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Retail Property Feasibility Analysis

December 13, 2012

Gary M. Ralston, CCIM, SIOR, CPM, CRE, SCLS

Coldwell Banker Commercial Saunders Ralston Dantzler Realty


Lakeland, FL

(863) 877-2828
Gary@SRDcommercial.com

Gary Ralston
Gary M. Ralston, CCIM, SIOR, SRS, CPM, CRE, SCLS, is a managing partner of Coldwell Banker

Commercial Saunders Ralston Dantzler Realty, LLC the premier commercial services provider
in Central Florida (Polk County). He is a recognized subject matter expert on retail and
commercial properties. His consulting assignments include handling Florida REO properties for
one of the nations largest special servicers of small commercial loans. He also serves as a
principal of a retail build-to-suit development and investment company.
From the early 1990s to 2004 Gary was the president and a member of the board of directors of
Commercial Net Lease Realty, Inc. (NYSE:NNN) the industry leader in single-tenant corporate
net-leased real estate. During that time he guided the company's growth from less than $15 million in real estate
assets to over $1.5 billion.
Gary holds the Certified Commercial Investment Member (CCIM), Society of Industrial and Office Realtors
(SIOR), Specialist in Real Estate Securities (SRS), Certified Property Manager (CPM), Counselor of Real Estate
(CRE) and Senior Certified Leasing Specialist (SCLS) designations and is also a Florida licensed real estate
broker and certified building contractor.
Gary is a senior instructor for the CCIM Institute and a member of the board of directors of the CCIM Institute
and CCIM Technologies, Inc. He is a Past President of the Florida CCIM Chapter. Gary is a full member of the
Urban Land Institute (ULI) and a former Vice Chairman of the Small Scale Development Council. He is a
member of the International Council of Shopping Centers (ICSC) and an instructor for the ICSC University of
Shopping Centers at Wharton, the ICSC Executive Learning series and RECon Academy.
Gary holds a Masters in Real Estate and Construction Management from the University of Denver and serves on
the Burns Counselor Board of the Franklin L. Burns School of Real Estate and Construction Management at the
University of Denver. In 2007 was named an adjunct faculty member at the University of Denver and in 2011 he
was named an adjunct faculty member at Florida Southern College.
Gary is a past member of the Executive Advisory Board of the Center for Retailing Education and Research at
the University of Florida. He was inducted as a Hoyt Fellow (www.hoyt.org) in 2001. In 2011 Gary was
appointed to the Board of Directors of the Central Florida Development Council (www.cfdc.org).
Gary is a member of the Regional Economic Information Network of the
Jacksonville Branch of the Federal Reserve Bank of Atlanta.
SAUNDERS RALSTON DANTZLER

CCIM Real Estate Feasibility Model


Market

(Demand/Supply)

Analysis

Strategic Analysis

Financial
Analysis

Goals and Objectives


Alternatives
Decision Criteria
Go/No Go Decision Points

Political &
Legal
Analysis

Location,
Site &
Building
Analysis

Retail Interesting Facts


WMT is almost 10% of US non-automotive
retail sales (44, 45, less 4411)
Top 100 retailers
259,400 stores
Less than 15% of total number of stores

Almost 50% of total US non-automotive


retail sales

2011 Top 100 US Retailers


Rank
1

Company
Wal-Mart

Headquarters
Bentonville, Ark.

WMT (less Sam's)

www.stores.org

Sales
316,083,000,000

# Stores 2011
4,423

Sales/Stores
71,463,486

264,186,000,000

3,868

68,300,414

Kroger

Cincinnati

85,491,000,000

3,574

23,920,257

Target

Minneapolis

68,466,000,000

1,763

38,834,940

Walgreen

Deerfield, Ill.

66,330,000,000

7,651

8,669,455

Costco

Issaquah, Wash.

69,400,000,000

433

160,277,136

The Home Depot

Atlanta

62,075,000,000

1,963

31,622,517

CVS Caremark

Woonsocket, R.I.

59,688,000,000

7,345

8,126,344

53,795,000,000

611

88,044,190

Sam's Club (WMT)


8

Lowe's

Mooresville, N.C.

49,282,000,000

1,712

28,786,215

Best Buy

Richfield, Minn.

37,551,000,000

1,443

26,022,869

10

Safeway

Pleasanton, Calif.

36,923,000,000

1,453

25,411,562

11

McDonald's

Oak Brook, Ill.

34,172,000,000

14,087

2,425,783

12

Sears Holdings

Hoffman Estates, Ill.

33,837,000,000

3,489

9,698,194

13

SUPERVALU

Eden Prairie, Minn.

29,297,000,000

2,466

11,880,373

14

Publix

Lakeland, Fla.

26,967,000,000

1,198

22,510,017

15

Amazon.com

Seattle

26,397,000,000

16

Macy's

Cincinnati

26,344,000,000

840

31,361,905

17

Rite Aid

Camp Hill, Pa.

25,256,000,000

4,664

5,415,094

18

Ahold USA / Royal Ahold

Washington, D.C.

25,074,000,000

756

33,166,667

19

Delhaize America

Salisbury, N.C.

19,230,000,000

1,650

11,654,545

20

Kohl's

Menomonee Falls, Wis.

18,804,000,000

1,127

16,685,004

21

Apple Stores / iTunes

Cupertino, Calif.

17,825,000,000
10,608,500,000

245

43,300,000

Apple Stores
22

TJX

Framingham, Mass.

17,386,000,000

2,212

7,859,855

23

J.C. Penney

Plano, Texas

17,146,000,000

1,105

15,516,742

Rank
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43

Company
True Value
YUM! Brands
H-E-B
Meijer
Dollar General
Wakefern / ShopRite
BJ's Wholesale Club
Gap
Subway
Verizon Wireless
Nordstrom
7-Eleven
Staples
Whole Foods Market
Ace Hardware
Bed Bath & Beyond
Aldi
Wendy's
Ross Stores
Limited Brands

Headquarters
Chicago
Louisville, Ky.
San Antonio
Grand Rapids, Mich.
Goodlettsville, Tenn.
Keasbey, N.J.
Westborough, Mass.
San Francisco, Calif.
Milford, Conn.
Basking Ridge, N.J.
Seattle
Dallas
Framingham, Mass.
Austin, Texas
Oak Brook, Ill.
Union, N.J.
Batavia, Ill.
Dublin, Ohio
Pleasanton, Calif.
Columbus, Ohio

Sales
17,135,000,000
17,100,000,000
16,820,000,000
16,603,000,000
14,807,000,000
12,838,000,000
11,797,000,000
11,443,000,000
11,206,000,000
10,997,000,000
10,497,000,000
10,361,000,000
10,337,000,000
9,794,000,000
9,491,000,000
9,402,000,000
9,218,000,000
8,931,000,000
8,605,000,000
8,590,000,000

# Stores 2011
4,650
18,050
308
197
9,937
291
196
2,436
25,014
2,330
225
7,779
1,583
311
4,072
1,143
1,195
5,876
1,124
2,623

44
45
46

Family Dollar
Burger King Holdings
Toys "R" Us

Matthews, N.C.
Miami
Wayne, N.J.

