Are local retail services an amenity or a nuisance?

Abstract

We test whether local retail services are considered a nuisance or an amenity and how this distinction is capitalized into residential property values. Using a rich, micro-spatial dataset on property sales transactions and business activity in New York City, we estimate the impact of access to neighborhood retail services on residential sales prices. We construct two instruments to channel supply-side drivers of retail change and to address concerns of endogeneity between changes in retail activity and property values. Results show that retail services that are more frequently consumed and experiential, and are located in relatively more mixed-use neighborhoods are positively capitalized into property values. Residents also pay more to be closer to more diverse retail clusters, and relatively less to be closer to chains. This is true across smaller 1-to-4 family homes as well as larger condos/coops and multi-family rental buildings. The price effects from certain classifications of retail, like restaurants and personal services, are mixed depending on the kind of residential property and the local concentration of the retail. Therefore, the relative strength of the amenity or nuisance effect is very much conditioned on the type of service and the localized neighborhood context.