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Survey of the realtors use of trade area (location) analysis Beauregard, Andre Vincent 1979

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SURVEY OF THE REALTORS USE OF TRADE A R E A (LOCATION) A N A L Y S I S b y ANDRE V I N C E N T BEAUREGARD B . E d . , The U n i v e r s i t y o f C a l g a r y , 1972 T H E S I S SUBMITTED IN P A R T I A L F U L F I L M E N T 0 THE REQUIREMENTS FOR THE - DEGREE OF MASTER OF S C I E N C E i n BUSINESS ADMINISTRATION i n THE F A C U L T Y OF GRADUATE S T U D I E S D e p a r t m e n t o f U r b a n L a n d E c o n o m i c s We a c c e p t t h i s t h e s i s as c o n f o r m i n g t o t h e r e q u i r e d s t a n d a r d THE U N I V E R S I T Y OF B R I T I S H COLUMBIA J u l y 1979 © A n d r e V i n c e n t B e a u r e g a r d , 1979 In presenting th i s thesis in pa r t i a l fu l f i lment of the requirements for an advanced degree at the Univers ity of B r i t i s h Columbia, I agree that the Library shal l make i t f ree ly avai lable for reference and study. I further agree that permission for extensive copying of th i s thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It i s understood that copying or publ icat ion of th i s thesis for f inanc ia l gain shal l not be allowed without my written permission. Department of Urban Land Economics The Univers ity of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 D E - 6 B P 7 5 - 5 1 I E ABSTRACT Th i s study surveys commercial r e a l e s t a t e agents on t h e i r use of trade area ( l o c a t i o n ) a n a l y s i s i n the marketing ( l e a s i n g and s e l l i n g ) of r e t a i l space. Throughout the study, the broad d e f i n i t i o n of the broker as an i n f o r m a t i o n agent on a l l f a c e t s of r e a l e s t a t e i s narrowed i n order to i s o l a t e the purpose, type and scope of the trade area ( l o c a t i o n ) i n f o r m a t i o n he p r o c e s s e s . As such, the primary o b j e c t i v e of the study i s to determine the extent to which r e a l t o r s p r a c t i c e trade area ( l o c a t i o n ) a n a l y s i s i n t h e i r marketing of r e t a i l space. Real e s t a t e l i t e r a t u r e emphasizes two p o i n t s t h a t together serve as the b a s i s f o r the study: (1) brokers should s t r i v e t o become a d v i s o r s to t h e i r c l i e n t s and customers and (2) the importance o f trade area ( l o c a t i o n ) d a t a f o r i d e n t i f y i n g a r e t a i l p r o p e r t y ' s most b e n e f i c i a l use(s) and determining i t s v a l u e . Yet, even though these two p o i n t s are w e l l r e c o g n i z e d , some q u e s t i o n remains about the e x t e n t of trade area ( l o c a t i o n ) i n f o r m a t i o n r e a l t o r s are p r o c e s s i n g . For example, one l a r g e corporate r e a l e s t a t e buyer has remarked t h a t out of the many investment proposals he r e c e i v e d from b r o k e r s , few c o n t a i n s u f f i c i e n t market data to allow prudent investment d e c i s i o n -making. In a d d i t i o n , r e a l e s t a t e p r a c t i t i o n e r l i t e r a t u r e , w h i l e n o t i n g the importance of trade area, o f f e r s few i f any procedures t h a t c o u l d be f o l l o w e d to develop a trade area a n a l y s i s . Based on these o b s e r v a t i o n s , t h i s study attempts t o g a i n an i n s i g h t i n t o the r e a l t o r s p r a c t i c e s o f trade area a n a l y s i s To accomplish t h i s o b j e c t i v e , trade area l i t e r a t u r e was reviewed to i d e n t i f y trade area c h a r a c t e r i s t i c s , techniques o f a n a l y s i s , and data sources. From t h i s i n f o r m a t i o n a s e t of que s t i o n s was developed and used t o survey r e a l t o r s on t h e i r p r a c t i c e s o f trade area a n a l y s i s . Data from the survey show: (1) the type o f analyses developed, (2) the content of the anal y s e s , and (3) the purpose of the a n a l y s e s . I n t e r p r e t a t i o n of the survey data i n d i c a t e s t h a t there i s a dis c r e p a n c y between the trade area analyses t h a t are c u r r e n t l y b e i n g developed and the " s t a t e of the a r t " as evidenced by trade area l i t e r a t u r e . Recommendations are t h a t r e a l e s t a t e p r a c t i t i o n e r l i t e r a t u r e c o u l d devote more a t t e n t i o n to i n c l u d i n g procedures t h a t r e a l t o r s might f o l l o w to^develop a trade area a n a l y s i s and t h a t r e a l t o r s c o u l d i n c r e a s e t h e i r use of r e a l e s t a t e l i t e r a t u r e . i v TABLE OF CONTENTS PREFACE Paqe ABSTRACT ; • i i TABLE OF CONTENTS i v LIST OF TABLES v i i LIST OF FIGURES.. . v i i i ACKNOWLEDGMENT i x CHAPTER 1 INTRODUCTION . 1 1.1 I n t r o d u c t i o n 2 1.2 Context o f Problem 2 1.3 Statement o f the Problem 6 1.4 Review o f P r i o r L i t e r a t u r e 7 1.5 S i g n i f i c a n c e o f the Study . . . . . . . . 9 1.6 O r g a n i z a t i o n o f the Study 11 1.7 Footnotes 13 2. CONTRIBUTIONS TOWARDS THE DEVELOPMENT OF TRADE AREA ANALYSIS 15 2.1 I n t r o d u c t i o n 16 2.2 Trade Area Concept . 16 2.3 C e n t r a l P l a c e Theory . . . . : 17 General review 17 L i m i t a t i o n s and u s e f u l i m p l i c a t i o n s . . 21 2.4 Law of R e t a i l G r a v i t a t i o n 22, General review 22 L i m i t a t i o n s and u s e f u l i m p l i c a t i o n s . . 26 2.5 St u d i e s o f Consumer Behavior 2 7 General review 27 L i m i t a t i o n s and u s e f u l i m p l i c a t i o n s . . 2 8 2.6 Marketing Geography 29 General review 29 L i m i t a t i o n s and u s e f u l i m p l i c a t i o n s . . 30 2.7 Footnotes 32 3. TRADE AREA ANALYSIS: APPLICATION 34 3.1 I n t r o d u c t i o n 35 3.2 General Procedure f o r A n a l y s i n g a Trade Area 35 3.3 Step One - Trade Area D e l i n e a t i o n . . . . 36 R e t a i l l o c a t i o n tvpe of the s u b j e c t s i t e "". 37 Data sources and techniques . . . . 40 Inf l u e n c e of a c c e s s i b i l i t y 40 Data sources and techniques . . . . 4 3 - I n f l u e n c e of competing shopping areas and e s t i m a t i o n o f trade area 43 Data sources and techniques . . . . 44 V Chapter Page 3.4 Step Two - D e s c r i p t i o n o f P o p u l a t i o n and Income C h a r a c t e r i s t i c s 47 - P o p u l a t i o n trends " 47 Data sources and techniques . . . . 47 Po p u l a t i o n and income c h a r a c t e r i s t i c s . 51' - Data sources and techniques 52 3.5 Step Three - Merchandising Value of the S i t e 53 T r a f f i c flow 54 - Data sources and techniques . . . . 55 Business environment 56 Data sources and techniques . . . . 58 3.6 Step Four - Use of Sale F o r e c a s t i n g Techniques f o r I d e n t i f y i n g the Most B e n e f i c i a l Uses 59-Determining the value of a v a i l a b l e b usiness 61 C a l c u l a t i o n of the a t t a i n a b l e s a l e s volume p o t e n t i a l u s i n g the " r e s i d u a l " technique 6 3 C a l c u l a t i o n o f the a t t a i n a b l e s a l e s volume p o t e n t i a l u s i n g the "market share" approach 66 3.7 Footnotes . . . 6 8 4 METHODOLOGY 72 4.1 I n t r o d u c t i o n 7 3 4.2 D e s c r i p t i o n o f the Q u e s t i o n n a i r e 73 Type of t r a d e drea analyses developed-. ' 74 Purpose o f trade area analyses . . . . 74 - Scope of trade area analyses 75 - Use of r e a l e s t a t e l i t e r a t u r e 76' 4.3 Survey A d m i n i s t r a t i o n 76 4.4 Data A n a l y s i s . . . . . . . . . . . . . . 77 4.5 D e s c r i p t i o n o f Respondents 7 8 Age and work experience w i t h i n d u s t r i a l , commercial, and investment p r o p e r t y . . 78 Education l e v e l and p r o f e s s i o n a l r e a l estate, d e s i g n a t i o n s . . 80 Gross annual income and percent o f income a t t r i b u t e d t o business/commercial p r o p e r t y . . . . . 81 Business/commercial p r o p e r t i e s s o l d d u r i n g the past two years and type o f l i s t i n g agreement 82 4.6 Footnotes , . 85 5. RESULTS 86 5.1 I n t r o d u c t i o n and Summary of the Main F i n d i n g s 87 Chapter v i Page 5.2 S e c t i o n 1 - Type of Trade Area Analyses Developed 90 C o n s i d e r a t i o n o f trade area ( l o c a t i o n ) i n the marketing of r e t a i l space . . . . 90 Type o f trade area ( l o c a t i o n ) analyses • developed: g e n e r a l or f o r s p e c i f i c uses 90 Form of trade area ( l o c a t i o n ) a n a l y s e s : w r i t t e n or mental notes 9 2 5.3 S e c t i o n 2 - Purpose of Trade Area Analyses:-; . . 93 Trade area a n a l y s i s as a value determinant 93 Trade area a n a l y s i s as a marketing t o o l f o r l o c a t i n g l i s t i n g s or p r o s p e c t s . 9 5 5.4 S e c t i o n 3 - Scope of Trade Area Analyses Developed . 9 8 Items c o n s i d e r e d by respondents r e l y i n g e x c l u s i v e l y on mental notes . . 9 8 - Items c o n s i d e r e d by respondents who do w r i t t e n analyses 99 Steps used t o i d e n t i f y s p e c i f i c p rospects .' 102 Use of s t a t i s t i c a l data and r e l a t e d sources 104 5.5 S e c t i o n 4 - Use of Real E s t a t e L i t e r a t u r e 105 6 DISCUSSION AND CONCLUSION 107 6.1 I n t r o d u c t i o n 108 6.2 P r e p a r a t i o n o f Trade Area Analyses . . . . 109 Form of a n a l y s i s : w r i t t e n or mental notes 110 Type of a n a l y s i s : g e n e r a l or f o r s p e c i f i c uses . I l l Steps used t o develop a n a l y s i s 113 Trade area c h a r a c t e r i s t i c s 114 S t a t i s t i c a l data and data sources / . . 115 6.3 Use of Trade Area A n a l y s i s as a Marketing A i d 117 Determining "value . . . . . . . . . . . 118'. L o c a t i n g l i s t i n g s and prospects . . . . 120 6.4 C o n c l u s i o n and Recommendations f o r Fur t h e r Research . . . 121 SELECTED BIBLIOGRAPHY APPENDIX f l S O ^ v i i LIST OF TABLES  Number Page 1.1 C h e c k l i s t of P roperty C h a r a c t e r i s t i c s . . 5 • 3.1 C l a s s i f i c a t i o n o f R e t a i l L o c a t i o n Types . 38 4.1 Age D i s t r i b u t i o n of Respondents 78 4.2 Years worked w i t h I.C.I. Property . . . . 79 4.3 L e v e l of E d u c a t i o n 80 4.4 Gross Annual Income i n Thousands . . . . 81 4.5 Mean Percent of Annual Income Accounted f o r by S e l e c t e d P r o p e r t y C l a s s i f i c a t i o n s 82 4.6 Business/Commercial P r o p e r t i e s S o l d by Respondents Over a Two Year P e r i o d . . . 83 4.7 Percentage of E x c l u s i v e L i s t i n g s Worked by Respondents 84 5.1 C o n s i d e r a t i o n o f Trade Area ( l o c a t i o n ) . . 90 5.2 Type of Trade Area ( l o c a t i o n ) Analyses Developed 90 5.3 Frequency of W r i t t e n Trade Area ( l o c a t i o n ) Analyses 92 5.4 F a c t o r s L i s t e d as Major I n f l u e n c e s on Value f o r Business/Commercial P r o p e r t i e s 93 5.5 Who Determines the Asking P r i c e of Business/Commercial P r o p e r t i e s 94 5.6 Use of Trade Area ( l o c a t i o n ) A n a l y s i s t o I d e n t i f y P rospects 96 5.7 B a s i s f o r D e c i d i n g When to Prepare a W r i t t e n A n a l y s i s 97 5.8 Trade Area„(location) Items Considered by Respondents who Rely E x c l u s i v e l y on ,; Mental Notes . 1 1 98 5.9 O v e r a l l Rank Order and Frequency of Use of Items Included i n W r i t t e n Trade Area ( l o c a t i o n ) Analyses by Major Components 100 5.10 Steps used t o I d e n t i f y S p e c i f i c P rospects Grouped Under the Major Components o f a Trade Area A n a l y s i s 103 5.11 Use of S t a t i s t i c a l Data . 104 5.12 Names of S t a t i s t i c a l Sources and , „ „ Frequency of S e l e c t i o n . 105 v i i i LIST OF FIGURES Number Page 2.1 H i e r a r c h y o f Trade Centres and T h e i r Respective Trade Areas . . . . 20 2.2 Breaking P o i n t of Trade Area f o r C i t y . . . 24 2.3 Trade Area of Shopping Center 26 3.1 Vancouver Census T r a c t s 50 i x ACKNOWLEDGEMENT I would l i k e t o thank my t h e s i s a d v i s o r , P r o f e s s o r Gary E l d r e d , f o r h i s p a t i e n c e and g u i d i n g c r i t i c i s m , without which t h i s study c o u l d not-have been completed. I would a l s o l i k e to thank the members o f the I.C.I. D i v i s i o n , Vancouver Real E s t a t e Board, f o r t h e i r c o o p e r a t i o n . CHAPTER ONE INTRODUCTION 2 1.1 I n t r o d u c t i o n T h i s study surveys the r e a l t o r ' s use of trade area ( l o c a t i o n ) i n f o r m a t i o n i n h i s marketing of business/commercial p r o p e r t i e s ( i . e . p r o p e r t i e s used f o r r e t a i l i n g f u n c t i o n s ) . Throughout the study, the broad d e f i n i t i o n of the broker as a market i n t e r m e d i a r y who a s s i s t s c l i e n t s and customers i n a l l f a c e t s of t h e i r r e a l e s t a t e investment d e c i s i o n s has been narrowed to focus on r e a l t o r p r a c t i c e s of trade area ( l o c a t i o n ) ' a n a l y s i s . D e t a i l e d i n f o r m a t i o n on the trade area of a r e t a i l p r o p e r t y ( i . e . s i z e and shape of trade area, p o p u l a t i o n and income c h a r a c t e r i s t i c s and merchandising v a l u e of the s i t e ) i s e s s e n t i a l f o r matching a p r o p e r t y w i t h i t s most b e n e f i c i a l uses or determining v a l u e . Survey f i n d i n g s are used to e x p l o r e r e l a t i o n s h i p s between theory and p r a c t i c e ; between the realm of trade area l i t e r a t u r e and the a c t i v i t i e s of the broker. 