8,548,000,000
8,446,000,000
8,281,000,000

7,023
7,218
871

47
48
49

Army Air Force Exchange


Menard
Starbucks

Dallas
Eau Claire, Wis.
Seattle

8,228,000,000
8,067,000,000

181
262

10,639,900,000

10,787

Sales/Stores
3,684,946
947,368
54,610,390
84,279,188
1,490,088
44,116,838
60,188,776
4,697,455
447,989
4,719,742
46,653,333
1,331,919
6,530,006
31,491,961
2,330,796
8,225,722
7,713,808
1,519,912
7,655,694
3,274,876
1,217,144
1,170,130
9,507,463
45,458,564
30,790,076
986,363

Rank
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75

Company
Darden Restaurants
Trader Joe's
Office Depot
Barnes & Noble
Hy-Vee
Winn-Dixie Stores
Health Mart Systems
A&P
Giant Eagle
GameStop
Dollar Tree
AutoZone
AT&T Wireless
Dunkin' Brands
DineEquity
Wegman's Food Markets
Dillard's
Advance Auto Parts
O'Reilly Automotive
OfficeMax
QVC
Dick's Sporting Goods
PetSmart
Big Lots
Defense Commissary Agcy.
Save Mart

Headquarters
Orlando
Monrovia, Calif.
Boca Raton, Fla.
New York
W. Des Moines, Iowa
Jacksonville, Fla.
Omaha, Neb.
Montvale, N.J.
O'Hara Township, Pa.
Grapevine, Texas
Chesapeake, Va.
Memphis
Dallas
Canton, Mass.
Glendale, Calif.
Rochester, N.Y.
Little Rock, Ark.
Roanoke, Va.
Springfield, Mo.
Naperville, Ill.
West Chester, Pa.
Coraopolis, Pa.
Phoenix, Ariz.
Columbus, Ohio
Fort Lee, Va.
Modesto, Calif.

Sales
7,905,000,000
7,307,000,000
7,297,000,000
7,157,000,000
7,092,000,000
6,986,000,000
6,943,000,000
6,791,000,000
6,681,000,000
6,566,000,000
6,531,000,000
6,523,000,000
6,486,000,000
6,428,000,000
6,322,000,000
6,199,000,000
6,194,000,000
6,119,000,000
5,789,000,000
5,529,000,000
5,412,000,000
5,212,000,000
5,186,000,000
5,093,000,000
5,067,000,000
5,036,000,000

# Stores 2011
1,936
376
1,125
1,330
261
484
2,850
310
406
4,455
4,252
4,507
2,300
9,472
3,385
78
304
3,636
3,740
881

Sales/Stores
4,083,161
19,433,511
6,486,222
5,381,203
27,172,414
14,433,884
2,436,140
21,906,452
16,455,665
1,473,850
1,535,983
1,447,304
2,820,000
678,632
1,867,651
79,474,359
20,375,000
1,682,893
1,547,861
6,275,823

561
1,159
1,451
180
238

9,290,553
4,474,547
3,509,993
28,150,000
21,159,664

Rank
76

Company
Alimentation Couche-Tard

Headquarters
Tempe, Ariz.

Sales
4,867,000,000

77

Dell

Round Rock, Texas

4,748,000,000

78

WinCo Foods

Boise, Idaho

4,563,000,000

80

57,037,500

79

Sherwin-Williams

Cleveland

4,529,000,000

3,326

1,361,696

80

Harris Teeter Supermkts.

Charlotte, N.C.

4,286,000,000

204

21,009,804

81

Tractor Supply Co.

Brentwood, Tenn.

4,233,000,000

1,085

3,901,382

82

Albertsons

Boise, Idaho

4,100,000,000

211

19,431,280

83

Chick-fil-A

Atlanta

4,051,000,000

1,615

2,508,359

84

Brinker International

Dallas

4,038,000,000

1,335

3,024,719

85

Neiman Marcus

Dallas

4,035,000,000

77

52,402,597

86

Foot Locker

New York

3,959,000,000

2,476

1,598,950

87

RadioShack

Fort Worth, Texas

3,959,000,000

5,480

722,445

88

Burlington Coat Factory

Burlington, N.J.

3,837,000,000

477

8,044,025

89

Roundy's Supermarkets

Milwaukee, Wis.

3,827,000,000

158

24,221,519

90

Michaels Stores

Irving, Texas

3,825,000,000

1,109

3,449,053

91

Belk

Charlotte, N.C.

3,700,000,000

303

12,211,221

92

Stater Bros. Holdings

San Bernardino, Calif.

3,693,000,000

167

22,113,772

93

Sonic

Oklahoma City, Okla.

3,693,000,000

3,561

1,037,068

94

Williams-Sonoma

San Francisco

3,682,000,000

561

6,563,280

95

IKEA North America

Conshohocken, Pa.

3,632,000,000

38

95,578,947

96

Price Chopper Supermkts.

Rotterdam, N.Y.

3,556,000,000

129

27,565,891

97

The Sports Authority

Englewood, Colo.

3,471,000,000

460

7,545,652

98

OSI Restaurant Partners

Tampa, Fla.

3,461,000,000

1248

2,773,237

99

Ingles Markets

Asheville, N.C.

3,429,000,000

203

16,891,626

100

Raley's

W. Sacramento, Calif.

3,335,000,000

142

23,485,915

http://www.stores.org/2012/Top-100-Retailers

# Stores 2011
4,050

Sales/Stores
1,201,728

DECLINE

MATURITY

EXPANSION

INNOVATION
SALES IN $ OR VOLUME

Retail Business Life Cycle

TIME

Source: Monthly Retail Trade and Food Services


44X72: Retail Trade and Food Services: U.S. Total
Seasonally Adjusted Sales - Monthly [Millions of Dollars]
Period: 2007 to 2012

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2007

363,340

364,458

367,902

366,466

371,045

367,773

369,539

371,085

374,620

374,485

378,939

376,660

2008

376,031

372,110

372,846

374,810

376,189

377,289

375,214

373,741

366,877

353,187

342,298

333,348

2009

338,246

337,081

331,380

332,258

335,557

339,659

340,600

348,621

339,523

342,223

346,812

348,184

2010

348,585

348,794

355,695

358,023

355,693

354,404

355,436

358,715

361,756

366,507

370,165

372,587

2011

375,739

378,934

382,115

383,810

383,733

387,045

388,064

388,595

392,354

395,995

397,868

398,012

2012

400,550

404,692

406,200

404,112

403,641

400,635

403,176

NA

NA

NA

NA

NA

Definition: NAICS 44-45, Retail Trade


The Retail Trade sector comprises establishments
engaged in retailing merchandise, generally
without transformation, and rendering services
incidental to the sale of merchandise.
The retailing process is the final step in the
distribution of merchandise; retailers are,
therefore, organized to sell merchandise in small
quantities to the general public.

http://www.census.gov/econ/census02/data/us/US000_44.HTM

2007 Economic Census

Total Retail Sales 2011


44-45 & 722

Retail and food services sales, total

4,647,648

Retail sales and food services excl motor vehicle and parts

3,821,349

Retail sales, total

4,154,147

Retail sales, total (excl. motor vehicle and parts dealers)

3,327,848

441

Motor vehicle and parts dealers

442

Furniture and home furnishings stores

88,821

443

Electronics and appliance stores

99,996

444

Building mat. and garden equip. and supplies dealers

278,902

445

Food and beverage stores

613,908

446

Health and personal care stores

272,286

447

Gasoline stations

526,196

448

Clothing and clothing access. stores

226,748

451

Sporting goods, hobby, book, and music stores

452

General merchandise stores

629,123

453

Miscellaneous store retailers

113,452

454

Nonstore retailers

393,745

722

Food services and drinking places

493,501

http://www.census.gov/retail/index.html

826,299

84,671

Retail Business Trends


Consumer is trading down / recession retail
Wal-Mart
Dollar stores
Warehouse clubs

Retail Business Trends


Consumer is trading down / recession retail
Wal-Mart
Dollar stores
Warehouse clubs

Convenience & Value


Efficiency
Who took Circuit Citys business?

