Unacast works with a lot of people in the commercial real estate world, brokers, investors and operators included. One group we work with often are CRE brokers interested in retail properties.
Typically, they will ask us how to use our data to answer big, though common, questions in assessing the viability of a trade area, or potential investment property. In this post we’ll address three questions we field from CRE Brokers about retail properties:
- How do changing migration patterns impact total buying power for visitors in this trade area?
- How can I prove an area supports demand for more affluent clientele and up-market retail tenants?
- In light of the above, how can I better assess a potential investment property?
1. How do changing migration patterns impact total buying power for visitors in this trade area?
In terms of changing migration patterns, there are two key indicators to look for: 1) a growing population in a given area (TAM growth), and 2) a population with a rising median income (greater individual buying power).
Pulling the data from Unacast Insights is easy. Just open the app, click on the Zips tab, and you can easily pinpoint areas with a growing population. By clicking on any of them, you automatically get a net population flow, as well as average median age and income for people that have moved here.
So, if the area is growing, as in the example below, and average median income is increasing, the simple equation to calculate growth in buying power in any given area is: (Net Population Flow) x (Avg. Median Income Increase) = Change in Buying Power.
Using the example of the 11239 zip code in Kings County, New York, we can see a Q1 2022 through Q2 2023 net population flow of +581 people (+4.5% total), composed of people earning a little less than $61,000 on average. That’s good growth -- let’s go a little deeper.
By clicking on the View More Details button, we can see that the average person already in the 11239 zip code earns just under $34,000 per year.
Using our base equation above, that is (581) x ($27,000) = $15,687,000 positive change in buying power in this small area in the last 18 months. That answers question #1 — people and money are moving here.
2. How can I prove an area will support affluent clientele and up-market retail tenants?
Picking up where we left off, above, let’s click on the View More Details button that lets us prove that newcomers here are making approaching 2x the embedded population’s average income. In this same window, we can see that population growth here has been consistent since before Covid, and the trend line remains positive.
We can also see that the people moving here are consistently much younger (31 vs 46 years old) and more affluent on average than embedded residents. In short, this is the rare empirically demonstrable example of a modern regentrifying urban area in the U.S. Affluence is a relative term, but no question it is growing here.
All of the above leads us to believe that there is significant opportunity for new retail brands to enter this market. That means they will require new or redeveloped properties of suitable location and amenities. A great place to find such a property is in an area that our ideal retail consumer profiles are already spending time as part of their work or home routine. Which brings us to question #3.
3. How can I better assess a potential investment property?
The easiest way to assess a given address or property is to click on the Venues tab of Unacast Insights. The view will update to show you a bunch of pins, representing locations we track mobility for (you can also use custom polygons; ask us).
The consumer profiles of Educated Urbanites, Young Urban Singles and Near-Urban Diverse Families are all in our wheelhouse for newcomers with greater relative buying power (more below).
Now, we just have to find a venue that a lot of people visit in order to get a sense of if our ideal profiles already congregate here.
Everybody needs shoes, so let’s pick the Payless ShoeSource at 1360 Pennsylvania Avenue, about in the middle of the 11239 zip code. It’s in a little plaza, nothing fancy, just off a main road and close to the Fresh Creek Nature Preserve.
Right off the top, we see three ideal retail consumer profiles in the Top 5, as well as a bonus: Wealthy Suburban Families.
Young Urban Singles are right at the top of the list -- these are likely one person households, with a college degree, just getting started in a career; as such, they will be of increasing means in the future. We also see Near-Urban Diverse Families visit here (probably homeowners, or future homeowners, with children), and the omnipresent Educated Urbanites, who are well-educated and earn about 3x what the average current resident of this zip code does (they like nice stuff; good for CRE Brokers interested in upscale retail).
So, as to the question, “How can I better assess a potential investment property?” The answer is: study the combined effects of population growth (migration), change in buying power (median income), and evolving consumer profiles (foot traffic and venues visited).
In Summary
Here are the four main takeaways CRE Brokers who work with retail properties can walk away with:
- Changing migration patterns can impact total buying power. Two key indicators are population growth and rising income. (Net Population Flow) x (Avg. Median Income Increase) = Change in Buying Power.
- Proving support for affluent clientele and up-market retail tenants is easy - By comparing the income and age of newcomers to embedded residents you can establish relative change in affluence. The example above highlights an urban regentrification trend, suggesting opportunities for more up-scale ventures.
- Better assessment of retail investment property means understanding visitors - By analyzing foot traffic and consumer profiles, CRE brokers can gain insights into the potential success of investment properties by understanding who already visits a given retail trade area or specific location.
- Unacast Insights can help answer these and more questions in detail. CTA
