Seeing Where Location, Location, Location is Heading

Discussion
Jul 06, 2006
Al McClain

By Al McClain

Lots of factors go into decisions about where to locate new stores, but looking for fast-growing markets is surely part of the mix. According to a new Wharton study, the fastest
future growth in the U.S. should occur in the West, the Sunbelt, and between Raleigh, NC and Atlanta, GA.

Generally, Americans are leaving the Northeast, Mid-Atlantic, and Midwest, for sunnier and warmer areas. Areas expected to decline include Baltimore, New Orleans, Syracuse, Rochester,
Buffalo, Pittsburgh and Youngstown-Warren.

The Las Vegas area is forecast to grow by 85 percent, adding 1.35 million new residents by 2020. The attractions include weather, gambling, tourism and an “easy lifestyle.”

The study authors say that competition between cities to attract residents is much keener than it used to be, as the amenities that an area has to offer are key to driving growth.
Important factors include quality of life, parks and recreation, architecture, climate, taxes and, most importantly, the quality of education.

By 2020, the total U.S. population is expected to reach 336 million people. That factors in an anticipated increase of 53.7 million new Americans between 2000 and 2020.

Moderator’s Comment: Is it important for the retailing industry to think about population trends 15 years out?

It’s pretty well taken as fact that the U.S. population continues to move south and west, and that the ethnic make-up is continuing to become more
diverse. Retailers and suppliers are constantly trying to figure out what consumers are going to do next, and what the “next big thing” will be. But how far ahead should plans
be made? Is it unwise to try to strategize beyond the next five year period?

Al McClain – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

10 Comments on "Seeing Where Location, Location, Location is Heading"


Sort by:   newest | oldest | most voted
Mark Lilien
Guest
14 years 8 months ago

Retailers making store location decisions typically fill out a spreadsheet showing the investment, costs and revenues projected year by year for the life of the lease. Commonly, retail leases are 5 to 10 years, with one or two 5 year options. Sometimes retailers can get longer leases, but they’re certainly not the majority. Very few retailers purchase their locations. So it doesn’t make sense to pay extra today to lease a location that will be tops 10 years from today. The journey has to be profitable, not just the destination.

Mark Van Saun
Guest
Mark Van Saun
14 years 8 months ago
I found the discussion of red state growth patterns to be interesting. I’d argue that there likely is causality between politics and growth. There may be little causal link between new residents’ politics and growth but there is likely a strong link between existing political makeups and growth. Republicans, grounded in hands off government, are more likely to enact and oversee pro-development zoning statutes that encourage free enterprise. On the other hand, almost by definition, Democrats will likely have a more protectionist view of development and seek the implementation of statutes that check growth in favor of social or environmental priorities. Think Red Arizona vs Blue Vermont and the respective local and state-wide statutes that impact development. California, though considered blue as a whole, is mostly red when you look at 2004 electoral results county by county. The densely populated regions with limited areas for growth are Democratic bastions, but exburban areas and beyond, the areas with room to grow, are decidedly red, flavored by pro-growth, hands off zoning policies. Politics and growth seem to… Read more »
Bernice Hurst
Guest
14 years 8 months ago
My little girl reckons that Alaska is going to be the biggest population growth area in the next decade or so. The mining, oil and gas industries are booming and global warming means that the climate will be far more comfortable than anywhere in the lower 48, as they call the whole rest of the USA. Downside is that the stores all have to ship or truck every little thing on their shelves so prices are pretty darn high. But if the incomes are high, people will be able to afford whatever they fancy. Based on my one visit to the area, in the summertime, it’s already a tourist destination as the last frontier for all you hunting, fishing and camping folk but I plan to hit town this winter to see what the land of the noonday dark is like. I just loved the midnight sun. Oh yeah, and the roads aren’t great – actually don’t even exist in some places – but if there’s much more pork in the Senate budgets that will… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 8 months ago

Wait! Don’t leave the Northeast, Mid-Atlantic, and Midwest for sunnier and warmer areas! According to Al Gore, global warming will soon make those locales balmy vacation spots. And if you buy into that notion, there’s lots of ocean-front property available in Nevada.