The internet??

Retail Trade Sales--Total and E-Commerce


NAICS
code

2009
Value of sales (million dollars)
Total

Retail trade, total

44-45

E-commerce as %
E-commerce
of total sales

3,638,471

145,214

4.0

17,201

2.5

Motor vehicle and parts dealers

441

676,801

Furniture and home furnishings stores

442

86,657

Electronics and appliance stores

443

98,384

1,140

1.2

Building material/garden equipment/supplies stores

444

268,206

477

0.2

Food and beverage stores

445

570,581

883

0.2

Health and personal care stores

446

253,243

177

0.1

Gasoline station

447

388,515

Clothing and clothing accessories stores

448

204,866

2,965

1.4

Sporting goods, hobby, book, and music stores

451

81,373

1,865

2.3

General merchandise stores

452

592,009

220

Miscellaneous store retailers

453

105,366

2,360

2.2

Nonstore retailers

454

312,470

116,543

37.3

..Electronic shopping and mail-order houses

45411

234,667

112,791

48.1

Source: U.S. Census Bureau, "E-Stats, 2009 E-commerce Multi-sector Report," May 2011.

Retail Trade Sales--Total and E-Commerce


Estimated Quarterly U.S. Retail Sales (Adjusted1): Total and E-commerce2
(Estimates are based on data from the Monthly Retail Trader Survey and administrative records.)
Retail Sales
Quarter

(millions of dollars)

E-commerce

Percent Change

Percent Change

as a Percent

From Prior Quarter

From Same Quarter

of

A Year Ago

Total

E-commerce

Total

Total

E-commerce

2nd quarter 2012(p)

1,076,934

54,842

5.1

-0.4

3.3

4.3

15.3

1st quarter 2012(r)

1,081,347

53,091

4.9

1.5

2.9

6.4

15.3

4th quarter 2011

1,065,030

51,575

4.8

2.0

6.2

7.5

15.1

3rd quarter 2011

1,044,075

48,564

4.7

1.1

2.1

8.9

12.8

2nd quarter 2011(r)

1,032,271

47,575

4.6

1.5

3.3

8.4

15.7

1st quarter 2011

1,016,544

46,065

4.5

2.6

2.8

8.3

17.2

4th quarter 2010

990,726

44,819

4.5

3.3

4.1

7.2

17.4

3rd quarter 2010

958,694

43,043

4.5

0.7

4.7

4.6

16.1

2nd quarter 2010

952,070

41,112

4.3

1.4

4.6

6.4

16.9

1st quarter 2010

938,772

39,295

4.2

1.6

3.0

5.1

14.9

Total

E-commerce

Retail Trade Sales--Total and E-Commerce


Estimated Quarterly U.S. Retail Sales (Adjusted1): Total and E-commerce2
(Estimates are based on data from the Monthly Retail Trader Survey and administrative records.)
Retail Sales
Quarter

(millions of dollars)

E-commerce

Percent Change

Percent Change

as a Percent

From Prior Quarter

From Same Quarter

of

A Year Ago

Total

E-commerce

Total

Total

E-commerce

2nd quarter 2012(p)

1,076,934

54,842

5.1

-0.4

3.3

4.3

15.3

1st quarter 2012(r)

1,081,347

53,091

4.9

1.5

2.9

6.4

15.3

4th quarter 2011

1,065,030

51,575

4.8

2.0

6.2

7.5

15.1

3rd quarter 2011

1,044,075

48,564

4.7

1.1

2.1

8.9

12.8

2nd quarter 2011(r)

1,032,271

47,575

4.6

1.5

3.3

8.4

15.7

1st quarter 2011

1,016,544

46,065

4.5

2.6

2.8

8.3

17.2

4th quarter 2010

990,726

44,819

4.5

3.3

4.1

7.2

17.4

3rd quarter 2010

958,694

43,043

4.5

0.7

4.7

4.6

16.1

2nd quarter 2010

952,070

41,112

4.3

1.4

4.6

6.4

16.9

1st quarter 2010

938,772

39,295

4.2

1.6

3.0

5.1

14.9

Total

E-commerce

Amazon.com

Amazon 2011 10K

Amazon.com

Amazon 2011 10K

Retail Real Estate Trends


Internet means an informed consumer
Retail margins are under pressure
equals lower rent
Technology creates more efficient use of inventory &
space
equals more sales in less space
equals smaller stores
Supermarket business is increasingly focused on
dominant players and larger stores
Retail industry is increasing dominated by stronger,
national anchors over their smaller regional/local peers
This is not necessarily the case with in-line space
Large spaces are hard to re-tenant

Retail Real Estate Trends


Exclusive use provisions will impact 2nd
generation space
Landlords are making greater use of service
tenants to maintain occupancy
One study service was less than 15% ten
years ago vs. 24% today
Start ups companies retail, service, etc. will be
new mom & pops

Why More Open Stores


Economies of Scale
One promotional cost for all stores
Share distribution center
Leverage management and central operations

Cannibalization
Open stores as long as profits increase
Cannibalization diminishes returns from
locating too many stores in an area

Factors Affecting Store Location


Strategic fit with target market
(customers = demand)

Competition (supply)
Cost of operating store
(financial feasibility for retailer)

Economic conditions
Retailers expand when they are gaining market
share and generating free cash flow
General demographic trends
Growing population and income = more retail sales

How Do Retailers Evaluate Sites


Estimates potential sales at location
Minimum population or # of households
Income and lifestyle characteristics

Site characteristics
Specifics which many increase or decrease
potential sales estimate
Parking
Visibility
Adjacent tenants

Adjacent Tenants
Exclusive use restrictions
Creates artificial demand

Complimentary (traffic generators)


Principle of Cumulative Attractiveness
Co-Tenancy

Retailers Financial Feasibility


Occupancy cost is a percentage of sales
Occupancy costs includes
Base rent
CAM
Taxes, insurance, etc.

Different retail lines of trade have different


gross operating margins and thus rent as
a percent of sales can vary
Dollar store vs auto parts vs jewelry store

Retail Gross Margin


Cost

Kroger

AMZN

WMT

Sears

Sales

87,048,000,000

90,374,000,000

48,077,000,000

418,952,000,000

41,567,000,000

COGS

77,739,000,000

71,494,000,000

37,288,000,000

315,287,000,000

30,836,000,000

9,309,000,000

18,880,000,000

10,789,000,000

103,665,000,000

10,731,000,000

10.7%

20.9%

22.4%

24.7%

25.8%

Gross Margin
Gross Margin %

Publix

WAG

TGT

DG

HD

Sales

26,967,389,000

72,184,000,000

65,786,000,000

14,807,188,000

67,997,000,000

COGS

19,520,370,000

51,692,000,000

45,725,000,000

10,109,278,000

44,693,000,000

7,447,019,000

20,492,000,000

20,061,000,000

4,697,910,000

23,304,000,000

27.6%

28.4%

30.5%

31.7%

34.3%

Gross Margin
Gross Margin %

Advance Auto Parts Example

Search Advance Auto Parts


Investor Relations
Annual Report / 10K
Look for income statement

Sears Holding Corporation

Coffee can pay a lot of rent!


