Identifying competitively positioned retail sites through geolocation is not cutting edge technology. However, companies that specialize in mapping and data services customized to the commercial real estate world are taking geolocation to the next level. These services allow retail tenants, owners, and brokers to drill deeper than ever before into the complexity of specific trade areas.
But a number of questions remain: Will geolocation data replace other metrics? How can it most effectively be used?
We surveyed 43 real estate owners and brokers about their use and understanding of geolocation. Here’s what we found and what we can expect from this technology moving forward.
Geolocation providers are popping up left and right
Nearly 70% of respondents said their company has used geolocation technology to assess commercial real estate locations. Which isn’t surprising given how ubiquitous these tools have become.
A lot of geolocation service providers are building up business lines around commercial real estate and providing sophisticated assessment tools. At Metro, we’ve demoed at least 10 to 12 services over the past two years, experiencing a range of quality.
Some providers supply just the raw data, while others have user-friendly dashboards that summarize and contextualize the data in maps and charts so it’s easier to glean insights. Some of the tools are difficult to find in the first place, and some, especially the ones delivering raw data, can create more work for the teams that have to interpret that information.
With the number and variety of platforms, not to mention the cost, some might wonder whether geolocation tools are worth the effort. The answer is yes, for one major reason.
Why retail real estate needs geolocation data
Geolocation helps retailers — and owners and brokers — better understand the true trade area of a shopping center. Historically, we’ve discussed the market through demographic snapshots like radius and drive time to estimate potential traffic.
Geolocation technology now lets us see the existing traffic patterns of consumers that are actually shopping at the center. We know where they’re coming from, whether or not they live in the trade area, what the daytime population is based on where people work, and so on. It’s a much more precise way to gauge the potential of a site.
That’s part of the reason why 77.8% of the respondents in our survey said they use geolocation to assist in defining the trade area. In addition, 78.6% of respondents said that using geolocation data is a viable method for market assessment.
But will it replace other tools and data?
The short answer is no.
Where geolocation data fits among other metrics
Nearly 70% of respondents said they use geolocation data as a supplement to demographic, psychographic, credit card sales, and customer zip code data. Only 2.8% of respondents said their company uses geolocation data in lieu of any other form of data for market assessment.
Geolocation data is most effectively used in conjunction with comprehensive market research, sales data, and other tools to assist brokerage firms, retailers, and landlords trying to identify what their trade area is on a daily or weekly basis. Getting the most accurate trade area is ultimately going to give you the best representation of potential sales.
It’ll also give landlords a level of data granularity to understand customer profiles based on real traffic, which they can use to define their customer base to sell a location to a retailer. Owners and brokers are interested in and like geolocation data, but understanding how to get the most out of it is going to be the key.
How the retail sector will use geolocation data
Of course, geolocation isn’t a panacea. It’s not going to be the end-all-be-all. But it’s going to be another important resource that can help retailers, landlords and brokers to understand their market.
For example, you couldn’t use geolocation for new development. It doesn’t tell you anything because there’s no traffic there. For an existing center, it can tell you about your customers, but if you’ve got a big vacancy in one of your anchors, you won’t learn as much because the traffic will be skewed. It can help to understand traffic patterns of existing adjacent retail centers to provide consumer shopping patterns and how the trade area is defined based on the retail center and their tenants.
But if a shopping center is trying to fill a vacant, junior box or in-line space, brokers and managers can use geolocation data to provide a better profile about where clients are coming from.
We recently used geolocation for a project in Newtown, Pennsylvania, which is a more rural setting where the trade area expands a lot further than how you would typically define it from a purely demographic perspective. We suspected the trade area for this project extended much further to the north as the customers living there had limited retail options. The data confirmed our suspicions and allowed us to illustrate to retailers exactly where and who the customers are and how far the true trade area extended.
If you haven’t yet worked geolocation data into your metrics to better understand the customers visiting your shopping center, it’s time to get started. It adds new perspective, and the more tenants, owners, and brokers start using it, the stronger the tools will become.