RTAF Retail Model

Purposes:

  • Assess market feasibility for economic uses and type of development at specific sites
  • Define target industries to attract to a community or development projects
  • Determine market potential/recruitment targets for commercial districts
  • Improve understanding of customer markets for existing businesses to inform technical assistance and promotion work
  • Inform zoning and project design for land use, project and site planning
  • Feasibility analysis and planning for development finance institutions

Quantitative and qualitative methods applied in four broad steps:

  • Demand side analysis
  • Supply side analysis
  • Analysis of special conditions, opportunities and market segments
  • Integrate analysis to define target markets, type of development/products/services to implement, and level of unmet demand (e.g. net warranted space for retail uses)

Critical goal is to identify underserved market demand and market gaps to fill

Demand generators (and analysis) varies by use:

  • Retail demand is driven by local income and spending
  • Office and industrial real estate demand is driven by business and employment growth
  • Demand for financial services can be driven by demographic factors, e.g. concentrations of low-income and immigrant population, or needs among niche businesses or non-profits

Supply side analysis also varies by development type and purpose:

  • Retail market analysis focuses on competition from existing and future stores
  • Office and industrial analysis focuses on competition from current vacant space and future projects
  • Development finance market focuses on services and competition from banks and alternative financial institutions

Demand Side Analysis

  • Define market or trade area
  • Determine number of households and total household income (US Census Data, BEA Population & Income Estimates)
  • Estimate spending for different product and store categories (Consumer Expenditure Survey)
  • Can build more complex spending model tailored to different income and demographic groups
  • Adjust for likely market share/capture rate based on competitive differentials (site locations, size and quality of competing centers, and normal leakage.
  • Estimate square feet of retail space supportable by resulting sales (Dollars and Cents of Shopping Centers)

Supply Side Analysis

  • Identify competing stores in and near trade area
  • Assess competitive differences between site and competing stores. Consider store location, access, size, and quality in defining competitiveness.
  • Consider planned or potential stores that may enter the market area—national and regional retail trends are important
  • Based on this data, estimate the market share of trade area sales that a planned type of store at the site could achieve
  • Calculate the dollar value of this market share
  • Translate this sales level into supportable square footage. Use industry data on average sales per square foot for comparable stores.

Analysis can be tailored to focus on demographic groups served by the store or site.