Commercial real estate investors make long-term bets on the success of a property and area. How can these decisions be made with more confidence?
We see investors gaining a competitive edge by leveraging location data to understand:
- Near real-time migration patterns
- Surrounding area footfall & businesses
- Visitor demographic and psychographic profiles
By infusing data strategically at each point in the investment process, from macro themes to specific property insights, investors can become highly targeted and data-driven with their investments.
Four specific areas where location data supports investment teams that we’ll walk through in this guide include:
- Identifying macro migration themes to prioritize search areas
- Generating localized insights for out-of-state investments
- Understanding visitation trends and patterns in specific neighborhoods
- Validating a property’s performance
Identifying Macro Migration Themes
Investors generally have an investment thesis that informs their search area and property type.
Let’s say we’re a Multifamily investor focused on the Sunbelt states.
A key question for us might be: Where are people moving and creating demand for multifamily housing?
The Unacast Insights platform has near real-time information to answer this question with customizable time periods to understand both short- and long-term trends.
Below, we analyzed the cumulative net migration between Q2 2019 and Q3 2023 in the Sunbelt to look for which metros have net population growth since pre-COVID.
The data shows positive migration trends in:
- Mid-size metros in the Carolinas (Raleigh, Charlotte, Myrtle Beach)
- Coastal Florida (Jacksonville, Tampa, Sarasota)
- Large Texas metros (Dallas, Houston)
- Southwest desert metros (Phoenix, Las Vegas)
Just as important as the longer-term view is the near-term view. Where are people moving today?
Several of these longer-term shifts are reversing in the short-term. Between Q4 2022 and Q2 2023, large Texas metros have experienced net outflows and Florida has bifurcated into MSAs where growth has stagnated (Tampa, Fort Myers) and those that continue to grow (Jacksonville, Sarasota).
With these two views from the Insights platform, we can quickly and efficiently narrow our field of focus to places with long-term positive trends and short-term momentum, such as:
- Carolinas (Charlotte, Raleigh, Myrtle-Beach)
- Coastal Florida (Jacksonville, Sarasota-Bradenton, Naples)
- Phoenix, AZ
Investment teams can leverage this information to form data-driven insights about migration patterns in their search area to confidently move forward in the MSAs and counties that have favorable macro trends for their investing class.
Generate Localized Insights
A challenge for many out-of-state investors is getting a localized feel for a region.
Let’s say we want to better understand the local trends in the Charlotte, NC MSA that we identified earlier. This is easily accomplished by switching from the Metropolitan to Zip Code view in the Insights platform.
In Charlotte, recent migration trends (Q4 ’22-Q2 ’23) are generally positive in suburbs and negative around the downtown – a theme that is happening in many cities.
With this information as a base, we can start to explore the zip codes and get a better understanding of what’s happening at a more localized level than the MSA as a whole.
For example, south of downtown in zip code 28217, there’s positive net migration. These migrants are:
- Higher income than existing residents
- Younger than existing residents
- Predominantly moving from other Charlotte suburbs, suggesting this area might have favorable characteristics for locals
Higher earning, younger residents, and located near a downtown are generally good characteristics for multifamily housing as it suggests access to jobs, households without children, and the means to rent middle class or luxury apartments.
This information may then be used to flag the zip code as having high potential for deals or development opportunities.
Migration data fuels insights at a granular level to understand the movement of people across regions or areas, and it’s updated faster than most official sources.
The Insights platform shares not only these net migration trends, but also adds the layer of who is moving, which can be used to see localized trends, identify areas where the composition of the population is changing, and anticipate the new demand and services that might create.
With access to reliable and timely location data, investors can spot trends faster and act on them before the competition.
Understand Trends in Specific Neighborhoods
Neighborhood trends are front of mind for investors when thinking about the shifts in where people are spending time over the past 3 years.
Is this a neighborhood that was office-heavy and hasn’t yet recovered to pre-COVID footfall levels? Is the recovery of the neighborhood important to the success of the tenant in the property or do they draw customers from a wider catchment area?
