Using a productivity function based method to design a new shopping centre

Abstract

Previous studies of competitive location models for shopping centres have mainly focused on the commercial attraction, rather than considering a real cost function, which would require a comprehensive financial analysis of the shopping centre and of the stores to be installed in it. The aim of this paper is to develop a method to determine the optimal design of a new shopping centre based on the productivity function that is, taking into account both its attractiveness and the forecast costs. Thus, we propose an optimisation model that can be applied to determine an attractive commercial offer that ensures the economic viability both of the investment and of the maintenance and management of the shopping centre. The proposed method is eminently practical; the model constructed includes the variables that determine the probabilities of attracting demand and also those which influence the costs and profitability of the shopping centre. All the variables considered are interrelated in some way with the gross leasable area. The method described furnishes a tool that is flexible, adjustable to the urban characteristics considered, and which facilitates the decision-making process for a potential investor. Finally, an application of this methodology is presented.