This empirical analysis in the previous posts is a powerful benchmark. It is simple to understand, easy to aggregate, and the implication is straightforward. The urban markets surveyed currently support about 22 to 58 feet of retail per person, or 66 to 155 feet of retail per household. This information was taken at the county level, but as a rule of thumb it should stand up when applied to large submarkets and large cities. A three-mile radius is too narrow of a geography to apply this benchmark. Of course, if we examine a premier location, especially those with high levels of tourism, then these benchmarks do not apply. In those areas without compelling stories and above average ratios, expect persistent weakness in the retail sector and repurposing of existing properties.
Across the three areas surveyed, household density is the best indicator of supportable retail area. As the population and number of households increases there should be an increase in retail area demanded, but as density increases the ratio should decline. All of the areas surveyed are presented in the following table and are organized by increasing household density.
The geography with the lowest housing density (San Bernardino County) has 31 households per square mile and 150 square feet of retail per household. The area with the highest housing density (Manhattan) has 33,217 households per square mile and supports 73 square feet of retail per household. At the extreme end, household density increases by a factor of over 1,000, but the amount of retail per household only halves.
A summary of all the ratios described in this article are summarized in the following table.
David Segal, MAI, is a Director in Cushman & Wakefield’s Valuation & Advisory group. He specializes in the valuation of all retail properties, which include malls, power centers, and both anchored and unanchored shopping centers