These questions are particularly valuable and important to investors looking at retail properties that benefit from nearby workers being in-office (coffee shops, lunch spots, convenience stores, etc.).
Return-to-work rates have been uneven across cities and neighborhoods, and location data unlocks up-to-date information on how visitation today compares to pre-COVID levels.
Let’s say we’re an investor that falls into this retail investing category and have identified Raleigh, NC as a metro of interest. We want to understand which areas within the metro have “recovered” to pre-COVID footfall levels and which are lagging.
One proxy for understanding the recovery of office areas is to track visits to nearby gas stations, particularly in cities that are reliant on cars for transportation.
When people are coming to and from the area for work, we’d expect more visits. When people work from home, we’d expect visits to drop.
Two business hubs in Raleigh are the Research Triangle Park (RTP) and Downtown.
Through the Insights platform, we can analyze patterns in visitation at major gas station chains leading into these areas.
Specifically, we looked at the gateway roads into these areas – places that don’t have high surrounding area retail or residential that would drive additional traffic. This isolates, as much as possible, the commercial traffic flowing through.
Around RTP, the trend at gas stations tends to be that the COVID dip in visitation was more modest and the recovery faster. Many gas stations recovered to pre-COVID visitation – the orange dashed line – by late spring 2021 and sustained these levels for most of 2022.
Conversely, for stations near downtown Raleigh, there’s a steeper dip, a longer recovery, and the recovery has less “staying power”. Visitation so far in 2023 has been trending below 2019 benchmarks.
From this analysis, we may conclude that a retail property near downtown is ill-advised at this time because the recovery has been slower and more uncertain, or at the very least this uncertainty should be priced into the valuation.
Near RTP, we may have more confidence that a property will benefit from the regular flow of workers that will drive the required foot traffic to keep the tenant in business.
Changes to neighborhoods used to be incremental. COVID upended this virtually overnight and many neighborhoods today function differently than just a couple years ago.
Location data supports real-time insights to make decisions based on how the neighborhood looks today – not 3 years ago.
Validating a Property’s Performance
When an investor is evaluating a specific property, location data can validate the foot traffic to that location, the points of interest that surround it, and the broader health of the block.
This can provide the final layer of conviction that the property is attracting sustained foot traffic and the nearby area remains vibrant.
Let’s say we have a property of interest near RTP with Walgreens as a current tenant. What can location data tell us about this store?
First, we can understand the visitation trends to the store itself. Is the current tenant “healthy”? The data suggests yes. This Walgreens has maintained steady foot traffic with minimal disruption from COVID in early 2020.
Dynamic trade area information shows where these visitors live and work, and here it reveals that the location benefits from its proximity to the business park. A high share of visitors work nearby at RTP, emphasizing the importance of the health of the business park to the health of the store.
The visitors have mixed demographics, likely a result of the mix in age and income of office workers, which demonstrates a diversified customer base.
Zooming out from the location, investors don’t just buy a property; they buy into an area.
This makes the performance of nearby stores equally important. Is it a vibrant area or losing momentum? Are nearby stores drawing foot traffic and people to the area?
The nearby area to this location is anchored by two grocery stores, Sprouts and Harris Teeter. Unacast data shows that both stores have largely maintained or recovered foot traffic levels compared to 2019 benchmarks.
Next to the Walgreens is a Mattress Firm, which is trending slightly below 2019 levels but not materially. At the corner of the intersection is the Circle K we referenced in the earlier analysis.
From an investment perspective, these are positive signals for both the retailer’s long-term sustainability and track record as well as the health of the area that surrounds the location.
Location data unlocks insights about an area that were previously inaccessible. These insights drive higher confidence for the investment team that the property is healthy and the area remains vibrant.
Final Thoughts
Investors are constantly seeking an edge in proactively identifying market trends, out-selecting competitors on locations, and ultimately generating above-market investment returns.
Location data supports better commercial real estate investments through:
- Revealing near real-time migration trends
- Gaining value-add insights on a location’s performance and potential
- Vetting the area around the investment to understand neighborhood trends
This information, combined with the domain knowledge and expertise of the investing team, gives commercial investors an edge in the highly competitive real estate market.
