Retail Site Selection Variables, Part 1

Posted by Rickey Hayes on March 4, 2013 in Blog | 2 Comments

Written by
Rickey Hayes
Retail Attractions, LLC

Our company spends our waking hours helping communities, developers, and retail and restaurant clients find and develop the right retail sites. Site selection is an extremely specialized field. Cities across the country are competing for new retail sites and the sales tax revenue that comes with them. It is obvious if you consider discussions with city administrators and elected officials that most city leaders don’t really comprehend the myriad layers of site selection criteria. It is even more remarkable that many real estate professionals, including investors, brokers, and sales associates know very little about what drives the retail community to “pull the trigger” on a particular site. Picking a retail site is completely different from site selection for manufacturing and industrial uses. With the current instability in the national, state, and local economy, finding the right site is more crucial than ever to corporate and franchised retailers and restaurant outlets.

Since our core business is assisting cities in defining, validating, and marketing their trade area to national retailers, we see many trends in local economic development that are disturbing, and some that are even comical. Retail is not rocket science. So what do retailers and those that represent them look for when they need to grow? The obvious thing is that they are looking for a good, solid return on their investment. This is the foundational bedrock of every dollar that is invested. They are looking to make a profit. Retail is changing, and the way people purchase goods and services is changing. City leaders should retain the services of a qualified, independent, third party to keep them on the cutting edge of the retail world.

Obviously retailers and retail real estate and site selectors use various forms of demographic data to confirm and validate market strength. Retailers use data manufacturing and industrial site selection professionals do not use. Very sophisticated data and various types of financial modeling are utilized. Cities that put together marketing materials to attract retailers many times don’t know that the retail world already has access to the data their community is attempting to provide. Cities also need to know that the data the retail world uses is several layers deeper and more technical than the census data. I am not saying the basic demographic data available to communities is not useful. What I am saying is that restaurant and retail tenants sometimes key on demographic information that cities wouldn’t even have at their disposal, such as sales volumes of other owned brands and intelligence about their competitors.

National retailers and restaurants usually have some fairly precise pro-formas and new store sales projections and many times already know what sales volumes their competitors are doing in a market. They also analyze all existing and planned retail shopping areas, especially high traffic corridors. Total annual retail sales in a market are assessed as well as they provide a clear view of the depth of a market and add credibility to a market. The spendable income in a community and more importantly in the potential trade area is always an important piece of information in the new market growth of retailers.

Data on the latest traffic counts is crucial and has to be up to date and very precise. Defining the traffic patterns in a community and the planned improvements to that transportation infrastructure is something that retailers don’t always know. Communities that desire retail growth in their markets should always be looking to make ingress and egress into retail corridors easier, safer, and more efficient. Another key piece of data that forward thinking communities will (or should) be able to provide is planned commercial or residential development in an area of the market.

Maybe the most key piece of data to retailers is the trade area data, especially the population density and growth projections. Most leases are done on a ten year scope. Retailers and restaurants need to feel fairly comfortable that growth trends that are exciting now continue or grow even more over the ten year window. Sharing data that substantiates population growth, economic stability, and retail growth in a market over the ten year window is always beneficial to private sector investors.

In the next post, I will discuss the more intricate information retail site selection professionals are looking for in a market.

Rickey Hayes is the principal of Retail Attractions, LLC, a firm dedicated to helping cities and developers successfully find retail sites, close deals and improve the quality of life for our client cities.

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