Real Estate Market Analysis Methods and Case

Studies

Deborah L. Brett
Adrienne Schmitz

CHAPTER 5 RETAIL

KELOMPOK 5:

Octavia Olga 09211650024003

Rahmawati 09211650024007

MAGISTER MANAJEMEN TEKNOLOGI

MANAJEMEN PROYEK
INSTITUT TEKNOLOGI SEPULUH NOPEMBER
SURABAYA
2018
Retail Sector
The Census Bureau and the ICSC classify stores in two main groups:
 G A F O : acronym for stores selling General merchandise (discount and conventional
department stores, warehouse clubs), Apparel and accessories, Furniture and home
furnishings (including electronics), and Other goods (specialty shops selling books,
toys, jewelry, sporting goods).
 Convenience stores : include supermarkets and other food stores (such as bakeries or
fruit and vegetable markets) and drugstores. Home improvement, hardware, and
building supply stores are usually classified as convenience stores.
 Restaurants and bars : are also considered to be convenience purchases. The Census
Bureau identifies two main types of restaurants: full service (where patrons are served
by waitstaff and pay after they finish their meals) and limited service (where patrons
order and pay before eating)

Purpose Do Retail Market Study

 Shopping center developers use market studies to shape the nature of their proposed
projects, attract the interest of prospective tenants, win needed approvals from the
community, and secure financing.
 Local governments use retail market studies when preparing redevelopment plans for
busi-ness districts or older shopping centers and in determining the feasibility of tax
increment financing programs.
 Market studies are prepared as part of the due diligence process for investors in New
Market Tax Credits for commercial revitalization projects.
 Economic development agencies use market study data to attract prospective retailers
to their communities.
 Real estate departments at chain retailers and franchisers use market data to create
profiles of top store performers, thereby providing guidance for future location
decisions. They also study demand demographics and competitive store inventory when
deciding whether to enter a mar-ket where they have not yet been represented.
 Prospective anchor tenants will often conduct their own market studies because their
decision-making criteria are different from a developer’s. A developer’s profit is based
on achievable rents, occupancy, and operating expenses for the entire center. A store is
most concerned with whether it can draw its target customer base and generate the sales
levels that will make the location a good performer.
Trends in shopping and spending

 Restaurant did well

 Computer stores showed poor sales growth
 Building materials did well
 Department stores showed declines because many online store or non store retailers.

Types of Shopping Centers

 Neighborhood centers : sell convenience goods (food, drugs, cards) and provide
personal services (dry cleaning, banking, package shipping, hair and nail care).
 Community or super community centers ex: Home improvement, hardware, lawn
and garden, and gift stores
 Power centers : These open-air centers tend to be in locations near large malls ex:
club warehouse
 Outlet centers : are collections of discount stores directly operated by brand
manufacturers or store chains. Ex: FO
 Regional centers : focus on general merchandise, apparel, furniture, and home
furnishings
 Super regional malls Ex: movie theaters
 Town centers are open-air, walkable neighborhood business districts, suburban
downtowns, and small-town retail ex: pharmacies
 Value-oriented “hybrid” malls : combining large discount and off-price anchors
with smaller factory outlet stores
 Lifestyle centers : are tenanted with the upscale apparel, housewares, and gift shops
often found in regional malls, as well as restaurants, specialty food stores, and
entertainment (movie theaters, music venues)

Trends in Shopping Center Supply and New Construction

Developers are now building very few enclosed super regional malls, for 5 reasons:
 They require many years of advance planning, including a lengthy (and often
acrimonious) public approval process.
 They are rarely finished within two years of ground breaking. General economic
conditions, as well as the financial stability of key tenants, can change dramatically
during that period.
 Owing to mergers and consolidation, there are simply not enough department stores
chains available to fill four or more anchor spaces.
 Most metropolitan areas do not need more regional mall space.

Store Mix in Shopping Centers

  In a regional or super regional mall, the full-line department stores are referred to
as the anchors.
 Anchors might also be entertainment centers or large specialty stores. As indicated
previously, most regional or super regional malls have three or more anchor
tenants.

The Importance of Key Tenants

In a retail market study, the analyst may be asked to come up with a specific list of
tenant prospects that make sense for the project based on their store requirements (store
size, street frontage, population density, access, median household income). The analyst
must answer the following questions:
• What anchor tenants are not already represented in the market area?
• Which ones are looking to expand in the area?
• Which ones would be appropriate for the proposed center (given the size of the center,
its available spaces, and the characteristics of trade area households)?

A good location for one type of retailer may not be a good location for another
For example:
• A power center located on a busy highway is appropriate for a destination-type
tenant such mas a home improvement warehouse. The home improvement store
that locates in a super community center or a big-box power center will be
interested in the center’s visibility, ingress and egress, the ease of vehicular
movement, and the availability of space for loading bulky or heavy items.
• An upscale department store such as Neiman Marcus or Saks Fifth Avenue wants to
be located near other high- fashion shops that cater to an affluent clientele. They
will be attracted to suburban malls in high-income suburbs or to urban
business districts that draw international visitors. Upscale retailers are very
concerned about a mall’s lighting, signage, architecture, layout, and finishes.
Valet parking is an attractive amenity.
• A supermarket needs ample parking; because it draws large numbers of frequent
shoppers, the ability to get in and out of the parking lot quickly and easily is
very important. So is security, because many shoppers visit after dark.
 • Many store chains have preferred co-tenants; it will be easier to persuade them to
sign a lease if other stores that cater to the same demographic profile have
already committed to a proposed center or have been successful at an existing
center.

Defining the Trade Area

• Analysts typically refer to “trade areas” rather than “market areas.”
• The location of competitive retail agglomerations influences the size of the trade area.

Trade Area Modeling

• Choosing an analytical approach depends on the needs of the user—developer, lender,
investor, retail store, or public sector agency— and the resources available to
complete the market study.
• Gravity Models : demographic data on market size, geographic distance between store
locations
• Drive-Time Models : Road Types, Speed limits, customer Location, Traffic capacity

Key Steps in the demand analysis

• A review of metropolitan area economic conditions
• Examination of population, household
• Analysis of household, family, and per capita
• Income
• An examination of sources of patronage other
• than the resident population
• Calculation of expenditure potential based on lifestyles

Using Shopper surveys

 Store credit card holders
 Surveys visitors
 Telephone surveys
 Merchant associations
 Stores offer discount coupons

The Supply Side

• Provide background information on retail market conditions in the county or

metropolitan area, looking at trends in total space inventory, rents, vacancy, and net
absorption
• Identify the location of similar properties within the primary trade area and near its
perimeter.
• Estimate the share of potential sales that couldbe captured by the proposed
development given its planned mix of spaces and store types, and the strength of its
location