Location data gives us unique insights into how behavior and markets are changing: where people are spending time, the impact of COVID and e-commerce on different neighborhoods, and suburban vs. city retail trends.
We dove into this data to uncover key real estate market trends and their implications for industry participants.
Our three most interesting real estate trends are:
- Foot traffic recovery in office-heavy neighborhoods is diverging between the “haves” (Sunbelt cities) and “have-nots” (coastal cities).
- Targeted brick-and-mortar anchor retail tenants can continue to drive foot traffic even in the eCommerge age.
- The revival of the suburbs is driving demand outside city centers.
Read on to learn more about these current real estate trends and the location data that identifies them.
Diverging Recovery of Office-Heavy Areas by Market
Return-to-office levels have been a closely tracked metric in the real estate industry. As workers start returning to office buildings, the benefits cascade throughout the neighborhood.
Owners of office buildings benefit from return-to-office, as do owners of surrounding retail and multi-family properties. More time at the office means more purchases from nearby retailers and more demand for living in these areas.
To understand office-driven foot traffic patterns, we created a foot traffic index for office-heavy areas in large urban counties to compare the current state of the market to pre-COVID.
Specifically, we combined Unacast visitation data with white collar jobs data to identify high-employment neighborhoods and analyzed the changes in foot traffic in these neighborhoods between 2019 and 2023 for the most recent three months of data (August to October; see Methodology for detail).
We found that the foot traffic performance varies significantly by market. The best performing market was Miami-Dade, where office-heavy neighborhoods are trending 38% above 2019 levels. The worst performing market was DC, which is trending 40% below 2019 levels.
This largely connects to broader macro themes that have emerged since COVID. The Sunbelt — places like Florida, Texas, and Arizona — are rebounding faster while coastal cities like New York, Philadelphia, DC, and San Francisco are lagging.
We see these localized trends continuing over the coming years. There is less uncertainty in the market today than 1-2 years ago, suggesting that the direction of current benchmarks (above / below pre-COVID) are likely to remain for the foreseeable future.
As investors consider properties in office-heavy neighborhoods, location data to understand the vibrancy of the local market is critical to assessing property value and attractiveness.
Not all Retail Tenants are Created Equal
Anchor tenants are tenants that drive foot traffic to shopping centers and neighborhoods. These tenants are typically large, well-known national retailers with strong brands.
However, trends change and anchor tenants might look different today than in previous years. Department stores like JCPenney and Macy’s that were previously strong anchor tenants are no longer the draw that they once were.
We analyzed several large retailers to understand which are trending up, which are flat, and which are trending down in 2023 compared to 2019.
We found that even in the age of digital shopping, many brick-and-mortar retailers remain prominent draws. Brands like Barnes and Noble, Target, ULTA Beauty, and Apple are growing their visitor traffic, in addition to home improvement retailers Lowe’s and Home Depot.
Big box stores like Best Buy, Macy’s, Nordstrom, and Kohl’s, while not fast-growing, are continuing to hold visitor traffic at their stores.
Petco and PetSmart, despite the rise in pet ownership during COVID, are the only brands in our analysis to have lower visitation year-to-date in 2023 compared to 2019.
Layering in average visitation to the stores, we find Apple, ULTA, and Barnes & Noble tend to have lower average visitation within the Gaining group while the home improvement stores and Target combine higher visitation growth with higher visitation volume.
Brands like Walmart, Nordstrom, and Bass Pro Shops combine higher visitation volume with stable visitation change.
We continue to see in the data that online shopping is complementary to, not a replacement for, brick-and-mortar shopping.
While real estate investors may have feared that Amazon would jeopardize the value of their investments, the data shows that aligning with anchor tenants that have successfully transitioned to the modern retail era will continue to drive foot traffic to a property or shopping center.
The Suburban Revival
Our data consistently shows that downtown centers are lagging at the expense of the suburbs. Even if return-to-office rates reach 80-90%, this still leaves 10-20% of the population dispersed through the remainder of a metro area. At the very least, hybrid schedules mean return-to-office doesn’t look like 5 days sitting in a city center office.
This has led to both migration and visitation patterns moving outside city centers. Let’s take Philadelphia as an example. Our office foot traffic index showed that Philadelphia was the second worst performing metro at ~67% “recovery.” What does this look like in practice?
We analyzed the data for Philadelphia County, home to the city center and its surrounding area. In the image below, we mapped different areas by their relative difference in foot traffic in 2023 compared to 2019 from January-October.
A couple of areas to pay attention to on this map:
- The dark red in the downtown center, suggesting the worst performance in the county.
- The shades of blue, indicating good foot traffic performance, are much more prominent in the surrounding suburbs.
These are signals that the foot traffic changes are more positive outside of the city center than they are inside the city center.
While the whole city center isn’t lagging equally, some areas are as low as ~50% of their pre-COVID values, while some areas in the suburbs are 2x and 3x pre-COVID levels.
As real estate investors and developers consider the best uses of their capital over the coming years, we see higher upside in the commuting suburbs into urban city centers where a hybrid in-office schedule is feasible compared to the traditionally stable urban investments.
Location data adds novel insights to the real estate industry by helping investors, landlords, and industry participants identify and quantify trends.
As the cost of capital increases, the need for certainty rises too. Investors are looking for any advantage to continue to find profitable long-term real estate investments.
Unacast supports real estate investors by providing clean, easy-to-access location data to understand trends and analyze markets.
To learn more and explore the Unacast Insights platform, book a meeting with us.
To create our foot traffic index, we began by identifying the counties with the largest number of jobs in addition to other key US markets. We then sourced the number of jobs by block group using the LODES government data set and isolated jobs in NAICS 51 (Information), 52 (Finance and Insurance), 54 (Professional, Scientific, and Technical Services), and 55 (Management of Companies and Enterprises).
We extracted the top 2.5% of block groups in each county by total number of jobs in these professions, which represented 55%-80% of the employment depending on the market. We consider these to be “office-heavy” areas.
A representative map of the block groups included for Suffolk County (Boston), MA is below.
For each block group that fit our definition of office-heavy areas, we sourced foot traffic data for the median daily visitors to each block group using the Unacast Insights platform for the most recent three months (August-October, 2023) in addition to the same period for 2019.
We aggregated the numbers across each year to develop the foot traffic index. A number above 1 indicates that median daily visitors is higher in 2023 than 2019, and a number less than 1 indicates that median daily visitors is lower in 2023 compared to 2019.