership and retirement savings, factors such as the proximity to a shopping centre must be carefully weighed up due to the effect it may have on house prices and subsequently individual wealth.
Case Studies
A limited number of international studies have been conducted on the economic effect of shopping centres on surrounding property prices. Colwell et al 1985, analysed the effect of the Southgate Shopping Centre, Illinois, USA, on adjacent residential property prices and investigated whether “neighbourhood shopping centres increase, decrease or both increase and decrease the value of proximate residential property”.
The study found that houses situated within 500 metres were more negatively affected than houses further away, which suggested that there is an “optimal spatial frequency of these small shopping centres”.
Another study by Des Rosiers et al. 1996, analysed the effect of 87 shopping centres of varying sizes on the prices of approximately 4000 residential properties traded between January 1990 and December 1991 in Quebec, Canada. It found a positive relationship between the size of a shopping centre and residential property prices. This study also concluded that the optimal distance to a shopping centre is approximately 215 meters.
The available international literature reveals that the most commonly applied property value technique is the hedonic price model. The word “hedonic” stemming from the Greek word “hedone” which means enjoyment. The hedonic price model relies on the variation in property prices due to differing attribute combinations and the willingness of buyers to pay for attributes – such as swimming pools, electric fences and proximity to the shops and other amenities.
A more localised study in the suburb of Walmer focused on the effect of Walmer Park shopping centre, considered to be one of Port Elizabeth’s most popular retail outlets, on the surrounding Nelson Mandela Bay residential area. Previous research by Sirmans et al. 2005 was also consulted. The distances from the subject properties to Walmer Park were measured using Google Maps. The closest distance was 400m and the furthest distance was 5300m.
The study found that there was a significant correlation between the proximity to Walmer Park and the adjacent residential property prices in the neighbourhood. In this case, the convenience of being situated close to the Walmer Park shopping centre outweighed the negatives, such as increased traffic, noise and pollution.
All things considered, a deeper understanding of how shopping centres affect residential property prices could lead to residential property owners and developers reaping substantial benefits.
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