Technology Solutions

Beyond Demographics

Psychographics give brokers an edge in retail site selection.

By Tom Buxton |

Access to consumer information has improved the site-selection process, but in today’s competitive market, traditional demographics may not provide the most complete picture of a trade area’s potential. Commercial real estate professionals can obtain more accurate assessments of location value through psychographics — detailed information about residents’ lifestyles and purchasing patterns and decisions.

Understanding Psychographics

For example, suppose a shopping center leasing agent is targeting service tenants. After analyzing the trade area’s age and income demographics, he decides it can support a dry cleaner tenant. But analyzing psychographics shows a large number of two-income working professionals. With this information, the agent can attract an established dry cleaner with a reputation for quality service, instead of a start-up mom-and-pop shop with no track record — or credit history.

In short, psychographics enhance demographic data. While demographics generally measure an area’s population in terms of size, age, income, and ethnicity, psychographics measure the lifestyles and purchasing behaviors of the residents.

In a psychographic profile, households in a trade area are categorized into segments. For instance, one segment may comprise young, affluent married couples with children. This segment lives in the suburbs and buys child-centered products. Their children participate in karate, soccer, and other sports. Another segment also is composed of young, affluent married couples with children. However, these families live in a rural setting and purchase camping gear. These two segments are similar in their demographics (age and income), but very different in psychographics (lifestyle and buying habits).

Commercial Real Estate Benefits

Many retailers, restaurants, and even hospitals use psychographic profiling systems to find new sites. Psychographic profiles can help commercial real estate professionals communicate more effectively with clients who seek sites for new developments or leasing.

For example, a Fort Worth, Texas, developer partnered with a landowner on a retail shopping center ground lease. The developer assumed the area’s consumers were middle-of-the-road in terms of their lifestyles and income levels. However, demographic information covers large areas, and the results are stated as an average, which often misleads developers. To gain a better understanding of the trade area around this Fort Worth site, the landowner and developer commissioned a psychographic study.

Demographically, this trade area was populated by households with household incomes of about $60,000. However, the psychographic study of the consumers living in these households showed that many of them earned well above the average and their purchasing behavior revealed that they had high-end department store credit cards and frequented upscale retailers and restaurants. The results of this study were then used to market the development. Today, the Chapel Hill Shopping Center includes upscale retail concepts such as an 80,000-square-foot HEB Central Market grocery, James Avery Craftsman jewelry store, Mi Cocina restaurant, Borders bookstore, and specialty fashion stores.

Gaining a better understanding of the area’s psychographics helped the developer attract the right tenants and charge higher lease rates. It also allowed the landowner to create a ground lease worth several million dollars more than originally anticipated.

Psychographic research can be a key part of commercial real estate professionals’ marketing materials. Whether brokers mail clients new listing fliers or create online marketing brochures, including psychographic data enhances the information’s value. Yet similar to any kind of market research, psychographic data is only as good as its source. When considering a psychographic study, be certain to select an experienced market research company that has a proven track record of success.