1.2. Context o f the Problem Real e s t a t e l i t e r a t u r e emphasizes two major p o i n t s t h a t together serve as the b a s i s f o r t h i s r e s e a r c h : (1) the r o l e of the broker as an i n f o r m a t i o n agent and market i n t e r m e d i a r y and (2) the importance o f trade area data f o r marketing business/commercial p r o p e r t y . With r e s p e c t to the f i r s t p o i n t , r e a l e s t a t e l i t e r a t u r e s t r e s s e s t h a t r e a l t o r s should advise and counsel t h e i r c l i e n t s and customers on a l l 3 aspects of t h e i r investment d e c i s i o n . For example, G i r a r d s t a t e s , becoming an a d v i s o r and counselor to your c l i e n t s and customers i s an achievement which you as a commercial ( r e a l e s tate) salesman should s t r i v e to o b t a i n . . . the a r t of becoming an a d v i s o r and counselor i s being able to convince the buyer ^• and s e l l e r t h a t you know a l l f a c e t s of r e a l e s t a t e . S i m i l a r l y , Hoagland mentions, Few buyers or s e l l e r s of p r o p e r t y know i t s value or can acquire the f a c i l i t y , i n a s h o r t time, of l e a r n i n g i t . They must lean h e a v i l y upon the r e p r e s e n t a t i o n s of the broker. 2 The second major p o i n t i s the v i t a l importance o f trade area ( l o c a t i o n ) i n f o r m a t i o n f o r marketing r e t a i l p r o p e r t y . M a i s e l t e l l s r e a l t o r s , L o c a t i o n i s of prime importance f o r r e t a i l space . . . the key to the a n a l y s i s of s t o r e s i s the f a c t t h a t t h e i r value depends on the volume o f s a l e s they generate . . . s a l e s depend on the number of customers and t h e i r incomes . . . 3 and A l l e n c l a i m s , Commercial p r o p e r t y succeeds or f a i l s depending on i t s t r a d i n g area. You must know the area i f you expect to have a s u c c e s s f u l showing of a commercial p r o p e r t y . 4 These claims are supported by a recent e m p i r i c a l study t h a t measured the i n f l u e n c e of v a r i o u s trade area ( l o c a t i o n ) f a c t o r s on the.value of commercial l a n d . R e s u l t s of the study show t h a t such c h a r a c t e r i s t i c s as p o p u l a t i o n , income l e v e l s , a c c e s s i b i l i t y and t r a f f i c l e v e l s a l l have a h i g h l y s i g n i f i c a n t p o s i t i v e i n f l u e n c e on commercial land v a l u e s . ~* In a d d i t i o n to u n d e r l i n i n g the key r o l e of trade area ( l o c a t i o n ) ' i n f o r m a t i o n f o r determining v a l u e , the l i t e r a t u r e 4 mentions t h a t t h i s i n f o r m a t i o n can be used to design marketing s t r a t a g i e s f o r o b t a i n i n g l i s t i n g s and p r o s p e c t s . G i r a r d t e l l s r e a l t o r s t h a t a trade area a n a l y s i s , w i l l determine the h i g h e s t and most b e n e f i c i a l use f o r the p r o p e r t y . T h i s a n a l y s i s w i l l a l s o i n d i c a t e who might be i n t e r e s t e d i n p u r c h a s i n g the p r o p e r t y . 6 Commenting on the type of a n a l y s i s t h a t should be performed, H e r z f e l d t e l l s brokers to o b t a i n i n f o r m a t i o n t h a t can be used, to search the market not i n terms of a g e n e r a l range of uses (such as automobile d i s t r i b u t i o n s i t e or f r a n c h i s e food operation) but to determine s p e c i f i c a l l y whether C h r y s l e r or General Motors, Shakey's P i z z a or Dunkin Donuts would f i n d the s i t e a t t r a c t i v e . 7 The p r e c e d i n g has i l l u s t r a t e d how r e a l e s t a t e l i t e r a t u r e emphasizes t h a t r e a l t o r s can become a d v i s o r / c o u n s e l o r s and c o u l d , i n t h i s r o l e , determine a p r o p e r t y ' s most b e n e f i c i a l use or value by performing a trade area a n a l y s i s . And y e t , r e a l e s t a t e p r a c t i t i o n e r l i t e r a t u r e o u t l i n e s few i f any steps t h a t can be f o l l o w e d f o r t h i s purpose. For example, one author of a book on commercial r e a l " e s t a t e t e l l s r e a l t o r s t h a t , L o c a t i o n (trade area) may be d e s c r i b e d as e x c e l l e n t , good or minimum. 8 However, the w r i t e r does not advise r e a l t o r s to ask: " E x c e l l e n t f o r what use? Good f o r what use?" In t h i s manner, the d i r e c t i v e s f a i l t o show brokers how to match the trade area ( l o c a t i o n ) c h a r a c t e r i s t i c s of a p r o p e r t y w i t h the needs of s p e c i f i c uses. Another s i m i l a r book mentions, 5 I f y o u r ( s i c ) s h o w i n g s m a l l c o m m e r c i a l s t o r e s , y o u s h o u l d know t h e s i z e a n d c h a r a c t e r o f t h e i m m e d i a t e t r a d i n g a r e a . 9 Y e t , t h i s a u t h o r d i d n o t t e l l r e a l t o r s how t o d e f i n e a t r a d e a r e a o r how t o e v a l u a t e i t s c h a r a c t e r i s t i c s . T a b l e 1 .1 i l l u s t r a t e s a c h e c k l i s t o f p r o p e r t y a n d t r a d e a r e a ( l o c a t i o n ) c h a r a c t e r i s t i c s p r e s e n t e d i n a t h i r d b o o k on c o m m e r c i a l r e a l e s t a t e . T a b l e 1 . 1 . C h e c k l i s t o f P r o p e r t y C h a r a c t e r i s t i c s 1. D e s c r i p t i o n o f Property 2. L o c a t i o n o f Property 3. Type o f Cons truc t ion 4. Land Area-Dimensions-sq. f t . - a c r e s 5. Present Zoning 6. S i ze o f Bui ld ing-Rentab le Area 7. Number o f Uni ts -Type 8. Park ing F a c i l i t i e s - N u m b e r o f Spaces 9. Serv ices Provided 10. Furnish ings 11. Income and Operat ing Expenses 12. Taxes and Insurance 13. Encurnbran<3e-Where-Hcw Much 14. Amortization-Term-Rate o f I n t e r e s t 15. Tenants-Leases-Rate-Term 16. L o c a t i o n o f E x i s t i n g Water-Sewar-Power 17. Q u a l i t y o f Area-Surrounding Developments 18. Distances t o : C i t y Business A r e a -Employment Centers -A i r p o r t R a i l - B u s -Highway-Freeways 19. P u b l i c Transpor ta t ion 20. Nearest Shopping Center-Descr ibe 21. Schools : Nursery-Elementary-• H i g h - C o l l e g e - P a r o c h i a l 22. Churches: EJencmination-Distance 23. E x i s t i n g Easements on the Property 24. Populat ion W i t h i n : 1 m i l e 2 mi les 3 mi l e s S o u r c e : W e l d o n G i r a r d , How t o Make B i g Money S e l l i n g C o m m e r c i a l  a n d I n d u s t r i a l P r o p e r t y (New J e r s e y : P r e n t i c e - H a l l I n c . , 1 9 7 7 ) , p p . 3 4 - 3 5 . An e x a m i n a t i o n o f t h e c h e c k l i s t f i n d s t h a t s e v e r a l i t e m s n e c e s s a r y f o r a n a l y s i n g a t r a d e a r e a , s u c h as i n c o m e a n d o t h e r d e m o g r a p h i c v a r i a b l e s , a r e m i s s i n g . R e c o g n i z i n g t h i s gap i n t h e l i t e r a t u r e , G r o s s s t a t e s , The p r o c e s s o f f i n d i n g t h e b e s t s i t e f o r t h e b u y e r o f c o m m e r c i a l o r i n d u s t r i a l p r o p e r t y i s a m a t c h i n g game t h a t a s a l e s p e r s o n c a n ' t a f f o r d t o p l a y on a h i t - o r - m i s s b a s i s , e s p e c i a l l y i n t o d a y ' s c o m p l e x m a r k e t . T o 6 consistently put the r i g h t s i t e and r i g h t buyer together he needs e f f i c i e n t techniques. 10 This recognition of a need for e f f i c i e n t techniques that realtors can use for matching properties with t h e i r best uses together with the observation that r e a l estate l i t e r a t u r e for p r a c t i t i o n e r s provides minimal di r e c t i o n for t h i s purpose raises an important question: "What steps are realtors following to determine a r e a l property's most b e n e f i c i a l use and therefore value?". One large corporate rea l estate buyer remarks, Of the proposals that I receive, only one i n f i f t y contains s o l i d information that allows prudent investment decisions . . . Brokers give me projections based upon a pro forma while neglecting to include pertinent market data to substantiate t h e i r projections . . . I t i s the rare case where the broker has made the e f f o r t to know his property and the market. 11 Based upon the foregoing statement there appears to be a contrast between the analysis of information brokers could be providing and the analyses that are being performed. 1.3 Statement of the Problem As a r e s u l t of thi s apparent contrast, t h i s study attempts to answer the question: "To what extent do realto r s perform and use trade area analyses i n the marketing (leasing and selling) of r e t a i l space?". To accomplish t h i s objective, the broad d e f i n i t i o n of the broker as an advisor/ counselor on a l l facets of re a l estate was narrowed to is o l a t e the type, purpose, and scope of the trade area 7 i n f o r m a t i o n he p r o c e s s e s . Based upon t h i s f o cus, a q u e s t i o n n a i r e was adm i n i s t e r e d to commercial r e a l t o r s to l e a r n how they develop and use trade area analyses i n t h e i r marketing of business/commercial p r o p e r t y . 1.4 Review o f P r i o r Research Four e m p i r i c a l s t u d i e s were l o c a t e d t h a t examined r e a l t o r p r a c t i c e s of marketing r e a l e s t a t e . One study focused on broker and i n v e s t o r p r a c t i c e s of investment a n a l y s i s ; the other three examined r e a l t o r p r a c t i c e s of marketing r e s i d e n t i a l r e a l e s t a t e . While these f o u r s t u d i e s do not examine the r e a l t o r s use o f trade area ( l o c a t i o n ) i n f o r m a t i o n i n the marketing o f r e t a i l space, some u s e f u l a n a l o g i e s can be drawn from t h e i r f i n d i n g s with r e s p e c t to the prese n t r e s e a r c h . A study by A r t h u r surveyed broker and i n v e s t o r p r a c t i c e s 12 o f c a l c u l a t i n g investment r e t u r n s . I t found t h a t both groups i n f r e q u e n t l y employ s o p h i s t i c a t e d methods of investment a n a l y s i s common to other b u s i n e s s f i e l d s . The main reason t h a t was c i t e d f o r t h i s l a c k of s o p h i s t i c a t i o n was the d i f f i c u l t y of o b t a i n i n g the necessary i n p u t data. The study concluded by recommending t h a t g r e a t e r a t t e n t i o n should be given to developing o p e r a t i o n a l techniques f o r g e n e r a t i n g more accurate and r e l i a b l e i n p u t data. S i m i l a r l y , r e a l e s t a t e p r a c t i t i o n e r l i t e r a t u r e should be devoting more a t t e n t i o n to o p e r a t i o n a l techniques f o r developing trade area analyses 8 as was n o t e d e a r l i e r . L y l e and B u r n s i n a n o t h e r s t u d y f o u n d t h a t b o t h b u y e r s a n d s e l l e r s o f " r e s i d e n t i a l r e a l e s t a t e w e r e u s u a l l y s a t i s f i e d w i t h t h e r o u t i n e a s p e c t s o f t h e b r o k e r ' s s e r v i c e s (( e g . , l e g a l d e t a i l s a n d e x p l a n a t i o n o f t h e t r a n s a c t i o n i n n o n -13 t e c h n i c a l t e r m s ) . H o w e v e r , t h e r e s e a r c h f o u n d t h a t t h e r e was s u b s t a n t i a l d i s s a t i s f a c t i o n , more s o on t h e p a r t o f b u y e r s t h a n s e l l e r s , r e g a r d i n g i n f o r m a t i o n r e l a t e d t o p r i c e s a n d m a r k e t t r e n d s . S i m i l a r r e s u l t s w e r e o b t a i n e d 14 i n a s t u d y b y C o n n e t t . a n d S a w a t z k y . T h e i r r e s e a r c h f o u n d t h a t s e l l e r s were p a r t i c u l a r l y d i s s a t i s f i e d w i t h t h e a g e n t ' s k n o w l e d g e o f t h e p r o d u c t ( r e s i d e n t a l p r o p e r t y ) he was m a r k e t i n g . I n f o r m a t i o n a b o u t p r i c e s a n d m a r k e t t r e n d s i s a l s o i m p o r t a n t f o r b u y e r s a n d s e l l e r s o f b u s i n e s s / c o m m e r c i a l p r o p e r t y . T o d i s c e r n m a r k e t t r e n d s a n d d e t e r m i n e v a l u e , b r o k e r s m u s t know w h a t d a t a t o c o l l e c t , w h e r e t o c o l l e c t i t , a n d f i n a l l y how t o i n t e r p r e t i t . H o u s t o n e t a l . a s s e s s e d r e a l e s t a t e b r o k e r s a s s o u r c e s o f n e i g h b o u r h o o d i n f o r m a t i o n . The r e s u l t s o b t a i n e d f r o m t h e s u r v e y i n d i c a t e d t h a t a g e n t s w e r e w e l l i n f o r m e d o n t h e o v e r a l l n a t u r e o f t h e g e o g r a p h i c a l m a r k e t s t h e y w o r k e d . W e a k n e s s e s i d e n t i f i e d c o n c e r n e d t h e q u a n t i t y o f i n f o r m a t i o n s u p p l i e d w i t h r e s p e c t t o n e i g h b o u r h o o d i n s t i t u t i o n s ( i . e . r e c r e a t i o n a l f a c i l i t i e s , s c h o o l s , c h u r c h e s , c h i l d r e n ' s g r o u p s a n d c o m m u n i t y o r g a n i z a t i o n s ) . T h e q u a l i t y a n d a c c e s s -i b i l i t y o f n e i g h b o u r h o o d i n s t i t u t i o n s a f f e c t t h e i n v e s t m e n t made b y a' h o m e - b u y e r . S i m i l a r l y , t r a d e a r e a i n f o r m a t i o n , » 9 i n c l u d i n g d e t a i l s of ne i g h b o r i n g b u s i n e s s e s , surrounding p o p u l a t i o n and income must a f f e c t the investment made by a user/buyer of r e t a i l space. 