Starbucks (NASDAQ:SBUX)

FY ending 12/2/2011
Net Sales

9,632,400,000

Cost of sales including occupancy costs

4,949,300,000

51.4%

Gross Margin

4,683,100,000

48.6%

Purchasing Power
Estimating demand
People / households
Income / disposable income
Lifestyle / tapestry
http://www.esri.com/library/brochures/pdfs/tapestry-segmentation.pdf

STDB Retail MarketPlace Profile report


http://www.esri.com/library/whitepapers/pdfs/esri-data-retail-marketplace.pdf

Summary Demographics
2009 Population
2009
Households
2009 Median Disposable Income
2009 Per Capita Income

Industry Summary

309,731,508
116,523,156
$43,361
$27,277

Demand
(Retail Potential)

Total Retail Trade and Food & Drink (NAICS 44-45, 722)
Total Retail Trade (NAICS 44-45)
Total Food & Drink (NAICS 722)

Supply

Retail Gap Surplus / Leakage

(Retail Sales) (Demand - Supply)

$3,159,959,994,136 $3,204,182,167,862
$2,696,791,458,246 $2,748,067,968,046
$463,168,535,890 $456,114,199,816

Number of

Factor

Businesses

-$44,222,173,726
-$51,276,509,800
$7,054,336,074

-0.7
-0.9
0.8

2,549,724
1,864,278
685,446

Demand
(Retail Potential)
$670,514,909,767
$578,877,558,045
$50,330,131,040
$41,307,220,682

Supply
(Retail Sales)
$687,977,716,392
$593,335,669,404
$52,094,544,181
$42,547,502,807

Retail Gap
-$17,462,806,625
-$14,458,111,359
-$1,764,413,141
-$1,240,282,125

Surplus / Leakage
Factor
-1.3
-1.2
-1.7
-1.5

Number of
Businesses
235,175
111,692
42,451
81,032

Furniture & Home Furnishings Stores (NAICS 442)


Furniture Stores (NAICS 4421)
Home Furnishings Stores (NAICS 4422)

$98,919,930,686
$62,542,941,027
$36,376,989,659

$91,847,106,437
$54,742,430,323
$37,104,676,114

$7,072,824,249
$7,800,510,704
-$727,686,455

3.7
6.7
-1.0

110,176
47,868
62,308

Electronics & Appliance Stores (NAICS 443/NAICS 4431)

$82,417,769,734

$84,493,504,711

-$2,075,734,977

-1.2

123,325

Bldg Materials, Garden Equip. & Supply Stores (NAICS 444)


Building Material and Supplies Dealers (NAICS 4441)
Lawn and Garden Equipment and Supplies Stores (NAICS
4442)

$116,439,012,859
$106,549,571,943

$116,952,731,058
$106,658,508,886

-$513,718,199
-$108,936,943

-0.2
-0.1

166,028
129,317

$9,889,440,916

$10,294,222,172

-$404,781,256

-2.0

36,711

Food & Beverage Stores (NAICS 445)


Grocery Stores (NAICS 4451)
Specialty Food Stores (NAICS 4452)
Beer, Wine, and Liquor Stores (NAICS 4453)

$512,484,559,459
$469,368,667,754
$18,839,987,869
$24,275,903,836

$518,878,839,136
$476,447,171,320
$16,811,716,877
$25,619,950,939

-$6,394,279,677
-$7,078,503,566
$2,028,270,992
-$1,344,047,103

-0.6
-0.7
5.7
-2.7

218,892
129,623
51,200
38,069

Industry Group
Motor Vehicle & Parts Dealers (NAICS 441)
Automobile Dealers (NAICS 4411)
Other Motor Vehicle Dealers (NAICS 4412)
Auto Parts, Accessories, and Tire Stores (NAICS 4413)

Demand

Supply

Surplus / Leakage

Number of

Industry Group

(Retail Potential)

(Retail Sales)

Retail Gap

Factor

Businesses

Health & Personal Care Stores (NAICS 446/NAICS 4461)

$104,417,752,601

$113,430,264,401

-$9,012,511,800

-4.1

129,338

Gasoline Stations (NAICS 447/NAICS 4471)

$432,703,600,864

$424,337,402,649

$8,366,198,215

1.0

105,225

Clothing and Clothing Accessories Stores (NAICS 448)

$120,364,069,285

$128,104,648,006

-$7,740,578,721

-3.1

236,065

Clothing Stores (NAICS 4481)

$93,448,677,340

$99,070,632,972

-$5,621,955,632

-2.9

156,523

Shoe Stores (NAICS 4482)

$11,788,977,284

$12,755,794,092

-$966,816,808

-3.9

30,754

Jewelry, Luggage, and Leather Goods Stores (NAICS 4483)

$15,126,414,661

$16,278,220,942

-$1,151,806,281

-3.7

48,788

Sporting Goods, Hobby, Book, and Music Stores (NAICS 451)


Sporting Goods/Hobby/Musical Instrument Stores (NAICS
4511)
Book, Periodical, and Music Stores (NAICS 4512)

$38,531,396,409

$42,190,971,217

-$3,659,574,808

-4.5

131,312

$20,217,691,471

$22,438,790,537

-$2,221,099,066

-5.2

102,310

$18,313,704,938

$19,752,180,680

-$1,438,475,742

-3.8

29,002

General Merchandise Stores (NAICS 452)

$370,767,412,695

$385,040,000,063

-$14,272,587,368

-1.9

76,412

Department Stores Excluding Leased Depts. (NAICS 4521)

$180,743,211,742

$182,664,226,029

-$1,921,014,287

-0.5

30,293

Other General Merchandise Stores (NAICS 4529)

$190,024,200,953

$202,375,774,034

-$12,351,573,081

-3.1

46,119

$55,167,277,457

$57,875,769,094

-$2,708,491,637

-2.4

303,678

$6,289,266,686

$5,478,872,712

$810,393,974

6.9

41,534

$18,313,701,964

$19,267,443,167

-$953,741,203

-2.5

83,592

$4,331,171,072

$4,863,757,757

-$532,586,685

-5.8

59,822

Other Miscellaneous Store Retailers (NAICS 4539)

$26,233,137,735

$28,265,695,458

-$2,032,557,723

-3.7

118,730

Nonstore Retailers (NAICS 454)

$94,063,766,430

$96,939,014,882

-$2,875,248,452

-1.5

28,652

Electronic Shopping and Mail-Order Houses (NAICS 4541)

$49,213,479,731

$54,134,827,567

-$4,921,347,836

-4.8

5,329

Vending Machine Operators (NAICS 4542)

$14,368,545,500

$10,946,777,588

$3,421,767,912

13.5

8,277

Direct Selling Establishments (NAICS 4543)

$30,481,741,199

$31,857,409,727

-$1,375,668,528

-2.2

15,046

Food Services & Drinking Places (NAICS 722)

$463,168,535,890

$456,114,199,816

$7,054,336,074

0.8

685,446

Full-Service Restaurants (NAICS 7221)

