Commercial Property News - November 2008 - (Page 30)

DUE Diligence New Math Do Retail Demographics Need a Fresh Look? By Paul Rosta ith the economy’s turmoil causing consumers to tighten their hold on their wallets and leading retailers to pull back on expansion plans, to shutter stores and in some cases to declare bankruptcy, those retailers that are still opening stores should be looking at data differently than they used to. Conventional wisdom usually blames the demise of retailers on causes that can range from overexpansion and subpar leadership to a sputtering economy. For those with a stake in retail real estate, though, the situation presents an opportunity to examine all aspects of strategy,including demographics. “It’s time for it, and (retailers and others) are going to be doing it,” speculated David Jacobstein, a senior advisor for Deloitte & Touche W household incomes of, let’s say, $75,000 a year no longer mean as much as they once did,”he pointed out. Retail owners and investors will want to seek out markets that offer not only long-term growth potential but also qualities that will enable them to prevail through the slowdown. So rather than considering income alone, retail decision makers need to look at more nuanced metrics to determine a market’s long-term potential. Nielsen Claritas, for example, SAFETY IN NUMBERS Munoz bases his assertion in developed a broad-based metric part on the stark realities of the that measures an area’s affluence economy. For instance, household by averaging three related but sepincome, a tried-and-true indicator, arate measurements: annual houseis now a less reliable metric than it hold income, home value and eduwas before the credit crunch. cational attainment. Each of the “With many households upside three contributes a different perdown on their mortgages and spective on the household and on overextended on consumer credit, the market. For example, a college or graduate degree is itself strongly linked to affluence, but it also increases the chances of 25 MOST AFFLUENT U.S. MARKETS getting or keeping a job TOP METRO CITIES 2008 Affluence at a time when unem(population of at least 200,000) 2008 Affluence Core Based Statistical Area Population Index ployment may be headCore Based Statistical Area Population Index Los Alamos, NM 19,258 174 ed for 10 percent. San Jose-Sunnyvale et al, CA 1.8M 164 San Jose-Sunnyvale et al, CA 1.8M 164 Washington et al, DC-VA-MD-WV 5.4M 163 An above-average comWashington et al, DC-VA-MD-WV 5.4M 163 Oxnard-Thousand Oaks-Ventura, CA 820,716 161 bined score for the three Oxnard-Thousand Oaks-Ventura, CA 820,716 161 Bridgeport-Stamford-Norwalk, CT 901,429 157 factors strongly suggests Bridgeport-Stamford-Norwalk, CT 901,429 157 San Francisco-Oakland et al, CA 4.3M 155 a heightened chance San Francisco-Oakland et al, CA 4.3M 155 for retail potential. But Vallejo-Fairfield, CA 421,678 153 while affluence is an Silverthorne, CO 27,334 152 TOP METRO TOWNS Edwards, CO 59,428 150 important issue, by itself (population of 50,000 to 199,999) 2008 Affluence Napa, CA 136,092 147 Core Based Statistical Area Population Index it may not represent San Diego-Carlsbad et al, CA 3M 146 Edwards, CO 59,428 150 enough for a retail stakeSanta Rosa-Petaluma, CA 476,532 145 Napa, CA 136,092 147 holder to take action. Santa Cruz-Watsonville, CA 256,515 144 Truckee-Grass Valley, CA 101,146 143 Munoz suggested that Jackson, WY-ID 27,816 143 Kahului-Wailuku, HI 144,043 137 developers and investors Boulder, CO 287,642 143 Lexington Park, MD 101,831 135 will be more likely to Truckee-Grass Valley, CA 101,146 143 look for safety in numBoston-Cambridge-Quincy, MA-NH 4.5M 142 TOP MICRO TOWNS bers while the market is Honolulu, HI 918,194 142 (population of 10,000 to 49,999) 2008 Affluence reviving.Thus, larger marSacramento-Arden et al, CA 2.1M 141 Core Based Statistical Area Population Index kets tend to offer more Juneau, AK 30,704 140 Los Alamos, NM 19,258 174 security than equally Gardnerville Ranchos, NV 47,589 137 Silverthorne, CO 27,334 152 Kahului-Wailuku, HI 144,043 137 affluent yet much smaller Jackson, WY-ID 27,816 143 New York et al, NY-NJ-PA 18.9M 136 markets. Juneau, AK 30,704 140 Seattle-Tacoma-Bellevue, WA 3.3M 136 To a large extent, that Gardnerville Ranchos, NV 47,589 137 Lexington Park, MD 101,831 135 derives from the usual The Nielsen Claritas Affluence Index combines indices of household income, home value and education level. The national averlink between size and age equals 100. The information in these charts, as well as other research, will also appear in a Nielsen Claritas white paper. wealth, but it also stems Source: Nielsen Claritas from a much-discussed USA L.L.P., who served as president & COO for Developers Diversified Realty Corp. from 1999 to 2007. “They’ll take the opportunity to look at how they’ve analyzed the market before.” SPECIAL No one is suggesting tossing out the baby with the bath water,of course. Retailers, for example, employ sophisticated modeling techniques that consider such information as existing market sales, population, education levels and ethnic composition.And those indicators will continue to influence retail decisions. Still, some experts are already recommending a fresh approach to demographics that better addresses the peculiarities of the downturn and the economy’s eventual recovery. “In general, retailers, investors CPN Nielsen Claritas and developers must look beyond traditional demographic indicators,” declared Terry Munoz, vice president & practice leader of the retail, real estate and restaurant industries for national R E P O R T marketing infor mation source Nielsen Claritas, CPN’s partner in this series of special reports and,like CPN,part of The Nielsen Co. WEALTH MAGNETS 30 COMMERCIAL PROPERTY NEWS • November 2008 • www.cpnonline.com http://www.cpnonline.com

Table of Contents Feed for the Digital Edition of Commercial Property News - November 2008

CPN - November 2008 Contents Starting Line Seniors Housing Data/Analysis Conferences Through the Fog CPN’s Top Cities for Investment & Corporate Relocation Finance International Sustainability CPN-Nielsen Claritas Special Report

Commercial Property News - November 2008

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