1.5 S i g n i f i c a n c e of the Study By r e s e a r c h i n g r e a l t o r p r a c t i c e s of tr a d e area ( l o c a t i o n ) a n a l y s i s , t h i s study has p o t e n t i a l value f o r r e a l t o r s and t h e i r c l i e n t s and. customers. Important trade area ( l o c a t i o n ) c r i t e r i a which,^re-overlooked or u n d e r u t i l i z e d i n c u r r e n t p r a c t i c e s o f a n a l y s i s may be i d e n t i f i e d and suggestions made f o r improving o p e r a t i o n a l techniques. R e a l t o r s who upgrade t h e i r a n a l y s i s and increase t h e i r l e v e l of knowledge about the p r o p e r t y they are working (and hence t h e i r e x p e r t i s e ) should be able t o heighten the e f f i c i e n c y of t h e i r s a l e s e f f o r t . In support a study by Busch analysed a salesman's expert and r e f e r e n t s o c i a l power bases i n regard to t h e i r impact on the customer's t r u s t i n the salesman's a t t i t u d e and b e h a v i o r a l i n t e n t i o n s . Expert power was d e f i n e d as, the i n f l u e n c e e ' s p e r c e p t i o n t h a t the i n f l u e n c e r has v a l u a b l e knowledge, i n f o r m a t i o n and s k i l l s i n a r e l e v a n t area, and r e f e r e n t power as, the p e r c e i v e d a t t r a c t i o n o f members i n the dyad to one another a r i s i n g from f r i e n d s h i p e t c . . . 1,6' R e s u l t s from t h i s study i n d i c a t e t h a t e x p e r t i s e i s g e n e r a l l y more e f f e c t i v e than r e f e r e n t power i n producing d e s i r e d customer changes. 10 In a d d i t i o n to i d e n t i f y i n g areas about which r e a l t o r s may be able to improve t h e i r l e v e l of e x p e r t i s e , the r e s e a r c h has r e l e v a n c e f o r r e a l t o r s who wish to improve t h e i r a b i l i t y t o l o c a t e l i s t i n g s and p r o s p e c t s . Using i n f o r m a t i o n obtained from a p r o p e r l y developed trade area a n a l y s i s , r e a l t o r s , should be able to t r a n s f e r t h e i r c o n c e n t r a t i o n of marketing e f f o r t s from the g e n e r a l market to s p e c i f i c s e l l e r s and buyers. This t a r g e t marketing w i l l reduce t h e i r s earch time f o r l i s t i n g s and p r o s p e c t s . Reducing search time p r o v i d e s r e a l t o r s w i t h more time to i n c r e a s e p r o d u c t i v i t y through more frequent s a l e / l e a s e t r a n s -a c t i o n s . Moreover, t a r g e t marketing w i l l r e s u l t i n premium t r a n s a c t i o n p r i c e s s i n c e p r o p e r t i e s w i l l more l i k e l y be t r a d e d at p r i c e s r e f l e c t i n g t h e i r most b e n e f i c i a l uses. As more s e l l e r s become aware t h a t the broker (through h i s use o f t a r g e t marketing) can match t h e i r p r o p e r t i e s w i t h buyers who are top b i d d e r s , they c o u l d be expected to i n c r e a s e t h e i r demand f o r h i s s e r v i c e s . The r e s e a r c h a l s o c o u l d have value f o r the l o c a t i o n d e c i s i o n s of u s e r s / i n v e s t o r s s i n c e evidence p o i n t s to poor trade area ( l o c a t i o n ) as an important u n d e r l y i n g cause of b usiness f a i l u r e . A r e p r e s e n t a t i v e sample of 81 s m a l l (assets under $1,000,000.00) newly e s t a b l i s h e d r e t a i l and \ - -s e r v i c e e n t e r p r i s e s i n the Providence^- Rhode I s l a n d , metro-17 p o l i t a n area were monitored over a two year p e r i o d . O b j e c t i v e s of the r e s e a r c h were to determine the s p e c i f i c circumstances which accompany a businesse's i n c e p t i o n , 11 development and demise. R e s u l t s show t h a t the causes of f a i l u r e f o r 32 of the 40 f i r m s t h a t c l o s e d were mainly-l i n k e d t o l i t t l e or no market r e s e a r c h p r i o r t o commencing busin e s s and inadequate s a l e s r e s u l t i n g from c o m p e t i t i v e weakness. A trade area a n a l y s i s may have averted these f a i l u r e s . 1.6 O r g a n i z a t i o n of the Study To g a i n an i n s i g h t i n t o r e a l t o r p r a c t i c e s of trade area a n a l y s i s a q u e s t i o n n a i r e t h a t c o u l d be used f o r t h i s purpose was developed. To g i v e an overview of m a t e r i a l used to c o n s t r u c t the q u e s t i o n n a i r e , chapter two i n t r o d u c e s the concept of trade area and reviews f o u r major c o n t r i b u t i o n s to the development of trade area a n a l y s i s . Chapter three p r o v i d e s the b a s i s f o r c o n s t r u c t i n g the q u e s t i o n n a i r e . Drawing from the body of trade area l i t e r a t u r e , the chapter o u t l i n e s trade area c h a r a c t e r i s t i c s and techniques of a n a l y s i s . As such, the chapter attempts to f i l l the e x i s t i n g gap i n r e a l e s t a t e l i t e r a t u r e by more p r e c i s e l y i d e n t i f y i n g trade area c h a r a c t e r s i t i c s of importance f o r business/commercial p r o p e r t y and by s u g g e s t i n g o p e r a t i o n a l techniques t h a t c o u l d be used to develop a t r a d e area a n a l y s i s . Chapter f o u r presents the methods and procedures of the r e s e a r c h . The c o n s t r u c t i o n and content of the q u e s t i o n n a i r e are d i s c u s s e d . Next, a d m i n i s t r a t i o n and data a n a l y s i s pro-cedures are d e s c r i b e d . The chapter concludes w i t h a 12 d e s c r i p t i o n o f the respondents. The r e s u l t s of the survey are pr e s e n t e d i n chapter f i v e . These r e s u l t s show the type, purpose, and scope of the trade area analyses being developed by the respondents. In a d d i t i o n , r e l a t i o n s h i p s among survey items are presented. Chapter s i x concludes and summarizes the major f i n d i n g s of the survey. Drawing from the r e s u l t s s e c t i o n and chapter t h r e e , two r e l a t e d areas are d i s c u s s e d : (1) r e a l t o r p r a c t i c e s of p r e p a r i n g trade area analyses and (2) the use of trade area i n f o r m a t i o n i n marketing business/commercial p r o p e r t y . In c o n c l u s i o n , suggestions f o r f u r t h e r r e s e a r c h are g i v e n . 13 1.7 Footnotes Weldon G i r a r d , How to Make B i g Money S e l l i n g  Commercial and I n d u s t r i a l P r o p e r t y (Englewood C l i f f s , N.J.: P r e n t i c e H a l l , 1977), p. 68. 2 H. Hoagland, Real E s t a t e P r i n c i p l e s 3rd E d i t i o n (New York: McGraw-Hill Book Company, 1955), p. 286. 3 Sherman J . M a i s e l and Stephen E. Roulac, Real E s t a t e  Investment and Finance (New York: McGraw-Hill Book Company, 1976) , p. 484. 4 John B. A l l a n , Commercial and I n d u s t r i a l Real E s t a t e (Los Angeles, CA: CAR, 197 3) ,~p. 53. 5 Paul B. Downing, "Fa c t o r s A f f e c t i n g Commerical Land Values: An E m p i r i c a l Study of Milwaukee, Wisconsin," Land  Economics 49 (February 1973): 44-56. ^Weldon G i r a r d , How to Make B i g Money S e l l i n g  Commercial and I n d u s t r i a l P r o p e r t y , p. 161. 7 Herbert H e r t z f e l d , "Quo V a d i s , Broker? What's Your Role?" Real E s t a t e Review 2 (Summer 197 2) : 2 4-30. g John B. A l l e n , Commerical and I n d u s t r i a l Real E s t a t e , p. 14. 9 "John B. A l l a n , S e l l i n g Income Property S u c c e s s f u l l y (Los Angeles, CA: CAR, 1976), p. 75. 1 0 Sheldon A. Gross, "A Model f o r E f f e c t i v e S i t e S e l e c t i o n , " Real E s t a t e Today, May-June 1975, p. 56. ^ May M. Kaplan, " T r a n s a c t i o n T i p s : P u t t i n g Together a S u c c e s s f u l Real E s t a t e Package," Real E s t a t e Today, March 1979 , pp. 15-17.' 12 David A r t h u r "Real E s t a t e Investment A n a l y s i s : Current P r a c t i c e " (Working Paper No. 1, Urban Land Economics P u b l i c a t i o n s , U n i v e r s i t y of B r i t i s h Columbia, 1977), pp. 1-16. 13 Jack L y l e and L e l a n d Burns, Communication Problems of  the Real E s t a t e Industry — The Image o f the Real E s t a t e Agent (Los Angeles: Graduate School o f Business A d m i n i s t r a t i o n , U n i v e r s i t y of C a l i f o r n i a , 1967), pp. 1-5. 14 14 Russell Connett and Jasper Sawatzky, The Public  Image of the Real Estate Agent (Sacramento, CA: Div i s i o n of Real Estate, State of C a l i f o r n i a , 1963), pp. 1-3 0. 15 M.J. Houston et a l . , "Real Estate Agents as a Source of Information for Home Buyers," The Journal of Consumer  A f f a i r s 11 (Summer 1977): 111-122. P. Busch and D. Wilson, "An Experimental Analysis of a Salesman's Expert and Referent Bases of Social Power i n the Buyer-Seller Dyad, "Journal of Marketing Research 13 (February 1976): 3-11. 17 Kurt Mayer and Sidney Goldstein, The F i r s t Two Years: Problems of Small Business Growth and Survival (Washington, D.C: Small Business Administration, 1961), pp. 1-133. CHAPTER TWO CONTRIBUTION TOWARDS THE DEVELOPMENT OF TRADE AREA A N A L Y S I S 16 2.1 I n t r o d u c t i o n T h i s chapter d e s c r i b e s the concept of trade area and reviews major c o n t r i b u t i o n s to the development of t r a d e a r e a a n a l y s i s from f o u r p e r s p e c t i v e s : (1) C e n t r a l P l a c e Theory, (2) Law of R e t a i l G r a v i t a t i o n , (3) Consumer Behavior, and (4) Marketing Geography. An i n t r o d u c t i o n to these f o u r p e r s p e c t i v e s i s important s i n c e together they form the framework upon which most trade area analyses are based. F o l l o w i n g the review of each p e r s p e c t i v e , i t s l i m i t a t i o n s and u s e f u l i m p l i c a t i o n s f o r a r e a l e s t a t e p r a c t i t i o n e r are presented. A c c o r d i n g l y , the chapter p r o v i d e s a c o n c e p t u a l background t o chapter t h r e e , which d e s c r i b e s t r a d e area a n a l y s i s a p p l i c a t i o n . 2.2 Trade Area Concept The American Marketing A s s o c i a t i o n d e s c r i b e s a trade area as, a d i s t r i c t whose s i z e i s u s u a l l y determined by the boundaries w i t h i n which i t i s economical i n terms of volume and c o s t f o r a marketing u n i t to s e l l and or d e l i v e r a good or s e r v i c e . 1 T h i s d e f i n i t i o n means t h a t a s t o r e ' s trade area i s t h a t area from which the s t o r e d e r i v e s most of i t s b u s i n e s s , or where most of i t s customers come from. The concept can be under-stood by viewing p o t e n t i a l customers'as f o r c e s of demand and r e t a i l e s t a b l i s h m e n t s as f o r c e s of supply. These two f o r c e s , supply and demand., i n t e r a c t w i t h i n trade areas to determine 17 what p a r t i c u l a r goods or s e r v i c e s are r e q u i r e d at a given l o c a t i o n . T h e r e f o r e , a knowledge of supply and demand f a c t o r s w i t h i n a trade area makes i t p o s s i b l e f o r the a n a l y s t to determine what goods or s e r v i c e s are most r e -q u i r e d by the surrounding p o p u l a t i o n and p r o v i d e s the b a s i s f o r e s t i m a t i n g p o t e n t i a l s a l e s f o r s t o r e s marketing these goods or s e r v i c e s . The f o l l o w i n g b r i e f review of major c o n t r i b u t i o n s to the development of trade area analyses p r o v i d e s f u r t h e r i n s i g h t i n t o the concept of t r a d e area. Considered.-together, these c o n t r i b u t i o n s comprise the main body of knowledge which p r a c t i t i o n e r s use t o develop t h e i r t r a d e area a n a l y s e s . The f i r s t three c o n t r i b u t i o n s reviewed are t h e o r e t i c a l l y o r i e n t e d . Marketing-, Geography, the f o u r t h p e r s p e c t i v e , draws• much of i t s content from the pr e c e d i n g c o n t r i b u t i o n s and p r e s e n t s the most p r a c t i c a l g u i d e l i n e s f o r a n a l y s i n g a trade area. 2.3 C e n t r a l P l a c e Theory General review C e n t r a l P l a c e Theory was o r i g i n a l l y formulated t o d e s c r i b e the s i z e , number and d i s t r i b u t i o n of c i t i e s and towns p r o v i d i n g 2 goods and s e r v i c e s to t h e i r h i n t e r l a n d s . Subsequent v a r i a t i o n s of the theory have attempted t o e x p l a i n the d i s -t r i b u t i o n p a t t e r n of r e t a i l i n g f u n c t i o n s w i t h i n urban are a s . ^ 18 While the theory i s not p r a c t i c a l f o r a n a l y s i n g a trade area, i t does have some u s e f u l conceptual i m p l i c a t i o n s f o r the p r a c t i t i o n e r . The theory i s based on two elements: (1) the t h r e s h o l d of a business and (2) shopping range. Berry s t a t e s t h a t 'the t h r e s h o l d of a b u s i n e s s r e f e r s t o ; the s m a l l e s t market area t h a t w i l l support the s m a l l e s t e c o n o m i c a l l y f e a s i b l e e stablishement of the c l a s s , and range as, the maximum d i s t a n c e consumers are w i l l i n g t o t r a v e l to i t . 