INVESTMENT ANALYSIS
By Jeff White
FOOT TRAFFIC JAMS
For retailers looking to succeed in a post-pandemic market , understanding traffic patterns and demographics is vital .
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
Using advanced foot traffic data derived from location analytics along with other CRE data allows companies to gain actionable insights into market trends .
owners and managers , transparent information regarding the storefront can lead to longer-term leases and reduce tenant churn .
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 .
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE FALL 2022