$196,120,539,286

$200,757,467,451

-$4,636,928,165

-1.2

384,498

Limited-Service Eating Places (NAICS 7222)

$203,344,507,091

$191,605,481,221

$11,739,025,870

3.0

210,456

Special Food Services (NAICS 7223)

$38,017,365,935

$38,012,352,773

$5,013,162

0.0

34,658

Drinking Places - Alcoholic Beverages (NAICS 7224)

$25,686,123,578

$25,738,898,371

-$52,774,793

-0.1

55,834

Miscellaneous Store Retailers (NAICS 453)


Florists (NAICS 4531)
Office Supplies, Stationery, and Gift Stores (NAICS 4532)
Used Merchandise Stores (NAICS 4533)

Retail Geographies
Region
Typically formal geographies such as MSA or
combination of Counties

Market
Typically formal geographies such as Counties or
divisions of Counties

Submarket
Group of buildings competitive with each other and
distinct boundaries, often zip codes

Trade Area (Retail Trade Area)


will discuss and demonstrate in Case Study

Trade Area
A Retail trade area is the geographic area
from which the steady, sustaining
patronage for a shopping center is
obtained.
Trade area delineation

Rules for defining a Retail Trade Area


Trade Area defined using Theissen Polygon
distance to next occurrence of competing
supply
Cannibalization
Consistent with Reillys Law of Gravitational Analysis
for retail properties

Map competing supply and/or next closest


store of same chain (cannibalization)
Establish preliminary boundary of trade area
based on distance to competing supply in
each direction
Adjust to account for road systems

Ralstons Rules for retail trade areas


1) Radius distance to next competing
point of supply
2) Drive-time (3, 5 & 10 min)
3) Custom polygon based on physical
boundaries and road network

Subject & DG -> 3 mile radius trade area

Trade Area -> 3 mile radius, plus 3, 5 10 min drive time

Trade Area -> 3 mile radius trade area, plus 3, 5 10 min drive time & custom polygon

Retail (Sales) Gap Model


Retail Sales Gap Model Disaggregated by
Line-of-Trade
Delineate Trade Area
ESRI Retail Sales Demand estimates using
modified Retail MarketPlace Profile report
ESRI or CoStar estimate of Supply report
modified to address NAICS retail line-of-trade
Gap (Leakage) calculation

Tenants within Lines of Trade with positive


Gap

Gap Analysis Benchmark Geography


Model for demand parameter:
Total retail SF in benchmark geography
Divided by:
Population or households in benchmark geography
= Retail SF per capita or per household in benchmark
geography

Gap Analysis
1. Select Benchmark Geography
a. Typically MSA or County
2. Calculate Demand parameter
Model for Demand Parameter
Total retail square feet in benchmark geography

Total population or number of households in benchmark geography


Retail square feet per capita or per household in benchmark
geography

Gap Analysis
3. Estimate the demand for aggregate
retail space in the market area
Model for Demand
Demand parameter

Market area population or number of households

Square feet of demand

If vacancy in the benchmark geography or the


Market area is other than normalized i.e., long
term stabilized occupancy, then adjust to account
for normalized vacancy.

Gap Analysis
4. Calculate the gap including an acceptable vacancy for aggregate retail space in
the market area

Model for Gap


Demand including

Supply

Gap including adjustment for acceptable vacancy

Gap using Benchmark Geography


Lake County, FL
Population
Households
Retail SF

Trade Area

Households
Retail SF

305,150
126,929
6,046,685

11,800
410,000

What is the Gap?

Benchmark Geography Example


Retail SF in Lake
HH in Lake

6,046,685
126,929

SF/HH

47.64

Demand Parameter

47.64

# of HH in Trade Area

11,800

Demand

562,132

Demand

562,132

Supply in Trade Area

410,000

Gap

152,132

Some say we have too much space


US Retail Space Per Capita

has increased but so have sales until 2007


50.0
49.0
48.0
47.0
46.0
45.0
44.0
43.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Retail Activity
Retail Activity can occur as either a
free standing establishment or as
part of a shopping center
Two principal sources of information
are ICSC and ULI
Dollars and Cents of Shopping
Centers
53
12/13/2012

Retail Space Definitions (ICSC / ULI)


Freestanding
Shopping Centers
Open Air
Center

Costar -> General


Costar -> Shopping

Convenience
Neighborhood
Community
Power Center (a/k/a Super Community)

Other
Lifestyle
Theme / Festival

Enclosed

Regional / Superregional
Outlet

Mixed use

Strip Centers
Neighborhood
Community

Costar -> Specialty

Theme / Festival
Outlet

Costar -> Mall

Shopping Center Characteristics

Module 8 Retail Properties

55

12/13/2012

2008

2009

2010

2011

106,617

107,514

107,773

107,823

No Minimum Size

No Minimum Size

No Minimum Size

No Minimum Size

Super-Regional (800,000+ sq ft)

639

644

646

646

Regional (400,000 - 800,000 sq ft)

779

791

791

791

Community (100,000 - 350,000 sq ft)

9,211

9,293

9,317

9,324

Neighborhood (30,000 - 150,000 sq ft)

31,582

31,804

31,875

31,887

Power Center (250,000 - 600,000 sq ft)

2,027

2,070

2,079

2,083

Lifestyle (150,000 - 500,000 sq ft)

391

412

417

418

Theme/Festival (80,000 - 250,000 sq ft)

247

250

250

250

Outlet (50,000 - 400,000 sq ft)

319

323

325

325

61,355

61,859

62,004

62,030

67

68

69

69

7,234,299,203 sq ft

7,307,603,702 sq ft

7,325,729,312 sq ft

7,330,063,735 sq ft

Super-Regional (800,000+ sq ft)

10.7%

10.7%

10.7%

10.7%

Regional (400,000 - 800,000 sq ft)

6.2%

6.2%

6.2%

6.2%

Community (100,000 - 350,000 sq ft)

24.9%

24.8%

24.8%

24.8%

Neighborhood (30,000 - 150,000 sq ft)

31.8%

31.7%

31.7%

31.7%

Power Center (250,000 - 600,000 sq ft)

11.3%

11.4%

11.4%

11.5%

Lifestyle (150,000 - 500,000 sq ft)

1.8%

1.8%

1.8%

1.8%

Theme/Festival (80,000 - 250,000 sq ft)

0.5%

0.5%

0.5%

0.5%

Outlet (50,000 - 400,000 sq ft)

1.0%

1.0%

1.0%

1.0%

Strip/Convenience (< 30,000 sq ft)

11.6%

11.6%

11.6%

11.6%

Airport Retail (75,000 - 250,000 sq ft)

0.2%

0.2%

0.2%

0.2%

45.9%

46.0%

45.9%

45.9%

2,376 sq ft

2,380 sq ft

2,372 sq ft

N/A

N/A

N/A

N/A

N/A

Number of Shopping Centers1


Minimum Size Shopping Center Included
Shopping Centers by Type (Number of Centers):1

Strip/Convenience (< 30,000 sq ft)


Airport Retail (75,000 - 250,000 sq ft)
Shopping Center GLA1
Shopping Centers by Type (Share of GLA):1

Shopping Center GLA as % of Total Retail Space


Total Shopping Center GLA per 100 Inhabitants
Number of Retail

Establishments 2

Source: www.costar.com

Sales

Total Retail Sales (in USD)2


Year-on-Year % Change in Retail Sales
Total Retail Sales per Capita (in USD)
Total Retail Sales % GDP2, 3
Shopping-Center Sales (in USD)2, 4, 5
Year-on-Year % Change in Shopping-Center Sales
Shopping-Center Sales per Capita (in USD)
Shopping-Center Sales % GDP

2008

2009

2010

2011

US$4.41 tril.