4 The range of a business s e l l i n g s p e c i f i c goods can have both an upper and lower l i m i t . The upper l i m i t r e p r e s e n t s the d i s t a n c e beyond which the b u s i n e s s i s unable t o a t t r a c t consumers; the lower l i m i t i n c o r p o r a t e s the t h r e s h o l d pur-chasing power r e q u i r e d to s u s t a i n the b u s i n e s s . Range thus i d e n t i f i e s the trade area f o r a commodity or s p e c i f i c k i n d of b u s i n e s s . The t h r e s h o l d r e p r e s e n t s the minimum market area r e q u i r e d to support the b u s i n e s s . Below a c e r t a i n t h r e s h o l d i t would be uneconomical f o r a b u s i n e s s to supply goods or s e r v i c e s s i n c e adequate p r o f i t s c o u l d not be earned. The theory maintains t h a t r e t a i l e s t a b l i s h m e n t s are l o c a t e d where t h e i r t h r e s h o l d requirements w i l l be most e f f i c i e n t l y s a t i s f i e d . T h i s i m p l i e s t h a t the l e v e l and d i s t r i b u t i o n of demand within:; an urban area w i l l determine both the number and l o c a t i o n of s t o r e s . T h e r e f o r e , i f 19 demand i s s e v e r a l times g r e a t e r than the t h r e s h o l d l e v e l o f one f i r m , other f i r m s marketing s i m i l a r products w i l l be a t t r a c t e d to the same area. In a d d i t i o n to demand, the theory a l s o r e c o g n i z e s a c c e s s i b i l i t y as an important i n f l u e n c e d e t e r m i n i n g the l o c a t i o n o f r e t a i l a c t i v i t i e s . A consumer, depending upon the type o f product being sought, may be prepared t o t r a v e l v a r y i n g d i s t a n c e s . E x p l a i n i n g the consumer's w i l l i n g n e s s to t r a v e l v a r y i n g d i s t a n c e s f o r d i f f e r e n t commodities, C e n t r a l P l a c e Theory d i s t i n g u i s h e s between hig h and low order goods. High order goods r e f e r t o those items t h a t are pur-chased at i r r e g u l a r and i n f r e q u e n t i n t e r v a l s by the same consumer. Most durables such as t e l e v i s i o n s e t s and c a r s would f a l l i n t o t h i s category. Conversely, low order goods such as g r o c e r i e s and d r y - c l e a n i n g s e r v i c e s are s t a n d a r d i z e d and purchased at s h o r t , frequent and r e g u l a r i n t e r v a l s by the same consumer. The theory s t a t e s t h a t because hig h o r d e r goods are of g r e a t e r v a l u e , a consumer i s w i l l i n g t o t r a v e l a g r e a t e r d i s t a n c e t o a c q u i r e them. S i m i l a r l y , s t o r e s marketing hig h order goods r e q u i r e a high e r t h r e s h o l d because of the shopping h a b i t s a s s o c i a t e d w i t h the items. Low order goods, on the other hand, have a lower t h r e s h o l d s i n c e consumers purchase the items at s h o r t r e g u l a r i n t e r v a l s . Stores marketing these products l o c a t e c l o s e t o t h e i r customers because convenience r a t h e r than comparison shopping i n f l u e n c e s the consumer's shopping h a b i t s f o r these items. 20 S temming f r o m t h e a b o v e r e l a t i o n s h i p s , t h e theory-p r o p o s e s t h a t t h e h i g h e r t h e o r d e r o f t h e g o o d p r o v i d e d , t h e l e s s d i s p e r s e d w i l l be i t s d i s t r i b u t i o n p o i n t s . W i t h i n t h i s d i s p e r s i o n w i l l o c c u r a n e s t i n g p a t t e r n s o f s u c c e s s i v e l y l o w e r o r d e r d i s t r i b u t i o n p o i n t s w i t h g r e a t e r d i s p e r s i o n . T h i s means t h a t s e v e r a l s m a l l s h o p p i n g a r e a s o f f e r i n g low o r d e r g o o d s w o u l d b e p o s i t i o n e d c e n t r a l t o s m a l l s u r r o u n d i n g t r a d e a r e a s a n d f e w e r l a r g e r c e n t r e s w i t h h i g h o r d e r g o o d s w o u l d be: - c e n t r a l t o l a r g e r s u r r o u n d i n g t r a d e a r e a s as shown i n f i g u r e 2 . 1 . F i g u r e 2 . 1 H i e r a r c h y o f T r a d e C e n t r e s a n d  t h e i r R e s p e c t i v e T r a d e A r e a s S o u r c e : B . J . B e r r y , G e o g r a p h y o f M a r k e t C e n t r e s a n d R e t a i l  D i s t r i b u t i o n ( E n g l e w o o d C l i f f s : N . J . . P r e n t i c e H a l l I n c . , 1 9 6 7 ) , p . 6 5 . 2 1 Limitations and useful implications For application purposes, central place theory possesses a number of l i m i t a t i o n s . The r i g i d size and shape (hexagonal patterns) of i t s defined trade areas do not conform to reality:' since, empirical studies that consider the s p a t i a l shape of market areas suggest that the basic shape i s affected by competition (including intervening opportunities), by varying population density and income, and by barri e r s to movement. 5 The theory i s further limited by i t s treatment of consumer behavior. I t implies that consumers w i l l make the least e f f o r t to obtain a good by v i s i t i n g the nearest centre o f f e r i n g the required item(s). Given high population densities, consumers may have several stores or centres of d i f f e r i n g a t t r a c t i o n available within the maximum distance range that they are prepared to t r a v e l . In such a s i t u a t i o n , i t i s l i k e l y that each centre has a pr o b a b i l i t y of being patronized at least once. While Central Place Theory has a number of drawbacks, i t also possesses some useful ideas for the p r a c t i t i o n e r . I t introduces the relationship between market siz e , type of store, and the location the store must have to s a t i s f y i t s minimal threshold requirements. Thus, while a given area may be able to sustain one convenience grocery store, two or more convenience grocery stores competing for the same business may re s u l t i n below average earnings for each store. 2.4 Law of R e t a i l G r a v i t a t i o n General review A second major c o n t r i b u t i o n t o the development of trade area a n a l y s i s comes from r e s e a r c h based on the Law of R e t a i l G r a v i t a t i o n . The r e s e a r c h was f i r s t undertaken t o e x p l a i n the d i f f e r e n c e i n a t t r a c t i o n towards two c i t i e s t h a t were some d i s t a n c e a p a r t f o r p o t e n t i a l customers r e s i d i n g i n a town between the c i t i e s . L a t e r , v a r i a t i o n s of t h i s law were used t o e x p l a i n the d i f f e r e n c e s i n drawing power between i n t r a u r b a n shopping c e n t r e s . As d i d C e n t r a l Place-Theory, the Law o f R e t a i l G r a v i t a t i o n p r o v i d e s f u r t h e r i n s i g h t i n t o the concept of trade area. Research i n t h i s area was pioneered by R e i l l y who formulated ' R e i l l y " s Law' u s i n g the f o l l o w i n g e q u a t i o n : Ba (Pa\N (Db_ Bh \Pb } x \Da where, Ba = trade drawn by c i t y A from any g i v e n i n t e r m e d i a t e c i t y . Bb = trade drawn by c i t y B from the same i n t e r m e d i a t e c i t y . Pa = r e s i d e n t p o p u l a t i o n of c i t y A. Pb = r e s i d e n t p o p u l a t i o n of c i t y B. Da = d i s t a n c e o f c i t y A from the i n t e r m e d i a t e c i t y . Db = d i s t a n c e of c i t y B from the i n t e r m e d i a t e c i t y . N = 1. With the a d d i t i o n a l terms d e f i n e d as f o l l o w s : DB = d i s t a n c e from B to the breaking p o i n t , Bo. i . e . , the p o i n t where =1. Dab = d i s t a n c e between A and B = Da + Db. The equation s t a t e s , That two c i t i e s a t t r a c t trade from an i n t e r m e d i a t e town i n the v i c i n i t y of the b r e a k i n g p o i n t £point where the t r a d i n g i n f l u e n c e i s e q u a l J approximately i n d i r e c t p r o p o r t i o n to the p o p u l a t i o n s of the two c i t i e s and i n i n v e r s e p r o p o r t i o n t o the squares of the d i s t a n c e s from these two c i t i e s t o the i n t e r m e d i a t e town. 7 8 R e i l l y ' s model was m o d i f i e d by Converse. T h i s m o d i f i -c a t i o n made i t p o s s i b l e to c a l c u l a t e the approximate p o i n t between two or more competing c i t i e s a t which the t r a d i n g i n f l u e n c e of each was equal by u s i n g the f o l l o w i n g equation: the b r e a k i n g p o i n t between c i t y A and c i t y B i n m i l e s from B; the d i s t a n c e s e p a r a t i n g c i t y A from c i t y B; the p o p u l a t i o n of c i t y B; and the p o p u l a t i o n of c i t y A. 9 F i g u r e 2.2 i l l u s t r a t e s how t h i s e q u a t i o n c o u l d be used t o show the breaking p o i n t ( p o i n t where the t r a d i n g i n f l u e n c e i s equal) between c i t y P 1 and c i t i e s P-> through P c. where D, = b ^ ab Vb = P = a 24 Figure 2.2 Breaking Point of Trade Area for City Pn P3 = 200.000 P2 IOO'OOO P, = 200,000 500.000 Pi = 400,000 Source: David L. Huff, "Defining and Estimating a Trading Area," Journal of Marketing 28 (July 1964) : 37. Analysts have used Converse's equation to estimate the breaking point between intraurban shopping centres. In so doing, they have substituted shopping centres for c i t i e s , square feet for sales area for population and driving time for distance. I t has been noted, however, that this technique i s frequently inaccurate."^ The inaccuracy results from not taking into account business from walk-in customers and those customers who rely upon public trans-portation. In addition, the model oversimplifies drawing power by not considering differences i n income, ethnic composition and other factors. Attempting to overcome these l i m i t a t i o n s , one researcher has constructed an alternate model."'""'" This reformulation 25 i n c o r p o r a t e s t h e p r o b a b i l i t y t h a t c o n s u m e r s may v i s i t o t h e r c e n t r e s . C o n s i d e r a t i o n i s a l s o g i v e n t o t h e f a c t t h a t , d e p e n d i n g o n t h e c l a s s o r t y p e o f c o m m o d i t y b e i n g p u r c h a s e d , a c o n s u m e r may e x p e n d more o r l e s s t i m e a c q u i r i n g i t . A f o r m a l e x p r e s s i o n o f H u f f ' s m o d e l i s : S . D T . . A P. . 13 n S . T x j 1 w h e r e P . . = t h e p r o b a b i l i t y o f a consumer , a t a g i v e n p o i n t 1 - ' o f o r i g i n i t r a v e l i n g t o a p a r t i c u l a r s h o p p i n g c e n t e r j ; S . = t h e s i z e o f a s h o p p i n g c e n t r e j ( m e a s u r e d i n ^ t e r m s o f t h e s q u a r e f o o t a g e o f s e l l i n g a r e a d e v o t e d t o t h e s a l e o f a p a r t i c u l a r c l a s s o f g o o d s ) ; T . . = t h e t r a v e l t i m e i n v o l v e d i n g e t t i n g f r o m a 1 - 1 c o n s u m e r ' s t r a v e l b a s e i t o a g i v e n s h o p p i n g c e n t e r j ; a n d : a p a r a m e t e r w h i c h i s t o b e e s t i m a t e d e m p i r i c a l l y t o r e f l e c t t h e e f f e c t o f t r a v e l t i m e on v a r i o u s k i n d s o f s h o p p i n g t r i p s . 12 1 F i g u r e 2 . 3 p r e s e n t s a v i s u a l e x e m p l i f i c a t i o n o f how t h e t r a d e a r e a f o r a s h o p p i n g c e n t r e (J^) w o u l d a p p e a r u s i n g t h i s m o d e l , 26 Figure 2.3 Trade Area of Shopping Center J Source: David L. Huff, "Defining and'Estimating a Trading Area," Journal of Marketing 28 (July 1964): 37. From Figure 2.3, the trade area for a shopping centre located at J-^ i s composed of a series of p r o b a b i l i t y isopleths that d i s t r i b u t e consumer expenditures among two or more centres depending on the type or class of commodity under consideration. Limitations and useful implications A c r i t i c of the gravity model notes that despite r e f i n e -13 ments, i t s application continues to pose problems. These problems arise from data a v a i l a b i l i t y , the choice of measure for consumer at t r a c t i o n and f r i c t i o n , the need for analysis 27 of r e t a i l c e ntres by merchandise l i n e s and the model's i m p l i c i t assumptions about consumer and e n t e r p r e n e u r i a l behavior. In s p i t e o f these drawbacks, the model does have u s e f u l i m p l i c a t i o n s . I t e x p l a i n s why trade areas are not bounded by the r i g i d patterns of C e n t r a l P l a c e Theory. While emphasizing a shopping c e n t r e ' s c o m p e t i t i v e advantage based on s i z e , the model a l s o i l l u s t r a t e s t h a t trade areas are not immutable s i n c e o t h e r centres a l s o have a probab-i l i t y o f being v i s i t e d . 