HFI Working Paper No. 1
The first working paper in the HFI Working Paper series was recently published with the title Retail and Place Attractiveness: The Effects of Big-box Entry on Property Valuesy. The study shows that the establishment of IKEA-sores has an effect on housing sale prices which depends on the distance from the store.
The attractiveness of residential areas where new IKEA-stores are established can be adversely affected by noise, increased traffic, littering and crime. At the same time, access to large retail locations can have positive economic effects for the area such as increased convenience and greater opportunities for comparison and efficiency in the retail trade for those who live in the vicinity of the supermarket.
As sales prices for housing reflect the individual’s overall valuation of these effects, housing prices should be reflected in connection with the opening of an IKEA store. This is utilized by the authors to quantify the effect of new establishments by IKEA on the attractiveness of five Swedish cities.
The study shows that the distance to supermarkets is important. For housing closest to IKEA, the negative and positive effects are equally large, while homes at 1.5 km distance on average increase by about 7% in price after an IKEA establishment. The positive effect continues to increase up to a distance of 2 km, but then slowly plans out.
This study was conducted by Sven-Olov Daunfeldt, Institute of retail economics and Dalarna University; Oana Mihaescu, Institute of retail economics; Özge Öner, Research institute of industrial economics and Jönköping International Business School; and Niklas Rudholm, Institute of retail economics.
The study can be downloaded here.