In this third part of the series, let’s explore the important linkages that surround retail sites today. These used to be pretty straight forward in that retail generally wants to be located where their customers are; however with changing conditions due to transportation costs, e-commerce and other factors, some linkages are becoming increasingly important. Some of the linkages we’ll explore are:
-Access to an economically viable customer base
-Access to a skilled workforce
-Ease of transportation to distribution sites
Perhaps the easiest linkage to understand in retail, is the property’s access to an economically viable customer base. This means that the surrounding demographics support the purchasing power needed for retail establishments to survive and thrive. Calculating retail demand within a given radius is essential to understanding if there is enough disposable income to support your tenant’s business.
A business’s access to a skilled workforce used to be a given so long as it was located in a relatively populated area. Yet as time goes on, it appears that there is a widening gap between retail skills and the access to workers that can fill those skills. This is especially true when dealing with specific types of service retail. For example, a dialysis center may need to be located in an area that is adjacent to medical uses or in an area that has a higher concentration of workers with college degrees. The more specialized the retail use or service becomes, the more important this linkage becomes as time goes on.
Likewise, the ease of transportation to distribution sites used to not be as critical as it is today, especially with the advent of e-commerce and urban-centric planning. Many city planners, in response to a lack of affordable housing, are turning industrial areas into other uses while continuing to push distribution to the outskirts. While this occurs, e-commerce retailers such as Amazon are vying for last-mile distribution sites creating a limited supply scenario. With rising transportation costs, access to easy distribution becomes imperative so that retailers can keep cost of goods affordable.
Retail continues to evolve as consumers change their spending habits, but overall commercial retail sites need to remain competitive with good linkages to keep their tenants happy. Shopping centers with good linkages may be better suited to weather an economic downturn.