2.5 S t u d i e s of Consumer Behavior General review C o n t r i b u t i o n s from t h i s f i e l d of r e s e a r c h c o n s i s t o f e m p i r i c a l s t u d i e s , each f o c u s i n g on some p a r t i c u l a r aspect of human behavior. Examples of t h i s r e s e a r c h are s t u d i e s t h a t attempt to q u a n t i f y consumer a t t i t u d e s w i t h r e s p e c t t o s t o r e image, p e r c e i v e d d i s t a n c e and s i z e o f shopping c e n t r e s , and the c e n t r e s o v e r a l l a t t r a c t i v e n e s s . However, s i n c e t h i s type of r e s e a r c h i s s t i l l i n i t s i n f a n c y stage, i t can only o f f e r i n t u i t i o n s r e g a r d i n g the nature of consumer behavior w i t h i n trade a r e a s . The f o l l o w i n g p r e s e n t s some examples of the r e s e a r c h t h a t has been done i n t h i s f i e l d . 14 Mason and Moore e x p l o r e d the two f o l l o w i n g assumptions: (1) t h a t there i s homogeneity w i t h i n trade areas r e g a r d i n g consumer patronage, and (2) t h a t s i m i l a r socio-economic 28 groups e x h i b i t s i m i l a r r e t a i l patronage d e c i s i o n s . T h e i r f i n d i n g s i n d i c a t e d t h a t : (1) homogeneity r e g a r d i n g p a t r o n -age d e c i s i o n s i s l a c k i n g w i t h i n trade areas and (2) t h a t s i m i l a r socioeconomic groups do not have s i m i l a r shopping p a t t e r n s . From t h e i r f i n d i n g s , they suggest t h a t the a t t i t u d e s and p e r c e p t i o n s of customers have an important i n f l u e n c e on shopping p a t t e r n s . Other examples of s t u d i e s i n t h i s f i e l d focus on f a c t o r s a f f e c t i n g the customer's p e r c e p t i o n of t r a v e l l i n g time to 15 a shopping c e n t r e . R e s u l t s of the study by Thompson i n d i c a t e d t h a t the customer's s u b j e c t i v e f e e l i n g s about a r e t a i l e s t a b l i s h m e n t a f f e c t h i s a b i l i t y t o e v a l u a t e the c e n t r e ' s geographic p o s i t i o n and h i s t r a v e l time to i t . 16 Brunner and Mason e x p l o r e d the s i g n i f i c a n c e o f t r a v e l time on shopping behavior as opposed to o t h e r f a c t o r s . T h e i r f i n d i n g s i n d i c a t e d t h a t d r i v i n g time i s very i n f l u e n t i a l i n shaping shopping p a t t e r n s s i n c e 75% of the customers of each major centre i n t h i s sample r e s i d e d w i t h i n 15 minutes 17 of the c e n t r e . A f u r t h e r study by Cox and Cooke found t h a t d r i v i n g time beyond the 15 minute range i s i n f l u e n c e d by s i z e , a t t r a c t i v e n e s s and the absence of p e r c e i v e d b a r r i e r s ( i . e . c o n g e s t i o n , b r i d g e s etc.). L i m i t a t i o n s and u s e f u l i m p l i c a t i o n s While consumer be h a v i o r r e s e a r c h has not, as y e t , developed t h e o r i e s or models t h a t a p r a c t i t i o n e r c o u l d apply, 29 i t s value l i e s i n the emphasis i t p l a c e s on consumer a t t i t u d e s . Taking a l e s s o n from t h i s r e s e a r c h , trade area a n a l y s t s w i l l see the m e r i t i n conducting consumer surveys. T h e i r r a t i o n a l e w i l l be, based upon the simple n o t i o n t h a t i f we want t o know what people b e l i e v e , why they a c t the way they do, and how they p l a n t o a c t we should ask them. 18 Th i s type of approach can a s s i s t the a n a l y s t i n determining what merchandise l i n e s or s t o r e types would be most s u i t e d to an urban area. Examples showing the u s e f u l n e s s o f consumer r e s e a r c h f o r these purposes are g i v e n by Watkins 19 e t a l . , and Weal. 2.6 Marketing Geography General review Applebaum s t a t e s t h a t , Marketing Geography i s concerned w i t h the d e l i m i t a t i o n and measurement of markets and wit h the channels of d i s t r i b u t i o n through which goods move from producer to consumer. 2 0 With t h i s focus, the d i s c i p l i n e adopts a c l i n i c a l approach to the problem of trade area a n a l y s i s . Drawing i n s i g h t s from the three preceding c o n t r i b u t i o n s ( i . e . C e n t r a l P l a c e Theory, Law of R e t a i l G r a v i t a t i o n and St u d i e s of Consumer Research) p r a c t i t i o n e r s i n t h i s f i e l d r e l y mainly upon t h e i r o b s e r v a t i o n s r a t h e r than t h e o r e t i c a l or experimental study t o d e l i m i t and measure a trade area. 30 Using t h i s type o f c l i n i c a l or o b s e r v a t i o n a l approach, p r a c t i t i o n e r s c o n s i d e r s e v e r a l f a c t o r s w h i l e developing,-t h e i r trade area analyses. To d e l i m i t trade areas they analyse such f a c t o r s as road networks, competing shopping areas and p o p u l a t i o n d i s t r i b u t i o n . When s e l e c t i n g p o t e n t i a l uses f o r a s p e c i f i c s i t e , these a n a l y s t s c o n s i d e r such f a c t o r s as ne i g h b o r i n g b u s i n e s s e s , merchandise 1 l i n e s , consumer acceptance, and purc h a s i n g power. In'-their f i n a l stage of a n a l y s i s they use v a r i o u s methods and techniques f o r t r a n s l a t i n g the f a c t o r s of demand i n a trade area i n t o r e t a i l i n g o p p o r t u n i t i e s . Using c e r t a i n data, s a l e s f o r e -c a s t s f o r s p e c i f i c uses are estimated. In t h i s manner, s i t e s are matched with t h e i r most b e n e f i c i a l uses. L i m i t a t i o n s and u s e f u l i m p l i c a t i o n s Perhaps the only l i m i t a t i o n o f Marketing Geography i s t h a t at some p o i n t an a n a l y s t must use h i s own judgment or common sense w h i l e developing a trade area analysis.' Because of t h i s , Marketing Geography i s not an exact s c i e n c e . However, i t s g u i d e l i n e s o f f e r the most p r a c t i c a l approach t o the problem o f trade area a n a l y s i s . One:researcher, a f t e r r eviewing other c o n t r i b u t i o n s to trade area a n a l y s i s s t a t e s , Perhaps r e t a i l area a n a l y s i s i s one f i e l d of enquiry which must adopt the c l i n i c a l approach as a means f o r r e s o l v i n g i t s s p e c i f i c problems. 2 1 Because of Marketing Geography's c l i n i c a l ( i . e . o b s e r v a t i o n a l ) approach t o the problem o f trade area a n a l y s i s and r e l a t i v e 31 ease of a p p l i c a t i o n , i t s methods and techniques serve as the b a s i s f o r the q u e s t i o n n a i r e used to survey r e a l t o r s on t h e i r p r a c t i c e s of trade area a n a l y s i s . Towards t h i s ob-j e c t i v e , Chapter three o u t l i n e s the major f a c t o r s t h a t these a n a l y s t s c o n s i d e r and presents a procedure t h a t r e a l t o r s c o u l d f o l l o w . 32 2.7 Footnotes ^ David -L. Huff, "Defining and Estimating a Trade Area," Journal of Marketing '28 (July 1964): 37. 2 The interested reader i s directed to: W. C h r i s t a l l e r , Central Places i n Southern Germany (Englewood C l i f f s , N.J. : Prentice H a l l Inc., 1966) and A. Losch, The Economics of Location (New Haven: Conn.; Yale University Press, 1954). 3 For example see: B.J. Berry, Geography of Market Centers and R e t a i l D i s t r i b u t i o n (Englewood C l i f f s , N.J.: Prentice Hall Inc., 1967). 4 Ibid., p. 15. 5 P.L. Simons, "The Shape of Suburban R e t a i l Market Areas: Implications from a Literature Review," Journal of  Re t a i l i n g 49 (Winter 1973«1974): 66-67. D. Thompson, "Future Directions i n R e t a i l Trade Area Research," Economic Geography 42 (January 1966): 4. 7 P.D. Converse, "New Laws of R e t a i l Gravitation," Journal of Marketing 14 (1949): 379. p Ibid., pp. 379-384. 9 Ibid., p. 384. Curt Kornblou ed., Guide to Store Location  Research with an Emphasis on Super Markets (Reading, " Massachusetts: Addison-Wesley Publishing Company, 1968) pp. 26-27 David L. Huff, "Defining on Estimating a Trade Area," pp. 34-38. 12 Ibid., p. 36. 13 P. Scott, Geography and R e t a i l i n g , 3rd ed. [London: Hutchinson and Co. Ltd., 1973) , p. 178. 14 J. Mason and C. Moore, "An.Empirical Reappraisal of Behavioristic Assumptions i n Trading Area Studies," Journal  of R e t a i l i n g 46 (Winter 1960-19 ): 31-38. 33 15 D. Thompson, "New Concept: Subjective Distance," Journal of Retailing 39 (Spring 1963): 1-6. 16 J. Brunner and J. Mason, "The Influence of Driving Time upon Shopping Centre Preference," Journal of Marketing 32 (April 1968): 57-61. 17 W. Cox and E. Cooke, "Other Dimensions Involved i n Shopping Centre Preference," Journal of Marketing 34 (October 1970): 12-17. 18 Gary Eldred and Robert Zerbst, "Consumer Research and the Real Estate Appraiser," The Appraisal Journal 44 (October 1976): 511. 19 E. Watkins and V. Vandemark, "Consumer Information Strengthens Market Information Systems," Journal of  Retai l i n g 47 (Spring 1971): 49-54, and W. Weale, "Measuring the Customer's Image of a Department Store,!" Journal of  R e t a i l i n g 37 (Summer 1961): 40-48. 20 D. Thompson, "Future Directions in R e t a i l Trade Area Research," p.11. 21 Ibid., p. 12. CHAPTER THREE TRADE AREA ANALYSIS: APPLICATION 35 3.1 Introducti on This chapter has two objectives: (1) it-, outlines p r a c t i c a l methods of developing a trade area analysis and (2) i t i d e n t i f i e s trade area c h a r a c t e r i s t i c s , data sources and techniques that form the basis of the questionnaire used to survey realtors on t h e i r practices of trade area analysis. To accomplish these objectives, the chapter draws most of i t s content from Marketing Geography, for reasons of a p p l i c a b i l i t y which are discussed i n chapter two. The chapter begins by o u t l i n i n g a general procedure for analysing a trade area. Next, each step of the procedure i s described - including related trade area c h a r a c t e r i s t i c s , techniques of application and data sources. In conclusion, the chapter explains how r e t a i l i n g opportunities can be i d e n t i f i e d through a synthesis of trade area information and sales forecasting techniques. 3.2 General Procedure for Analysing a Trade Area A trade area analysis may be developed for two purposes. The analyst may have a s i t e for which a r e t a i l use i s needed or he may have a r e t a i l a c t i v i t y i n search of a s i t e . If the objective of the anaylst i s to locate a s i t e for a s p e c i f i c user, he begins by i d e n t i f y i n g the trade area (loca-tion) needs of the use i n question. He than can analyse one or more s i t e s to determine how well the trade area X l o c a t i o n ) 36 c h a r a c t e r i s t i c s of a s i t e match the needs of the subject use. I f the objective of the analyst i s to f i n d a user for a p a r t i c u l a r s i t e , the emphasis of his analysis w i l l vary. Instead of considering one or more s i t e s i n r e l a t i o n to the trade area (location) needs of a s p e c i f i c use, he considers one or more uses in r e l a t i o n to the trade area (location) c h a r a c t e r i s t i c s of the s i t e i n question. For both objectives, four basic steps can be followed to develop a trade area analysis. These steps are: (1) trade area delineation, (2) description of population and income c h a r a c t e r i s t i c s , (3) evaluation of the merchandising value of the s i t e , and (4) use of sales forecasting techniques to i d e n t i f y the most b e n e f i c i a l r e t a i l a c t i v i t y . Together, these four steps have relevance for most of the r e t a i l spaces to be found i n an urban area. However, there are cases where an analyst may concentrate his analysis on some of the steps while eliminating others. For example, one case would be a r e t a i l space located i n a hotel lobby where the trade area would be comprised of passing pedestrian t r a f f i c . Here, i t would not usually be necessary for the analyst to examine street networks or competing shopping areas to define the trade area. Therefore, f l e x i b i l i t y on the part of the analyst i s required to adapt his method of trade area analysis to the problem at hand. 3.3 Step One - Trade Area Delineation The f i r s t question that an analyst can ask about a 37 r e t a i l space i s , "Where w i l l the pot e n t i a l customers come from?". An answer to t h i s question w i l l i d e n t i f y the size and shape of the space's trading area. As an i n i t i a l e f f o r t to answer this question the p r a c t i t i o n e r could begin by o u t l i n i n g an area, beyond which the space would not reason-ably be expected to draw customers. This area w i l l be a generalization since the actual trade area that i s eventually i d e n t i f i e d i s dependent upon what r e t a i l f a c i l i t y i s proposed for the space. This choice i s made at a l a t e r stage i n the analysis or i s already known, depending on whether the analyst i s searching for a s i t e or for a user. Several factors which can be considered to delineate a trade area for a s p e c i f i c r e t a i l a c t i v i t y w i l l now be described. R e t a i l location type of the subject s i t e A r e t a i l space may be located i n any one of a number of d i f f e r e n t r e t a i l location types. Table 3.1 presents a useful summary of the various r e t a i l location types which an analyst may encounter. 38 Table 3.1 C l a s s i f i c a t i o n of R e t a i l Location Types A. Unplanned Business D i s t r i c t s 1. Central Business d i s t r i c t . 