Retail Density: Apples to Oranges
Monday, July 27th, 2009
Over the past decades I have worked in almost every major metropolitan area in the United States. In this capacity I often encounter reports that the subject market is significantly under stored. While doing my market research I am always amazed to find newspaper articles reporting that a market has significantly less retail space than the national average which always turns out to be wrong. So, I will share some insights into one of the biggest myths in the retail real estate industry – “my market has significantly less retail space than the national average”.
The proliferation of this myth falls right into the lap of an uninformed media which appears to want to take a position of supporting growth or showing that an area is over stored with retail space. This is because of the rapid expansion of power centers in the 1990s; lifestyle centers after 2000; and free standing mega stores in recent years have all contributed to a crowded retail landscape. Therefore, in an attempt by the media to quantify the amount of retail space and to compare the density of retail in one market to another, retail space per capita has been used as a common indicator. However, our analysis concludes that these types of numbers are among the most misquoted and misunderstood data points in the analysis of retail real estate. The problem is like the old joke – “one lies and the other swears to it”. In this case, retail space per capita is the number that is often, if not almost always, reported inaccurately and then the next article repeats it all over again and before you know it, you have a fact that everyone relies on. But, when comparing vastly different markets and using so called national averages one may end up with nothing more than a comparison of apples to oranges.
The most commonly used database on retail space comes from The National Research Bureau (NRB); however, they only include shopping centers and not the total of all retail space. Consequently, shopping center data has often been incorrectly used as a total for all retail space and then compared to the local population to generate a per capita number. In brief, the retail space per capita that is often quoted is actually shopping center space and not retail space.
This type of comparison works well as a barometer across the United States, but it is highly inconsistent when using it as a source of retail density in major urban areas that have a large amount of retail not located in shopping centers.
According to many, NRB[1] is the premier provider of retail real estate information in the U.S. Its database of information contains information on over 40,500 shopping centers which is the most comprehensive and detailed information source on U.S. retail properties available. Likewise, NRB has prepared the Shopping Center Census for the past 20 years, which is published by the International Council of Shopping Centers (ICSC) and by the U.S. Department of Commerce / U.S. Census Bureau in Statistical Abstracts of the United States. The NRB census is widely considered the authoritative source to calculate the retail area per capita. While the NRB is an excellent source for shopping center gross leasable areas (GLA), it is insufficient when analyzing per capita GLA for urban areas for a number of reasons.
Tags: Florida, GLA, ICSC, leasing, lifestyle center, Miami, NRB, real estate myths, retail space per capita, square footage
Posted in Real Estate, Real Estate Development, Retail, Shopping Centers, Specialty Retail | 1 Comment »