A hedonic model of the association between grocery brand provision and residential rental prices in England

• DOI: https://doi.org/10.1108/IJHMA-05-2020-0062
• Published date: 29 January 2021
• Date: 29 January 2021
• Pages: 680-700
• Subject Matter: Property management & built environment,Real estate & property,Housing markets
• Author: Stephen Clark,Nick Hood,Mark Birkin

A hedonic model of the association

between grocery brand provision

and residential rental prices

in England

Stephen Clark and Nick Hood

School of Geography, University of Leeds, Leeds, UK, and

Mark Birkin

Leeds Institute for Data Analytics, University of Leeds, Leeds, UK

Abstract

Purpose –This study aims to measure the association between local retail grocery provision and private

residential rental prices in England. Renting is an important sector of the housing market in England and

local grocery provision is an important aspect of service provision and consumers are known to be highly

sensitiveto the branding of this type of retailing.

Design/methodology/approach –This research uses a novel data source from a propertyrental Web

platform to estimate a hedonic model for the rental market. These models incorporate information on the

nature of the properties and their neighbourhoods, with an emphasis on how different retail brands are

associated with rental prices. This retail brand is captured on two scales: the provision of local branded

conveniencestores and the provision of larger stores.

Findings –The study finds clear differentials in how the local grocery brand is associated with rental

prices. When controlling for commonly explored confounding factors, “Luxury”retailers such as Waitrose

and Marks and Spencer are associated with higher rentalprices, while “Discounter”retailers are associated

with lower rental prices. This finding has many implications, particularly in relation to potential price

changesin an already challenginghousing market for many people.

Research limitations/implications –This is an observationalstudy and as such only associations (not

causation)can be implied by these findings.

Originality/value –The focus of this research is on the private residentialproperty market, an important

market in England but one that has enjoyed less scrutiny than the sales or socially rented markets.Rather

than using general accessibility to retail,this research has differentiated the association by the retail brand

and store size, two very importantaspects of consumer choice.

Keywords England, Retail, Residential property, Housing prices, Pricing model, Renting

Paper type Research paper

1. Introduction

In their article, Jang and Kang (2015) comment that retailactivities are important functions

of (urban) life which can play a role in shaping neighbourhood desirability and therefore

rental and house prices. These economic positives resulting from greater retail provision

The authors would like to thank the referees who provided insightful commitments on earlier drafts

of this article.

Funding: This work was supported by the ESRC funded Consumer Data Research Centre for

CDRC –Grant reference –ES/S007164/1.

IJHMA

14,4

680

Received22 May 2020

Revised24 July 2020

Accepted30 July 2020

InternationalJournal of Housing

Marketsand Analysis

Vol.14 No. 4, 2021

pp. 680-700

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-05-2020-0062

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1753-8270.htm

and accessibility can be seen in urban growth and development (Glaeser et al., 2001)as

provision attracts other businesses and customers into an area. Time savings (through

convenience), increased choice (e.g. in a shopping centre or grocery hypermarket) or lower

costs (through choice or economies of scaleachieved by large retailers) are all possible with

an increase in provisionor improvement in access.

In the context of the UK housing market, numerousnewspaper stories exalt the influence

of major grocery retailers on UK house prices [for example, see Shaw (2017) and Burridge

(2018)]. They often centre on the idea of a “Waitrose Effect”, named after the luxury

supermarket chain Waitrose,which is often said to have the largest effect on house prices of

any major UK grocery retailer (Lloyds Bank, 2017). However, these studies either

inappropriately define the neighbourhood of a store and, of great concern in terms of the

house price literature, attributethe entire premium associated with house prices to the retail

effect, not controlling for other structural and locational factors. As we shall demonstrate

here, this tends to over inflate the premium associated with retail and is the primary

motivation for us to conductthis analysis.

Testing the impact of grocery supplyon house prices contributes to the understanding of

proximal effects of differential access to services and amenities at a local level. Several

externalities have beenfound to be capitalised in house prices, ranging from positive factors

such as access to good schoolsto negative impacts such as noise nuisance from busy roads.

While multiple studies have investigated the impact of access to retail services on house

prices, the focus has generally been on access to central city/town shoppinglocations or on

out-of-town shopping centres. A smaller subset of studies has focused on the impact of

grocery supply on the housing market, but there is a dearth of such literature in a UK

context and in terms of the variability of the grocery supply.While the retail market is quite

diverse in the UK, ranging from “Discounters”, through the “Big-Four”retail chains and

onto more niche “Luxury”retailers, this diversity is rarely captured within these studies.

Furthermore, previous studies on the impact on proximal grocery externalities on the

housing market have focused almost exclusively on the home ownership sales submarket.

However there are two other substantive housing submarkets, social rented (where

provision and rental is largely prescribed by legislation; Walker and Marsh, 2003;Wilson,

2019) and the private rentalmarket. This study addresses the gap in knowledge concerning

the private rental submarket by using a hedonic modelling approach to assess the

association between localgrocery store brand and size and private rental prices in England.

In doing so, it provides a tool that allows a guide price for rentalproperties to be estimated

based on a range of factors.

This article proceeds as follows. Section 2 reviews and gives a brief overview of the

literature on hedonic house price modelling, while Section 3 focuses on studies relating to

retail and house/rental price association. Section 4 discusses thedata used, followed by the

methodology in Section 5. The paper is rounded off with the results in Section 6 and

discussion in Section7.

2. Hedonic house price modelling

Commonly, studies of houseprice capitalisation are focused on the sales market and adopt a

hedonic approach (Rosen, 1974), with fewer studies focused on the rental market. There is

some consensus in the literaturethat the housing market may not be monotonic and various

studies have filtered the housing market into different subsets, known as submarkets, to

better understand the drivers of house prices. While the existence of such submarkets is

generally uncontested, there is not an agreed definition of housing submarkets and how to

identify them (Bangura and Lee, 2020).The private rental sector is an important segment of

Residential

rental prices in

England

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