2. CBD String stores. 3. Secondary Business D i s t r i c t . Serves portions of a central c i t y or a suburb. 4. Secondary String stores. Adjoin secondary, business d i s t r i c t s . 5. Neighborhood stores. Occur i n small clusters or i n i s o l a t i o n . 6. Outlying Highway stores. Occur i n strings or i n i s o l a t i o n . B. Planned Shopping Centers 1. CBD Planned Shopping Center. Arise through urban renewal. 2. Regional Planned Shopping Center. In strong competition with the CBD. 3. Community Planned Shopping Center. In competition mainly with secondary business d i s t r i c t s or with the CBD i n smaller c i t i e s . 4. Neighborhood Planned Shopping Center. Frequently c a l l e d neighborhood " s t r i p . " 5. Outlying Planned Shopping Center. Draws, i n part, upon the passing parade of highway t r a f f i c . Source: W. Applebaum and S. Cohen, "S.tore Trading Areas i n a Changing Market," Journal of Retailing.37 :.\ ( F a l l 1961) : 20. .'. . From table 3.1, shopping areas can be c l a s s i f i e d as planned or unplanned. Within each c l a s s i f i c a t i o n , there exists a hierarchy of shopping areas according to size and associated drawing power. Generally, the larger'.the r e t a i l location type, the larger will-be'the.".area" from-'which i t derives most of i t s sales. This r e l a t i o n s h i p i s referred to as drawing power. In addition to s i z e , the kind of r e t a i l associations that comprise the r e t a i l location type also influence drawing 39 power and the r e s u l t i n g size and shape of a trade area for a subject s i t e . Explaining t h i s r e l a t i o n s h i p , Nelson distinguishes among three main business sources: (1) generative, (2) shared and (3) suscipient."'' Generative business i s represented by customers who are primarily attracted to an area for the purpose of shopping at a p a r t i c u l a r store. This business i s produced by the store i t s e l f and i s representative of i t s own drawing power. On the other hand, shared business i s business r e s u l t i n g from customers who have, as t h e i r primary objective, shopping at a neighboring s t o r e ( s ) . In contrast, suscipient business i s represented by customers whose intention for being i n the area i s other than shopping and who are coi n c i d e n t a l l y attracted to the store. Applebaum states that, In theory, the jTtrade areaj boundary of the most powerful store [store generating the most businessj w i l l also serve as the boundary of a l l other stores. 2 In practice, however, the analyst-must exercise judgement i n delineating trade area boundaries. I f a s i t e i s occupied by.only one store, then that store must exert a l l the p u l l i n g power to generate customers since i t cannot r e l y upon shared business sources. I f the s i t e i s associated with other stores, then i t s trade area may be influenced by the drawing power of these stores i n combination with i t s own drawing power. In each case, however, competition from other r e t a i l location types and factors of a c c e s s i b i l i t y generally serve to delineate the s i t e ' s outermost trade area boundaries. 40 Data sources and techniques At this i n i t i a l stage i n his data gathering program, the analyst can record the r e t a i l location type of the subject s i t e . I f the r e t a i l location type i s characterized by more than one store, a marketing map can be started. This map would show the types of businesses, the merchandise lines they carry and t h e i r position i n r e l a t i o n to the subject s i t e . Maps for t h i s purpose can be obtained from municipal or regional government o f f i c e s . Commercial street d i r e c t o r i e s that cross reference businesses by t h e i r street 3 addresses can also be of assistance. Influence of a c c e s s i b i l i t y Cohen and Applebaum define a c c e s s i b i l i t y as, a concept that i s usually employed i n a q u a l i t a t i v e and r e l a t i v e sense. A s i t e that has good a c c e s s i b i l i t y i s one that i s e a s i l y reached by customers. . . 4 This d e f i n i t i o n implies that a c c e s s i b i l i t y can be evaluated by examining two factors:. (.1) distance and (2) ease of customer movement. For the purpose of delineating a trade area, these two factors can be examined i n a comparative sense. Thus, the analyst can compare the a c c e s s i b i l i t y of two or more shopping areas for p o t e n t i a l customers. This comparison when considered along with other factors such as the size and attractiveness of the competing centres and customer shopping habits w i l l provide the necessary information to 41 determine the size and shape of the subject s i t e ' s trade area i n r e l a t i o n to the proposed'use. Distance and ease of customer movement between two or more r e t a i l location types can be evaluated by considering an area's road network and barrie r s to movement exis t i n g within t h i s network. The road network serves to d i r e c t t r a f f i c and hence potential customers. Barr i e r s , on the other hand, impede t h i s movement by influencing the potential customer's perception of distance and ease of movement. 5 Mertes has developed a useful framework that an analyst could use to examine an area's road network i n r e l a t i o n to the a c c e s s i b i l i t y of a s i t e or shopping area. Roads": are c l a s s i f i e d according to t h e i r function. Residential streets are viewed as t r a f f i c accumulators. They serve to move t r a f f i c from i t s place of o r i g i n to major thoroughfares. Major thoroughfares assemble t r a f f i c from the r e s i d e n t i a l streets and move thi s t r a f f i c to other roads c a l l e d t r a f f i c d i s t r i b u t o r s which, i n turn, move t r a f f i c to and from major business d i s t r i c t s . The a c c e s s i b i l i t y of sit e s or shopping areas can then be evaluated by considering t h e i r location i n r e l a t i o n to these roads. For example, a s i t e located at the int e r s e c t i o n of two major thoroughfares w i l l have greater a c c e s s i b i l i t y to move potential customers than a s i t e located at the intersection of a r e s i d e n t i a l street and a major thoroughfare. S i m i l a r l y , a s i t e located i n a major business d i s t r i c t w i l l 42 have the greatest o v e r a l l a c c e s s i b i l i t y because of the b u i l d up of t r a f f i c along t r a f f i c d i s t r i b u t o r s being fed by both r e s i d e n t i a l streets and major thoroughfares. I t i s t h i s convergence of t r a f f i c that influences the size of a s i t e ' s trading area. The road network also serves to influence the shape of a trade area. Applebaum and Cohen stater.- that, In general, store trading areas are elongated i n the d i r e c t i o n of customer movement. 6 Since t r a f f i c or potential customer movement i s cen t r i p e t a l towards the major business d i s t r i c t s due to street patterns, the trade areas that emerge w i l l be influenced by these patterns. Their boundaries w i l l tend to p a r a l l e l rather than cut across patterns of movement. An evaluation of a c c e s s i b i l i t y can also consider b a r r i e r s to movement. Barriers to movement can be referred to as natural or a r t i f i c i a l . They are important to consider since they may influence a poten t i a l customer's perception of d r i v i n g time or ease of movement. Examples of natural barriers are r i v e r s , greenbelts and other topographic c h a r a c t e r i s t i c s . A r t i f i c i a l b a r r i e r s may be i n d u s t r i a l areas, t r a f f i c congestion or a c u l t u r a l break between a fashionable suburb and a slum area. Because, the impact of such b a r r i e r s cannot be measured pre c i s e l y , an analyst must exercise judgement when assessing t h e i r influence on the 7 size and shape of a trade area. 43 Data sources and techniques A street map of the area can a s s i s t the analyst i n evaluating the a c c e s s i b i l i t y of the subject s i t e . On thi s map, natural and a r t i f i c i a l b arriers to movement could be i d e n t i f i e d and streets could be c l a s s i f i e d according to th e i r function. When thi s map i s examined i n r e l a t i o n to competing shopping areas, the analyst w i l l be i n a position to delineate the trade area of the subject s i t e . Maps for this purpose can be obtained from various government or commercial agencies. Influence of competing shopping areas and estimation  of trade area After the analyst has analysed the r e t a i l location type and a c c e s s i b i l i t y of the subject s i t e , he i d e n t i f i e s competing shopping areas. These areas can be defined as r e t a i l location types which are reasonable alternatives for pote n t i a l customers i n terms of location, size and merchandise l i n e s . Together they form the extreme points beyond which potential customers would generally not be drawn to the subject s i t e . The pattern of trade areas that characterizes an urban area i l l u s t r a t e s the nature and influence of competing shopping areas. Within t h i s pattern, the trading area of the C.B.D. i s completely superimposed upon the entire urban 44 area. S i m i l a r l y , the trading area of a regional shopping centre may superimpose i t s e l f upon that of a community or neighborhood shopping centre. Within this framework, iso l a t e d neighborhood stores w i l l have smaller trading g areas within the boundaries of the larger ones. The objective of the analyst i s to determine the extent (size and shape) to which the trading area of a subject s i t e f i t s into the o v e r a l l trade area pattern. To accomplish th i s objective, p r a c t i t i o n e r s have conveniently divided 9 trading areas into three zones. The zone of greatest poten t i a l or drawing power i s referredCto as the primary trading area. The primary trading area or zone according to practice, i s expected to contribute approximately two thirds of the s i t e ' s p o t e n t i a l customers. The secondary zone i s the area beyond the primary zone that i s s t i l l expected to y i e l d customers but to a lesser degree due to the counter-pull of competing centres. This zone usually contributes most of the remaining customers not accounted for by the primary zone. The t e r t i a r y or fringe zone i s regarded as a catch a i l area for customers not accounted for by either the primary or secondary zones. Data sources and techniques Applebaum suggests the use of customer spotting techniques to determine these zones. Using t h i s technique, an analyst would interview shoppers passing the subject s i t e 45 to determine t h e i r addresses. The sample of addresses obtained would then be plotted on a customer d i s t r i b u t i o n map that has been divided into segments representing blocks or zones of incremental distance from the s i t e . The number of customers i n each segment i s then computed as a percentage of the t o t a l number of customers surveyed. These percentages would represent the s i t e ' s potential trading area expressed i n terms of drawing power. From these per-centages the s i t e ' s primary, secondary and t e r t i a r y trading area' . could be estimated."*"^ Another technique makes use of a competition map. This map i d e n t i f i e s surrounding shopping areas and t h e i r location in r e l a t i o n to the subject area. These shopping areas are then c l a s s i f i e d according to t h e i r r e t a i l location type and both the number and type of stores.in each shopping area are l i s t e d i n the same fashion as was done for the subject area. In deciding how many shopping areas should be i d e n t i f i e d on the competition map, the analyst uses his judgement. For example, an i s o l a t e d neighborhood store may have a neighbor-hood shopping centre on one side and a community shopping centre on the other side. In t h i s case, i t could be assumed that these two shopping areas form the outer l i m i t s of the store's trading area. On the other hand, the trade area boundary of a regional shopping centre would not be bounded by a cluster of neighborhood stores. Instead, the trade area of the neighborhood stores would resemble an i s l a n d 46 within the larger trade area of the centre. Once the analyst has i d e n t i f i e d competing shopping areas i n t h i s fashion, he compares the i r a c c e s s i b i l i t y to potent i a l customers with the a c c e s s i b i l i t y of the subject s i t e . Using the information gathered on his marketing maps, the analyst can then estimate the approximate size and shape of the subject, s i t e Is trade area."'""'" Another technique that the analyst could use i n con-junction with his competition map i s ca l l e d the "microcosm 12 technique." Using t h i s technique, the entire trading area i s f i r s t delineated with the assistance of road and com-p e t i t i o n maps to encompass an area beyond the possible draw of the subject s i t e . Next, th i s area i s divided into several small segments. Interviews are held with a sample of shoppers from each segment to determine t h e i r shopping habits such as what percentage of family income i s spent on various goods and where. Using t h i s information, the drawing power of the subject s i t e i s estimated i n r e l a t i o n to competing centres taking into account such factors as a c c e s s i b i l i t y , the size of competing centres and th e i r attractiveness. A judgement i s then made as to how many businesses the subject s i t e :might at t r a c t from each segment for d i f f e r e n t merchan-dise l i n e s . In this manner trade areas for d i f f e r e n t merchandise lines can be determined by the analyst. 