The trade area for a shopping center should be assessed regularly to see what factors of retail attraction are changing in the overall location.  That assessment should be part of the retail business plan for the property.

Having worked with many shopping centers as part of improving property performance and tenant offerings, I have always started the process through an analysis of the local area, the competing properties, and the customer demographics.  The systems and the skills that you learn in doing this will help greatly when it comes to later selling the same property.

What Can Change in Retail Property Performance?

Things change in retail property performance.  The economy and the customers will shift and change retail shopping patterns during the year.  On that basis your retail tenant mix has to be carefully shaped over time to give variation to customer interest.  Ultimately you want customers to return to your property regularly; the tenant mix will help do that.

The depth and consistency of the tenant mix will attract customers.  On that basis you can track customer numbers and interest.  Getting the sales numbers from retailers will help you in understanding what businesses are more successful than others.  From that point you can start clustering tenants into groups that support complementary sales.  You can do that very well in merchandising categories such as:

  • Fast Food and Take away
  • Fashion (mens, ladies, children)
  • Sporting
  • Travel goods
  • Convenience Food
  • Homewares and Lifestyle
  • Medical/Dental/Pharmacies/Optical

The concept here is that any single tenancy should not be sourced and placed individually.  Care should be taken in looking at the overall clusters around any vacancy.

Taking this a bit further you can look at competing properties and how they are impacting your customer visits and retail sales.  To do a trade area analysis you can consider and gather the facts around the following categories:

  1. SIZE: Compare your property in size to others locally.  The size of your property will have an impact on anchor tenant placement, lease terms, and specialty tenant profiles.  Is your retail property convenience based, or is it a property that supports specialty retail and regional retail shopping interests?  To answer those questions you may need to do a customer market survey.
  2. ROADS AND TRANSPORT: How are people getting to your property and why are they visiting.   The configuration and convenience of transport systems and roads will impact foot traffic and repeat visits.  Customers will keep coming back to your retail property if the experience your property provides to people visiting is a positive one.
  3. CAR PARKING: The car park at your property should be large and well laid out.  Is it easy for people to move from their car into the property?  Is signage, security, and lighting adequate for practical car park use?
  4. TENANT MIX COMPARISONS: Look at competing properties and assess the tenant mixes in each case.  That assessment will include shop numbers, gross lettable areas, anchor tenant types and brands, specialty tenant offerings, and tenant numbers per merchandise group.  Some retail properties will be biased towards food, or convenience; other properties will be biased towards specialty and destination retail.  What type of tenant mix should your property have?
  5. SALES PER MERCHANDISE GROUP: Understand the sales ratios per merchandise group in your property.  A few merchandise groups will stand out as important to customer interest and overall sales.  From that point you should consider an active strategy of clustering around key performing tenants.
  6. ANCHOR TENANTS: Some anchor tenants will be more valuable than others.  The leases for anchor tenants are longer and the rents are generally structured on a base rent plus a turnover rent.  As the anchor tenants start to drive more business to the property, the landlord benefits from improved rental returns.

So there you have it.  The ‘bones’ of getting a trade analysis underway for your retail shopping center.  You can add to the list in a number of ways based on your location, and the property elements of special consideration.


    1 Response to "Retail Shopping Center Managing Agents – How to Do a Trade Area Analysis"

    • Michelle Higbee

      This article really made me think about parking layout and the impact it has on access and repeat visits to any commercial center.

Comments are closed.