Foot Traffic Jam
There has been a huge shift in the commercial real estate market over the past 2.5 years. Many downtowns continue to struggle, as the occupancy rates of their office high-rises remain low due to remote and hybrid work arrangements, which also impacts businesses dependent on those commuters. Conversely, suburban, exurban, and rural areas have seen an influx of residents who relocated when work from home became an option. This dynamic brings new challenges for retailers and others looking for the right location for their storefront.
While understanding traditional metrics - such as foot traffic and market demand - remains key, the effects the pandemic has had on many people's lifestyles mean that today's data looks much different from that of pre-COVID-19 times. Although the use of location analytics in the CRE industry is not new, the accuracy and timeliness of the location data sets are more important than ever given the widespread behavioral changes.
Using advanced foot traffic data derived from location analytics along with other CRE data allows companies to gain actionable insights into market trends. More specifically, foot traffic data can be used for CRE research because it shares details around consumer activity, helps match clients to the best location for their business, and can compare the potential performance of different locations.
These in-depth analytics can identify the best location for a retail space based on the needs of each tenant. Commercial property managers can demonstrate to potential lessees the demographics of the population that frequents a specific area, how many similar businesses are within a specific radius, and other data that will influence sales and revenue. For lessees, this data can reassure business owners that the location will attract target buyers and patrons. For property owners and managers, transparent information regarding the storefront can lead to longer-term leases and reduce tenant churn.
Using advanced foot traffic data derived from location analytics along with other CRE data allows companies to gain actionable insights into market trends.
To illustrate the value of location intelligence for CRE property managers and lessees, here are four ways to use foot traffic data for market research:
1. Determine Market Demand
The most important factor in determining how and where a retail business should grow is understanding market demand. The most successful property owners and managers seek to match services and products offered by retail tenants to consumer needs. While demographic data can identify ideal customers based on factors such as income or marital status, it often does not fully reflect consumer preferences and interests.
Combining demographic data with actual customer movement data from the area can help fill these gaps as it creates a 360-degree view of the ideal customer, with insight into their interests and preferences based on where and when they choose to spend their time and money. From there, a predictive model can be built to show exactly how many core customers live in a specific area and their potential value to a retail store or restaurant. This profile can also predict the projected revenue of a new location, which gives retailers the opportunity to compare locations not just by amenities, but on earning potential as well.
2. Understand Consumer Activities
Since investing in a new business or location is a significant financial commitment, choosing the wrong location can be a very costly mistake. Historical market trends play a major role in site selection. Observing changes in consumer behavior, including the past performance of other nearby businesses and lessees of a specific site, provides insight into the viability of a specific location.
Communities experience constant shifts in social and business dynamics, which impact real estate prices. Compiled foot traffic data with benchmarks on consumer activity can act as a compass to show what's likely to come.
3. Analyzing the Competitive Market
Similarly, a thorough understanding of a retailer's competition, especially the habits and interests of their customers, can provide developers with a competitive edge. Knowing how competitors are moving gives CRE property managers the knowledge to help prospective lessees understand how they could be impacted by competitors. For example, a major competitor might be trying to acquire its own customers with a new marketing campaign or fresh product. An analysis of the competitive market can result in a proactive campaign to help counteract the competition's overall strategy.
4. Go Where the People Are
Location intelligence can also help identify and predict movement patterns. By determining the places that people frequent or where they are permanently relocating to, CRE owners and managers can determine which areas of the country make for smart investments by retailers. To understand the movement patterns of the Great Relocation, we looked at the counties that gained and lost the most population since the beginning of the pandemic.
For commercial real estate property owners looking to build their portfolios, identifying markets ripe for investment through data-driven analytics is a smart strategy.
The 10 counties that gained the most population since the start of the pandemic are:
- Kent County, R.I,
- Worcester County, Mass.
- Canyon County, Idaho
- Cheshire County, N.H.
- Ocean County, N.J.
- Kent County, Del.
- Utah County, Utah
- Kennebec County, Maine
- Washington County, Utah
- Cass County, N.D.
The 10 counties that lost the most population since the start of the pandemic are:
- Cook County, Ill.
- King County, Wash.
- Los Angeles County, Calif.
- Chittenden County, Vt.
- Johnson County, Kan.
- Cumberland County, Maine
- Providence County, R.I.
- Suffolk County, Mass.
- Fairfield County, Conn.
- Multnomah County, Ore.
For commercial real estate property owners looking to build their portfolios, identifying markets ripe for investment through data-driven analytics is a smart strategy. For retailers looking to establish or expand their businesses, the same insight can indicate whether a site is likely to succeed or serve as a warning sign. Intelligently using data can improve any decision-making process.
Overall, location intelligence can help with all facets of commercial real estate. This data can help CRE professionals compare potential sites, match clients to the right location, and understand consumer activity. Such information increases a CRE property owner's or manager's chances of matching the right site with the right lessee and meeting the needs of residents and visitors, resulting in better outcomes for all.