47 3.4 Step Two - Description of Population and income  Characteristics A description of population and income c h a r a c t e r i s t i c s associated with a trade area i s important for three reasons. F i r s t / such a description w i l l provide the analyst with data that he can use to i d e n t i f y growth trends within the trade area. Second i t provides the basis upon which the analyst can i n i t i a l l y determine the type and qu a l i t y of goods or services most l i k e l y to be in.demand by poten t i a l customers l i v i n g i n the trade area. Third, data gathered at t h i s stage can be used l a t e r to compute sales forecasts for proposed uses. Population trends The population of a trade area may be stable, declining or growing. Within this o v e r a l l growth pattern, other demo-graphic trends may be occurring. For example, a trade area's o v e r a l l population size may be stable, but an in-migration of young families may be balancing an out^migration of eld e r l y couples. I t i s the task of the analyst to notice these trends since they can a s s i s t i n i d e n t i f y i n g market opportunities for pot e n t i a l r e t a i l businesses. To determine an area's o v e r a l l population trend the analyst can make use of several sources of information and 13 techniques. Birnkrant suggests, that as a f i r s t step, 48 both h i s t o r i c and present population s t a t i s t i c s can be gathered about the trade area and i t s surrounding metro-p o l i t a n configuration. Future growth rates can then be predicted by using methods based on numerical increase, percentage increase or percentage share of a larger area. The numerical increase method examines population growth that has occurred.over a s p e c i f i e d time period and projects t h i s same growth over a s i m i l a r future period. The per-centage increase method assumes that current and future growth patterns w i l l be proportionately s i m i l a r to past percentage increases, using the preceding year as a base year for the cal c u l a t i o n s . In the percentage share of a larger area, the analyst assumes that the trade area's growth w i l l r e f l e c t o v e r a l l growth patterns of the metro-poli t a n area. Estimates of future population growth trends derived from these three methods are then adjusted, a f t e r considering the po t e n t i a l growth c h a r a c t e r i s t i c s of each trade area. This consideration w i l l involve examining such factors as: 1 — Known factors r e l a t i n g to the probable future population growth of the community, such as plans for i n d u s t r i a l development. 2 - Amount of desirable r e s i d e n t i a l land within the trading area available for future development. 3 - S p e c i f i c facts r e l a t i n g to near-term r e s i d e n t i a l development, such as building permits issued and announced plans for housing projects. 14 Consideration of these factors w i l l a s s i s t the analyst i n 49 i n determining potential growth patterns that can be used to modify his population forecast for the trade area. The analyst can use his information on growth trends as an i n i t i a l i n d i c a t i o n of market opportunity. I f a trade area's population i s growing, by determining the composition of t h i s growth, he w i l l be able to translate t h i s information into factors of demand for various goods and services. I f growth i s characterized by young families moving into single detached dwellings, a market opportunity may ex i s t for l i n e s of merchandise such as major appliances, furniture and other products related.to new family formation and home ownership. On the other hand, i f population i s declining the analyst can investigate the causes of the decline. For example, the cause may be due to maturing neighborhoods where sons and daughters are leaving home. This could r e s u l t i n a trade area comprised mainly of r e t i r e d households. In this case, the analyst could ^consider goods and services for his subject s i t e that are required by t h i s segment of the population. Data sources and techniques To s a t i s f y his data requirements the analyst can obtain population data from S t a t i s t i c s Canada for years ending i n one and s i x . This source describes population by census tracts which are small geographical areas within a defined metropolitan area. Diagram 3.1 presents an example of how a portion of Vancouver i s subdivided into census t r a c t s . 50 Diagram 3.1 Vancouver Census Tracts Source: S t a t i s t i c s Canada, Vancouver Census Tract Map Vancouver O f f i c e , S t a t i s t i c s Canada, 1979. If a trade area corresponded to census t r a c t 28, the analyst could refer to S t a t i s t i c s Canada Catalogue 95-82 8 which would show the population size of t h i s census t r a c t for various census years. However, a trade area may not correspond to a census t r a c t . To overcome th i s problem, S t a t i s t i c s Canada, since 1971, f i l e s census data i n a computer bank labeled "Cansim." For a small fee, a 51 non-government service named Tetrad Computer Applications Ltd. w i l l r etrieve census data from th i s computer bank for any size or shape of trade a r e a . ^ Another source of information that, the analyst can use to i d e n t i f y population trends i s the "Financial Post 17 Survey of Markets." This publication shows the o v e r a l l metropolitan growth rate and estimates population size for intereensus years. In addition to t h i s source, p r o v i n c i a l , regional and l o c a l levels of government can be consulted. These agencies may even be .able to supply the analyst with a current population map of the metorpolitan area. Population data can also be gathered i n conjunction with the "consumer spotting" and "microcosm" techniques discussed e a r l i e r . The analyst can use a l l the above data to up-date S t a t i s t i c s Canada data and observe population trends. Population and income c h a r a c t e r i s t i c s After the analyst has i d e n t i f i e d growth trends, he can describe population and income c h a r a c t e r i s t i c s of the trade area. Population size can be subdivided into such categories as households, age groups, sex, and ownership c h a r a c t e r i s t i c s . In t o t a l , there are more than 150 variables that can be examined. Due to the large number of "variables, the analyst begins by examining broad demographic c l a s s i f i c a t i o n s . Later i n the analysis, as r e t a i l uses are proposed, other s i g n i f i c a n t variables related to these uses can be examined. 52 For example, the educational l e v e l of the population w i l l have more significance for a book store than a grocery store. S i m i l a r l y , the number of single-detached owner occupied dwellings as opposed to m u l t i - r e s i d e n t i a l units w i l l be important for a store marketing lawn and garden supplies. Income c h a r a c t e r i s t i c s are equally important. When these c h a r a c t e r i s t i c s are broken down into family or house-hold disposable income, the strength of an area's purchasing power can be estimated. Areas having high household disposable incomes can be matched with luxury merchandise lines or demand goods of a high q u a l i t y . Areas with low household disposable incomes, on the other hand, w i l l have less demand for t h i s type of merchandise l i n e . Data sources and techniques The analyst can s a t i s f y his data requirements with respect to population and income c h a r a c t e r i s t i c s from several sources. As an i n i t i a l step, the annual S t a t i s t i c s Canada 18 Catalogue can be consulted. This catalogue contains a l i s t and b r i e f description of publications containing census information. Compusearch, as an alternative source, can also provide data. However, during intercensal years, data from these sources w i l l have to be updated. To update census data, the analyst can consult the "Financial Post Survey of Markets." This annual publication 53 provides estimates of current population and per capita disposable income by metropolitan regions. S t a t i s t i c s 19 Canada catalogue 13-20 7 can also be used. Based on an annual survey, the publication provides estimates of family and household incomes for major urban areas. As an alternative to S t a t i s t i c s Canada information or for updating purposes, the analyst can r e l y upon survey techniques. In conjunction with either the "customer spotting" or "microcosm" techniques discussed e a r l i e r , the analyst can r e p l i c a t e census data about income and population c h a r a c t e r i s t i c s . This method has the advantage of providing current information that can be t a i l o r e d to the s p e c i f i c data needs of the analyst. 3.5 Step Three - Merchandising Value of the Site Up to thi s point, the analyst has been gathering data on several trade area c h a r a c t e r i s t i c s . This data has assisted him to tentat i v e l y i d e n t i f y merchandise l i n e s or r e t a i l a c t i v i t i e s which could be matched with the subject space. A "further i n d i c a t i o n of market opportunity i s obtained when the p r a c t i t i o n e r evaluates these pot e n t i a l uses i n r e l a t i o n to the merchandising value of the s i t e . The mer-chandising value of a" .r e t a i l space i s determined by analysing the t r a f f i c flow past the s i t e ; ; and business environment ch a r a c t e r i s t i c s such as r e t a i l associations, street location, v i s i b i l i t y and parking a v a i l a b i l i t y . 54 T r a f f i c flow T r a f f i c flow past a s i t e can be separated into ve-h i c u l a r and pedestrian t r a f f i c . These two types of t r a f f i c can then be analysed as to quantity and composition. Regarding quantity, the speed and volume of passing vehicular t r a f f i c can be noted at d i f f e r e n t times of the day i n r e l a t i o n to the side of the street on which the s i t e i s located. Pedestrian t r a f f i c can be counted i n a s i m i l a r manner. Passing t r a f f i c can also be evaluated according to i t s purpose. I t may be going to work, recreational, going shopping or returning home. Proposals to widen streets and increase parking f a c i l i t i e s or changing land uses can then be considered as these could p o t e n t i a l l y a f f e c t the 20 t r a f f i c flow past the s i t e . The analyst can relate the findings from a t r a f f i c flow analysis to the types of customers required by d i f f e r e n t kinds of r e t a i l a c t i v i t i e s . Generally, stores that r e l y upon suscipient business sources ( i . e . people whose purpose for being i n the area i s other than shopping)' r e l y more upon the quantity of passing t r a f f i c than on i t s composition. Stores r e l y i n g upon shared business sources ( i . e . customers whose primary objective i s shopping at a nearby store) w i l l be less r e l i a n t upon o v e r a l l quantity. These stores w i l l be more concerned with the composition of the t r a f f i c flow as t h i s flow relates to t h e i r customer needs.. Stores that generate business ( i . e . stores that a t t r a c t customers whose 55 primary purpose i s shopping at the store i n question) are not concerned as much about t r a f f i c flow as with the absence of congestion. For these types of stores, the capacity of the street to conveniently accomodate t h e i r customers 21 during shopping hours i s of prime importance. Besides evaluating t r a f f i c flow i n r e l a t i o n to business sources, the analyst can consider merchandise lines or s p e c i f i c uses. For example, dry-cleaning establishments prefer to locate on the side of the street that customers pass going to work. Customers drop t h e i r cleaning on the way to work and pick i t up on the way back. Convenience food stores, on the other hand, prefer the returning home side of the 22 str e e t . Data sources and techniques The type and extent of t r a f f i c data that an analyst gathers w i l l depend on the subject s i t e and the business sources required by the proposed uses. Vehicular t r a f f i c counts are usually available from the c i t y engineering department. The volume of pedestrian t r a f f i c can be counted by observation. 