As major anchor chains close stores across the country, smaller dependent retailers are worrying whether the loss will impact the vitality of their own stores. Can their current location continue to support their business? If they have to move, where should they go?
These questions all point to a looming underlying issue: poor liquidity in the commercial real estate market. Make no mistake, there are many reasons that is the case. However, since IdealSpot focuses on “location, location, location” we find ourselves most interested in the reasons related to market fit and consumer demand. New wellsprings of demand emerge every day in America and the market is constantly looking for new ways to satisfy them. Pop-up shops, food trucks, corner stands, and other kiosks all have emerged to quickly adapt to local demand trends. They’re able to move quickly and easily meet demand when and where consumers need them. Larger chains are also able to meet demand relatively quickly. With enough capital backing a chain, it can open three new stores, prune the worst, then repeat until they have a strong body of several locations in any particular market. They use tools like IdealSpot to gauge the expected suitability and performance of new locations so that their decisions are made efficiently. Opening or closing a store is not free but due to economies of scale these actions become much cheaper as a business grows larger. The recent decline of shopping malls and corporate shifts among large anchor chains are signs of these capabilities – they are adapting to market demand.
The liquidity problem is most prevalent in the middle ground – brick and mortar businesses with a relatively small number of locations. Capital to take advantage of open opportunities may not be available and even when it is the risk of moving or expanding is much higher than for their larger and smaller peers. At this level, choosing the wrong location can ruin a business. Businesses might have to break a lease or sell their property to chase the new opportunity, which is often expensive in itself. They need to consider market potential, labor, suppliers, build-out, accounting, brand awareness, and every other possible source of financial or material risk in moving or opening a new location. All of these risks drastically reduce the odds of a business choosing to move into a market that may be more suitable to them, and each risk dramatically decreases commercial real estate liquidity and overall market efficiency. The end result is a slow-moving retail market that is constantly chasing last year’s trends.
Not a great situation to be in, especially when larger and smaller competitors are using today’s data to make major location decisions. Large corporations invest heavily in their data and mapping teams while small untethered players are constantly on top of day-to-day social media trends, search patterns, current events, and market imbalances. IdealSpot is addressing this problem by providing real-time demand data while also pulling together the best demographics and traffic data sets in the industry. We want your products to be exactly where demand is. If we can enable you to quickly make location adjustments with unparalleled confidence then we have done our job in making your business successful, improving market liquidity during a crunch period, and making the market more efficient in general.