US$4.09 tril.

US$4.36 tril.

N/A

-0.9%

-7.2%

6.4%

N/A

US$14,626

US$14,363

US$13,253

N/A

31.7%

30.7%

29.0%

N/A

US$2.27 tril.

US$2.22 tril.

US$2.29 tril.

N/A

0.7%

-2.6%

3.4%

N/A

US$7,423

US$7,408

US$7,176

N/A

16.1%

15.8%

15.7%

N/A

Market Cap Using Repeat Sales Price Estimate


Methodology for 2009*
Property Type

Square Footage

Price/SF

Market Cap

Office

12,058,379,264

$136

$1,639,939,579,842

Industrial

23,851,606,671

$45

$1,073,322,300,185

2,907,635,121

$91

$264,594,796,011

17,336,105,191

$172

$2,981,810,092,879

Health Care

2,634,773,693

$490

$1,291,039,109,668

Hospitality

2,556,726,260

$97

$894,854,191,000

Mixed-Use

107,651,632

$95

$10,226,905,040

Multi-Family
22,643,500,000
Specialty, Sports & Entertainment

$62

$1,403,897,000,000
$ 1,953,008,671,667

Flex
Retail

Totals

84,096,377,832

$10,865,840,902,512

This approach uses an arithmetic value weighting for Office, Industrial, Retail and Multifamily
prices shaded here in green. This estimate is closer to the end of 2009. The other values
remain the same. See: A Comprehensive Approach to Commercial Real Estate Prices
by Ruijue Peng et al, ARES 2010

Retail Space Per Capita U.S. Avg = 56.4 sq ft per capita

Shopping Center Terms


Types of space

In-line
End cap
Elbow
Out-parcel
Pad

Measurement -> GLA


Parking Index / Ratio
Typical lease terms

3 to 5 years for locals, 10 to 20 years for anchors


NN, NNN
CAM Charges

Real estate is space for people.

Space for people to:


live in
work in
shop in, and
store things in.

Demand for retail real estate is people


and money (household income).

Retail Demand Segmentation


Consumer income
Population & household numbers
Consumer expenditure percentages

Retail Demand Estimate


Purchasing Power
Per Capita Income
or
Average Household Income

Disposable purchasing power estimate


Allocation of purchasing based on consumer
expenditure patterns.

Summary Demographics
2009 Population
2009
Households
2009 Median Disposable Income
2009 Per Capita Income

Industry Summary

309,731,508
116,523,156
$43,361
$27,277

Demand
(Retail Potential)

Total Retail Trade and Food & Drink (NAICS 44-45, 722)
Total Retail Trade (NAICS 44-45)
Total Food & Drink (NAICS 722)

Supply

Retail Gap Surplus / Leakage

(Retail Sales) (Demand - Supply)

$3,159,959,994,136 $3,204,182,167,862
$2,696,791,458,246 $2,748,067,968,046
$463,168,535,890 $456,114,199,816

Number of

Factor

Businesses

-$44,222,173,726
-$51,276,509,800
$7,054,336,074

-0.7
-0.9
0.8

2,549,724
1,864,278
685,446

Demand
(Retail Potential)
$670,514,909,767
$578,877,558,045
$50,330,131,040
$41,307,220,682

Supply
(Retail Sales)
$687,977,716,392
$593,335,669,404
$52,094,544,181
$42,547,502,807

Retail Gap
-$17,462,806,625
-$14,458,111,359
-$1,764,413,141
-$1,240,282,125

Surplus / Leakage
Factor
-1.3
-1.2
-1.7
-1.5

Number of
Businesses
235,175
111,692
42,451
81,032

Furniture & Home Furnishings Stores (NAICS 442)


Furniture Stores (NAICS 4421)
Home Furnishings Stores (NAICS 4422)

$98,919,930,686
$62,542,941,027
$36,376,989,659

$91,847,106,437
$54,742,430,323
$37,104,676,114

$7,072,824,249
$7,800,510,704
-$727,686,455

3.7
6.7
-1.0

110,176
47,868
62,308

Electronics & Appliance Stores (NAICS 443/NAICS 4431)

$82,417,769,734

$84,493,504,711

-$2,075,734,977

-1.2

123,325

Bldg Materials, Garden Equip. & Supply Stores (NAICS 444)


Building Material and Supplies Dealers (NAICS 4441)
Lawn and Garden Equipment and Supplies Stores (NAICS
4442)

$116,439,012,859
$106,549,571,943

$116,952,731,058
$106,658,508,886

-$513,718,199
-$108,936,943

-0.2
-0.1

166,028
129,317

$9,889,440,916

$10,294,222,172

-$404,781,256

-2.0

36,711

Food & Beverage Stores (NAICS 445)


Grocery Stores (NAICS 4451)
Specialty Food Stores (NAICS 4452)
Beer, Wine, and Liquor Stores (NAICS 4453)

$512,484,559,459
$469,368,667,754
$18,839,987,869
$24,275,903,836

$518,878,839,136
$476,447,171,320
$16,811,716,877
$25,619,950,939

-$6,394,279,677
-$7,078,503,566
$2,028,270,992
-$1,344,047,103

-0.6
-0.7
5.7
-2.7

218,892
129,623
51,200
38,069

Industry Group
Motor Vehicle & Parts Dealers (NAICS 441)
Automobile Dealers (NAICS 4411)
Other Motor Vehicle Dealers (NAICS 4412)
Auto Parts, Accessories, and Tire Stores (NAICS 4413)

Demand

Supply

Surplus / Leakage

Number of

Industry Group

(Retail Potential)

(Retail Sales)

Retail Gap

Factor

Businesses

Health & Personal Care Stores (NAICS 446/NAICS 4461)

$104,417,752,601

$113,430,264,401

-$9,012,511,800

-4.1

129,338

Gasoline Stations (NAICS 447/NAICS 4471)

$432,703,600,864

$424,337,402,649

$8,366,198,215

1.0

105,225

Clothing and Clothing Accessories Stores (NAICS 448)

$120,364,069,285

$128,104,648,006

-$7,740,578,721

-3.1

236,065

Clothing Stores (NAICS 4481)

$93,448,677,340

$99,070,632,972

-$5,621,955,632

-2.9

156,523

Shoe Stores (NAICS 4482)

$11,788,977,284

$12,755,794,092

-$966,816,808

-3.9

30,754

Jewelry, Luggage, and Leather Goods Stores (NAICS 4483)

$15,126,414,661

$16,278,220,942

-$1,151,806,281

-3.7

48,788

Sporting Goods, Hobby, Book, and Music Stores (NAICS 451)


Sporting Goods/Hobby/Musical Instrument Stores (NAICS
4511)
Book, Periodical, and Music Stores (NAICS 4512)

$38,531,396,409

$42,190,971,217

-$3,659,574,808

-4.5

131,312

$20,217,691,471

$22,438,790,537

-$2,221,099,066

-5.2

102,310

$18,313,704,938

$19,752,180,680

-$1,438,475,742

-3.8

29,002

General Merchandise Stores (NAICS 452)