Of course retailers need to be attuned to population trends. But, they need to follow the model of the U.S. Postal Service and drag rather than lead. That is, install when the population is there, and not before. Don’t start the show until the audience is seated. Fish where the fish are. Yadda, yadda, yadda.

James Tenser
Guest
14 years 8 months ago

When it comes to geographic growth, retailers generally would do well to take Wayne Gretzky’s advice and “skate where the puck is heading.” Planting locations in developing bedroom communities sometimes pays off both in sales growth and real estate appreciation.

Long-term population trends are not easy to forecast, however, for reasons cited above. And retailers should care less about absolute population numbers than they do about the trend within their target demographics.

Barry Wise
Guest
Barry Wise
14 years 8 months ago

It’s easy to think that what’s happening with the population and the shifting of the population 15 years from now is something that can be dealt with when we get closer to it happening. However, it’s not just the population growth and the shifting of the population, but the average age of the population that is changing. With all of those factors to take into account, retailers need to be not just looking at where to locate their stores, but what kind of stores, and what merchandise and services will be needed. Perhaps it is time for retailers to look at new concepts, technology and innovation and begin to think about where they’ll need to go over the next 15 years.

David Livingston
Guest
14 years 8 months ago
I wonder how much work it took for the geniuses at Wharton to figure out that Baltimore, New Orleans, Syracuse, Rochester, Buffalo, Pittsburgh and Youngstown-Warren are declining? Forecasting population 15 years from now is almost like forecasting the weather. I’ve been studying population trends in the USA going back 200 years. Rarely have I seen quality of life factors such as parks and recreation, architecture, climate, taxes and, quality of education determine why one area grows more that another. Historically it has been economic opportunities, personal safety, and the availability of water. Without those three, all those quality of life factors mean nothing. Are illegal immigrants sneaking into our country because of taxes, architecture, and parks and recreation? I doubt it. Sometimes forecasting goes beyond population. We all know that most urban inner city areas have lost population. But they have lost their retail base even faster due to consumers basically being too scared to shop in their own neighborhoods. Could that have been forecasted 15 years ago? I amazed at the declining retail sales… Read more »
Leon Nicholas
Guest
Leon Nicholas
14 years 8 months ago

More often than not, I see retailers making site decisions based upon where their competition is (not always such a bad strategy) or how the MSA’s demographics/economics have looked historically. At best, straight-line projections/extrapolations “forecast” the future. A 5-10 year horizon is essential, though I’m respectful of the lease considerations already mentioned. Site location is a decision, though, that has to be made with both strategic and operational perspectives in mind. One thing is certain: You can’t base these decisions on historical extrapolations. You’ll miss out on, for example, Oregon’s or Maine’s forecasted rise in Hispanics that demographers worth their salt will point out to you. Who includes Oregon in their Hispanic marketing plans? Smarter, strategic thinkers…..

Eliott Olson
Guest
Eliott Olson
14 years 8 months ago

Even as cities grow there are trade areas that will lose population for infrastructure development to support the growth. New freeways, airports, and mass transit along with hospitals and other public services will displace residents and change commuting and shopping patterns. In addition, rising land costs can transform the use of low income housing areas and obsolete commercial land uses. While the omelet may be growing the contents are being scrambled and the traditional ways of looking at cities including the standard demographic reports are obsolete. New sources of current information, updated in a timely manner, that reflect small areas on a timely basis are needed.

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 7 months ago

If only we could entice corporations to think out a meaningful period of time for consumer trends and needs.

Far say it, but food companies and retailers in the business
aren’t playing ahead! Those Baby Boomers are going to need easier and better entry to outlets and specific departments.

As for location, location, location, just think if one bought property in Arizona or New Mexico 15 years ago! Would we be happy? Of course. Hmmmmmmmm

wpDiscuz

Take Our Instant Poll

How far ahead should retailers look at population and market trends?

View Results

Loading ... Loading ...