$370,767,412,695

$385,040,000,063

-$14,272,587,368

-1.9

76,412

Department Stores Excluding Leased Depts. (NAICS 4521)

$180,743,211,742

$182,664,226,029

-$1,921,014,287

-0.5

30,293

Other General Merchandise Stores (NAICS 4529)

$190,024,200,953

$202,375,774,034

-$12,351,573,081

-3.1

46,119

$55,167,277,457

$57,875,769,094

-$2,708,491,637

-2.4

303,678

$6,289,266,686

$5,478,872,712

$810,393,974

6.9

41,534

$18,313,701,964

$19,267,443,167

-$953,741,203

-2.5

83,592

$4,331,171,072

$4,863,757,757

-$532,586,685

-5.8

59,822

Other Miscellaneous Store Retailers (NAICS 4539)

$26,233,137,735

$28,265,695,458

-$2,032,557,723

-3.7

118,730

Nonstore Retailers (NAICS 454)

$94,063,766,430

$96,939,014,882

-$2,875,248,452

-1.5

28,652

Electronic Shopping and Mail-Order Houses (NAICS 4541)

$49,213,479,731

$54,134,827,567

-$4,921,347,836

-4.8

5,329

Vending Machine Operators (NAICS 4542)

$14,368,545,500

$10,946,777,588

$3,421,767,912

13.5

8,277

Direct Selling Establishments (NAICS 4543)

$30,481,741,199

$31,857,409,727

-$1,375,668,528

-2.2

15,046

Food Services & Drinking Places (NAICS 722)

$463,168,535,890

$456,114,199,816

$7,054,336,074

0.8

685,446

Full-Service Restaurants (NAICS 7221)

$196,120,539,286

$200,757,467,451

-$4,636,928,165

-1.2

384,498

Limited-Service Eating Places (NAICS 7222)

$203,344,507,091

$191,605,481,221

$11,739,025,870

3.0

210,456

Special Food Services (NAICS 7223)

$38,017,365,935

$38,012,352,773

$5,013,162

0.0

34,658

Drinking Places - Alcoholic Beverages (NAICS 7224)

$25,686,123,578

$25,738,898,371

-$52,774,793

-0.1

55,834

Miscellaneous Store Retailers (NAICS 453)


Florists (NAICS 4531)
Office Supplies, Stationery, and Gift Stores (NAICS 4532)
Used Merchandise Stores (NAICS 4533)

Legal Issues
Zoning / land use codes
WWW.municode.com

Cross access and easements


Restrictive covenants
Exclusive use restrictions
Co-tenancy

STDB Example
4717 S FLORIDA AVE, Lakeland, FL, 33813
Saunders Maps

STDB activity
http://www.stdb.com/
Create study areas
1, 2, 3 mile radius
3, 5, 10 min drive time

Run reports
demographic
Retail marketplace profile

Location Benchmark Comparison


Maps
Demographics & Demand
Gary Ralston, CCIM, SIOR, CRE, CPM, SCLS
Coldwell Banker Commercial Saunders Ralston Dantzler Realty
(863) 877-2828
Gary@SRDcommercial.com

5125 S Florida, Lakeland -> 5-10-15 minute drive time

FDOT Traffic Count

35496 Hwy 27, Haines City -> 5-10-15 minute drive time

FDOT Traffic Count

1100 3rd ST SW, Winter Haven -> 5-10-15 minute drive time

FDOT Traffic Count

210 SR 60 W, Lake Wales -> 5-10-15 minute drive time

FDOT Traffic Count

MANNYS CHOPHOUSE Locations (5, 10 15 min drive time)


35496 HWY 27 Haines City
210 SR 60 W Lake Wales
1100 3rd ST SW Winter Haven
5125 S Florida Lakeland

Demographic and Restaurant Demand Comparison

5125 S Florida Ave, Lakeland


Drive Time:
2010 Population
2010 Households
2010 Median Disposable Income
2010 Per Capita Income
Food Services & Drinking Places (NAICS 722)
Full-Service Restaurants (NAICS 7221)
Limited-Service Eating Places (NAICS 7222)
Drinking Places - Alcoholic Beverages (NAICS
7224)

10 minutes
83,686
33,828
$44,501
$28,341

35496 Hwy 27 Haines City

1100 3rd ST SW, Winter Haven

210 SR 60 W Lake Wales

15 minutes
167,743
65,481
$38,067
$23,590

10 minutes

15 minutes

10 minutes

15 minutes

10 minutes

15 minutes

39,164
15,059
$31,919
$19,371

60,891

74,238
29,352
$36,064
$21,633

125,988

35,874

$21,721

21,294
8,582
$29,375
$19,666

$129,783,049 $213,811,975
$54,374,016 $89,467,014
$68,857,263 $113,356,510

$38,931,466
$16,210,394
$20,794,135

$61,463,497

$87,238,531 $147,096,316
$36,487,567 $61,407,601
$46,312,862 $78,273,063

$22,030,744
$9,152,547
$11,774,122

$38,191,079

$602,572

$947,692

$2,420,088

$352,045

$589,870

$2,162,114

$3,564,362

23,496
$32,086
$19,197

$25,530,227
$32,888,797

$2,958,299

50,417
$35,999

14,330
$31,723
$20,111

$15,840,403
$20,455,634

1,479,803
2011 reconciled to 2010 Census
Drive Time:
Population
Households
Medial HH Income

Traffic Count (FDOT - AADT)

10 minutes

15 minutes

10 minutes

15 minutes

10 minutes

15 minutes

10 minutes

15 minutes

92,603
36,865
$52,282

176,210
66,847
$43,464

46,425
17,778
$36,390

101,790
39,870
$38,463

75,089
28,721
$38,266

142,680
55,080
$38,980

24,247
9,541
$31,274

72,291
28,032
$38,217

39,500

43,000

26,000

19,600

Summary
The proposed Lakeland location offers:
Almost twice as many people as Haines City and
over 3 times the potential restaurant sales
Almost 1.25 times as many people as Winter
Haven and about 1.5 times the potential
restaurant sales
Almost 4 times as many people as Lake Wales and
almost 6 times the potential restaurant sales

The Lakeland location has the potential to be


much better than any of the current locations!

Tenants Financially Feasible Rent


Identification of retail-line-of-trade (4 digit NAICS)
Define trade area delineate geography on map
Allocate disposable household income by NAICS
code (ESRI program/report)
Allocate trade area sales amongst competing
points of supply in trade area using gravity model
Adjust for leakage and displaced sales.
Result is Potential sales for tenant at subject
location
Using gross margin for tenant/retail line-of-trade
derive financially feasible rent

Identification of retail-line-of-trade (4 digit NAICS)


http://www.census.gov/cgibin/sssd/naics/naicsrch?chart_code=44&search=2012 NAICS
Search

Identification of retail-line-of-trade (4 digit NAICS)


4411
4412
4413
4421
4422
4431
4441
4442
4451
4452
4453
4461
4471
4481
4482
4483
4511
4512
4521
4529
4531
4532
4533
4539
4541
4542
4543

Automobile Dealers
Other Motor Vehicle Dealers
Automotive Parts, Accessories, and Tire Stores
Furniture Stores
Home Furnishings Stores
Electronics and Appliance Stores
Building Material and Supplies Dealers
Lawn and Garden Equipment and Supplies Stores
Grocery Stores
Specialty Food Stores
Beer, Wine, and Liquor Stores
Health and Personal Care Stores
Gasoline Stations
Clothing Stores
Shoe Stores
Jewelry, Luggage, and Leather Goods Stores
Sporting Goods, Hobby, and Musical Instrument Stores
Book Stores and News Dealers
Department Stores
Other General Merchandise Stores
Florists
Office Supplies, Stationery, and Gift Stores
Used Merchandise Stores
Other Miscellaneous Store Retailers
Electronic Shopping and Mail-Order Houses
Vending Machine Operators
Direct Selling Establishments

7223
7224
7225

Special Food Services (Caterers, Mobile Food Services)


Drinking Places (Alcoholic Beverages)
Restaurants and Other Eating Places

Tenants Financially Feasible Rent


Identification of retail-line-of-trade (4 digit NAICS)
Define trade area delineate geography on map
Allocate disposable household income by NAICS
code (ESRI program/report)
Allocate trade area sales amongst competing
points of supply in trade area using gravity model
Adjust for leakage and displaced sales.
Result is Potential sales for tenant at subject
location
Using gross margin for tenant/retail line-of-trade
derive financially feasible rent

Ralstons Rules for retail trade areas


1) Radius distance to next competing
point of supply
2) Drive-time (3, 5 & 10 min)
3) Custom polygon based on physical
boundaries and road network

Tenants Financially Feasible Rent


Identification of retail-line-of-trade (4 digit NAICS)
Define trade area delineate geography on map
Allocate disposable household income by NAICS
code (ESRI program/report)
Allocate trade area sales amongst competing
points of supply in trade area using gravity model
Adjust for leakage and displaced sales.
Result is Potential sales for tenant at subject
location
Using gross margin for tenant/retail line-of-trade
derive financially feasible rent

Potential Demand within Trade Area


Use ESRI Retail Market Place Profile report to estimate
potential sales within trade area

ESRI Report
Allocate disposable household income by NAICS code
(ESRI program/report modification/expansion of
Retail MarketPlace Profile)
NAICS code for retail (44-45 & 722)
Adjust current Retail MarketPlace Profile report to include new
NAICS list for retail

NAICS code for certain non-retail neighborhood services


(see new NAICS list)

Perhaps the calculation is allocation of disposable


income based on expenditure characteristics under
ESRI Tapestry Segmentation of 65 unique market
segments

Tenants Financially Feasible Rent


Identification of retail-line-of-trade (4 digit NAICS)
Define trade area delineate geography on map
Allocate disposable household income by NAICS
code (ESRI program/report)
Allocate trade area sales amongst competing
points of supply in trade area using gravity model
Adjust for leakage and displaced sales.
Result is Potential sales for tenant at subject
location
Using gross margin for tenant/retail line-of-trade
derive financially feasible rent

Use Gravity Model to allocate sales


amongst competing points of supply

Gravity Model
Retail Gravity Model

A gravity model is used to estimate


dollar flows to or the sale/revenue
potential of competing retail
establishments in a given
geographic market.

Lake Shadow

Store Size/Distance to Store2


2

Sum(Store Size/Distance to Store )

Conclusions

Capture
(or probability of visiting store)

The probability that consumers


will visit store "B" is higher than
store "A" even though they
are the same distance away
because store "B" is larger.

1. Calculate Sum(Store Size/Distance to Store)


Store A 14,000 Square Feet / 1.02 Miles to Target Neighborhood =
Store B 20,000 Square Feet / 1.02 Miles to Target Neighborhood =
Store C 100,000 Square Feet / 2.02 Miles to Target Neighborhood =

14,000
20,000
25,000
59,000

It is more likely that store "C"


will be visited even though it
is twice as far away because
it is far bigger than the other
two stores.

2. Calculate Probability That Neighborhood Residents Will Visit Each Store


2
Probability of Visiting Store A = ( 14,000 Square Feet / 1.0 Miles to Target Neighborhood) / 59,000 = 0.2372
2
Probability of Visiting Store B = ( 20,000 Square Feet / 1.0 Miles to Target Neighborhood) / 59,000 = 0.3389
2
Probability of Visiting Store C = (100,000 Square Feet / 2.0 Miles to Target Neighborhood) / 59,000 = 0.4237

Lake Bell

Neighborhood "X"
Block
Group X

(!

l es
Mi

M
ile

1.0

Lake Killarney

1.
0

Store "C"
100,000 SqFt.

2.0 Miles

Store "A"
14,000 SqFt.

(!
Lake Fairview

(!

Store "B"
20,000 SqFt.
L Lake Fairview

Tenants Financially Feasible Rent


Identification of retail-line-of-trade (4 digit NAICS)
Define trade area delineate geography on map
Allocate disposable household income by NAICS
code (ESRI program/report)
Allocate trade area sales amongst competing
points of supply in trade area using gravity model
Adjust for leakage and displaced sales.
Result is Potential sales for tenant at subject
location
Using gross margin for tenant/retail line-of-trade
derive financially feasible rent

Adjust for Leakage

$$$$

$$$$

Adjust for Leakage


Leakage

$$$$

$$$$

Adjust for Displaced Sales

$$$$

$$$$

Adjust for Displaced Sales


Displaced Sales

$$$$

$$$$

Displaced Sales Example

http://www.youtube.com/watch?v=0JnJp4t8YxY&feature=plcp

Site Plan

Restaurants

Hotels

Subject Property

LEGOLAND FLORIDA Market Area Map

LEGOLAND Vicinity 2010 Traffic Counts (AADT)

26,000

http://www2.dot.state.fl.us/FloridaTrafficOnline/viewer.html

Zoning
http://www.mywinterhaven.com/documents/ExistingFLUMap.pdf

Tenants Financially Feasible Rent


Identification of retail-line-of-trade (4 digit NAICS)
Define trade area delineate geography on map
Allocate disposable household income by NAICS
code (ESRI program/report)
Allocate trade area sales amongst competing
points of supply in trade area using gravity model
Adjust for leakage and displaced sales.
Result is Potential sales for tenant at subject
location
Using gross margin for tenant/retail line-of-trade
derive financially feasible rent

Tenants Financially Feasible Rent


Identification of retail-line-of-trade (4 digit NAICS)
Define trade area delineate geography on map
Allocate disposable household income by NAICS
code (ESRI program/report)
Allocate trade area sales amongst competing
points of supply in trade area using gravity model
Adjust for leakage and displaced sales.
Result is Potential sales for tenant at subject
location
Using gross margin for tenant/retail line-of-trade
derive financially feasible rent

Gross Margin Analysis


Potential sales at subject location/site
Apply gross margin % to potential sales
Adjust rental range based on gross margin
factor

Financially Feasible Rent


Consider rent as component of occupancy
cost
Is rent NNN?
Adjust for range of CAM
High to low

Conclude financially feasible rent

New Retail Real Estate Valuation Perspective


Traditional valuation approach
Comparable sales
Replacement cost
Income

Current practice provides for income approach to be based


on current rent and consideration of comparable rent
New approach bottom up based on tenants
perspective, i.e., Tenant Financial Feasibility for subject
location
Tenants financially feasible rent (TFF rent) at subject
location based on potential sales (demand)
TFF rent becomes alternative input to income valuation
approach