23 Determining the composition of t h i s t r a f f i c i s more complex. T r a f f i c spotters can be employed to c l a s s i f y t r a f f i c accord-ing to s p e c i f i c c r i t e r i a . For example, people carrying bags or entering stores can be i d e n t i f i e d as shoppers. Depending on the time of day, people at bus stops on d i f f e r e n t sides of a street may be going to or returning from work. Similar 56 c r i t e r i a may be used to determine the composition of vehicular t r a f f i c . T r a f f i c time tables can be used to record data. These tables would show the volume of d i f f e r e n t types of t r a f f i c and other c h a r a c t e r i s t i c s that the analyst deems useful. Business environment Business environment refers to a l l non-movement charact-e r i s t i c s associated with a s i t e l s r e t a i l location type. Major c h a r a c t e r i s t i c s that can be evaluated are parking, access and v i s i b i l i t y , and the location and character of neighbor-ing uses. I f the r e t a i l location type i s an i s o l a t e d one or a small cluster of neighborhood stores, less depth of analysis i s required than for a larger shopping area before pote n t i a l uses can be i d e n t i f i e d . The analyst can f i r s t consider what parking f a c i l i t i e s are available and whether these are o f f or on the s i t e . This i s p a r t i c u l a r l y important i f the proposed use i s highly dependent upon vehicular t r a f f i c . For example, a survey of 103 suburban r e t a i l shopping centres found that a r a t i o of 5.5 parking spaces per thousand square feet of gross leasable 24 area i s the general requirement. This r a t i o applies when l i t t l e walk-in t r a f f i c e x i s t s . Where shopping d i s t r i c t s are ce n t r a l l y located and served by mass transportation or where x a large amount of walk-in t r a f f i c i s obtained from the sur-rounding area, parking requirements are reduced. Merchandise 57 li n e s that are carried by the r e t a i l store also influence the amount of required customer parking. As.an example, a furniture store requires fewer parking f a c i l i t i e s than a drugstore because of i t s comparatively lower stock turn-over and customer patronage. The drugstore, on the other hand, has a high stock turnover and i s very dependent upon vehicular t r a f f i c for i t s patronage. To evaluate the access and v i s i b i l i t y of the s i t e for potential customers the analyst notes the s i t e ' s p osition r e l a t i v e to the t r a f f i c flow. Using information that was gathered e a r l i e r with respect to the street network, he considers the type of street fronting the s i t e . Next, the s i t e ' s location i n r e l a t i o n to the street i s noted. Sites can be c l a s s i f i e d as corner, near corner or middle st r e e t . Generally, s i t e s on or near a corner have the most v i s i -b i l i t y and access to passing vehicular t r a f f i c . If warranted, t r a f f i c oriented businesses such as drugstores, service stations or dry cleaning establishments may be 25 i d e n t i f i e d as potential uses for these types df s i t e s . Analysing the character of neighboring stores also a s s i s t s the p r a c t i t i o n e r i n his i d e n t i f i c a t i o n process of pot e n t i a l uses. By applying fundamental r e t a i l i n g concepts, the potential of the subject space with respect to surrounding uses can be evaluated. Nelson mentions six concepts that are hel p f u l for t h i s purpose. The concepts of generative, shared and suscipient business were defined e a r l i e r . The three other concepts are business interception, cumulative 58 2 6 a t t r a c t i o n and compatibility. Business interception occurs when a r e t a i l establishment positions i t s e l f between potential customers and a competing store. This concept encompasses a "least e f f o r t " p r i n c i p l e regarding the consumer's shopping habits. I t can be applied to outlets merchandising convenience goods. The concept of cumulative a t t r a c t i o n means that some stores w i l l trans-act more business together than i f they were widely scattered. This concept can be used with stores marketing comparison goods where clustering has a tendency to increase both the size and penetration of the trading area. Compatability means that some stores are more complementary than others. Examples of complementary stores would be those marketing women's clothing, accessories, shoes, m i l l i n e r y and cosmetics. Data source and techniques Operationally, the analyst can begin his evaluation of neighboring uses by noting the business neighborhood's general appearance and constructing a marketing map. This map would i n i t i a l l y show the location of neighboring uses and t h e i r general merchandise l i n e s . The analyst could then i d e n t i f y these uses according to the i r business source, beginning with the generative and proceeding to the suscipient and shared. The analyst can use these recorded observations to further select or screen pot e n t i a l uses for the subject s i t e 59 depending on the objective of his analysis ( i . e . a s i t e i n need of a user or a user i n need of a s i t e ) . If the s i t e i s adjacent to a store that generates business, a store r e l y i n g upon a shared business source could be considered. Nelson's concept of cumulative a t t r a c t i o n and compatability could also be applied. Thus, a paint store could ben'efit-from locating near furniture or hardware stores. I f mer-chandise lines carried by neighboring businesses are convenience oriented, the analyst may be able to apply the concept of business interception i n selecting a use. Further, i f some neighboring stores are unattractive, competing uses i n more at t r a c t i v e f a c i l i t i e s could be proposed. In addition to using a marketing map as a data source, the analyst could consult the trade association publications that are available. These publications, sponsored by various r e t a i l i n g groups ( i . e . restaurant, grocery, hard-ware e t c . ) , often contain information oh the trade area (location) requirements of d i f f e r e n t r e t a i l uses. As such, they are of valuable assistance to the analyst who i s selecting a s i t e for a user or a user for a s i t e . 3.6 Use of Sales Forecasting Techniques for Identifying the  Most B e n e f i c i a l Uses During the preceding stages of his trade area analysis, the analyst has been gathering data which have assisted him in either proposing uses for a p a r t i c u l a r s i t e or screening 6 0 s i t e s for a s p e c i f i c user. His remaining task i s to evaluate each use or s i t e , as the case may be, i n terms of i t s p otential sales generating a b i l i t y to i d e n t i f y the use or s i t e with the highest sales volume .potential. This i s accomplished by using various sales forecasting techniques which can reveal whether opportunities for a proposed ven-ture are very favorable, acceptable, poor or nearly impossible. By i d e n t i f y i n g the most b e n e f i c i a l uses or s i t e s and obtaining a r e a l i s t i c appraisal of the sales that could be attained the analyst also assists i n determining the re n t a l or investment value of a s i t e . Depending upon the use being considered, some techniques w i l l be more applicable than others. Here, the analyst w i l l have to exercise judgement i n , choosing the technique(s) that can produce the most r e l i a b l e data. For example, fore-casting the sales pot e n t i a l of a store r e l y i n g upon suscipient business could best be accomplished by techniques that consider the merchandising value of the s i t e and p a r t i c u l a r l y the volume of passing t r a f f i c •. rather than the surrounding trade area. On the other hand,. the sales volume potential of stores r e l y i n g upon generative or shared business sources are best estimated by techniques that con-centrate on the surrounding' trade area. Since the focus of th i s study i s trade area analysis, the remaining part of the chapter reviews sales forecasting techniques based on a s i t e ' s surrounding trade area. 61 Determining the volume of available business As an i n i t i a l step, the analyst determines the amount that i s spent by trade area residents for the lines of merchandise associated with the proposed use. This c a l -culation w i l l inform the analyst how much trade area residents spend on a commodity, regardless of whether t h e i r purchases are made inside or outside of the trade area. The amount i s calculated by determining the average amount that i s spent by various household types for a commodity and by multiplying t h i s amount by the number of households residing 27 i n the trade area. To i l l u s t r a t e the technique, suppose that a sporting goods store was being considered for the subject s i t e . The task of the analyst would be to determine how much money trade area residents spend on sports equipment purchases made inside and outside of the designated trade area. To determine th i s amount, the analyst could use the "customer spotting" or "microcosm" techniques discussed e a r l i e r . Using these techniques, the analyst could survey residents on t h e i r expenditure patterns for sporting goods. As an alternate source of data, S t a t i s t i c s Canada publications could be used. S t a t i s t i c s Canada catalogue 62-547, Urban Family 2 8 Expenditure, contains data on urban family expenditure patterns based on a survey conducted every two years. .Using information from t h i s publication, the analyst can estimate the average amount that trade area residents spend on sporting 62 goods. For example, table 21!". of the publication shows that the average annual household expenditure i n Vancouver 29 for sporting goods was $51.70 i n 1976. Other tables i n the publication cross reference expenditure patterns with selected demographic and income c h a r a c t e r i s t i c s based on a survey of eight major Canadian c i t i e s . For example, table 22 shows that single adult households spent an average of $13.10 on sporting goods i n 1976 while households comprising of two adults and three children spent an average of $58.00.^^ Other tables d e t a i l expenditures by class of tenure and by income. From table 23, the an-alyst would learn that homeowners with mortgages spent an average of $64.40 on sporting goods while tenants spent 31 $26.90. Table 24 would show that the greatest v a r i a t i o n of expenditures for sporting goods i s explained by income. For example, households reporting incomes of between $10,000.00 and $12,000.00 spent an average of $11.20 on . sporting goods whereas those reporting incomes of over $35,000.00 spent an average of $133.60. 3 2 Using his population and income data c o l l e c t e d e a r l i e r , the analyst could match these c h a r a c t e r i s t i c s with the data on urban family expenditures. He could then se l e c t those demographic or income variables that he considers to be the most relevant indicators of household expenditure patterns for the proposed l i n e of merchandise. In t h i s manner, an estimate of the amount spent for a commodity by each household i n the trade area can be calculated to arrive at the t o t a l 6 3 volume of available business. This amount can then be used with either the "residual" or "share of the market" techniques to forecast the sales p o t e n t i a l of a proposed use. Calculation of the attainable sales volume pote n t i a l  using the " residual "^technique The "residual" technique i s useful for determining the r e l a t i v e ease of entry of a proposed use into a trade area and can also be used to estimate the sales volume pote n t i a l of the proposed use. The procedure, using the residual approach, i s to consider a l l competing stores within the trade area and to measure the degree to which they are serving the trade area i n terms of actual sales volume. The estimated t o t a l amount of sales by these stores i s then subtracted from the t o t a l volume of available business i n the trade area that was calculated e a r l i e r . The residual or r e s u l t i n g figure indicates the remaining margin of sales potential available to the new entrant. To estimate the actual sales volume of competing stores i n a trade area, the analyst f i r s t conducts a f i e l d survey. This survey determines the condition and size (expressed i n gross leaseable area) of a l l competing stores. Using t h i s information and data from S t a t i s t i c s Canada, an estimate of the volume of sales o r i g i n a t i n g from stores within the trade area can be made. 64 For example, S t a t i s t i c s Canada catalogue 63-210"3'3 contains national averages of sales per square foot for chain stores s e l l i n g various merchandise lines based on a survey conducted every two years. Table D of catalogue 63-210 shows that i n 1977, sporting good stores sold an average of $142.00 of merchandise per square foot of gross 34 leasable area. Therefore, to estimate the actual sales volume of competing sporting good stores within a trade area, the t o t a l area of the competing stores could be m u l t i p l i e d by $142.00. When the r e s u l t i n g product i s subtracted from the t o t a l volume of available business, the residual volume of business available to the proposed use i s obtained. This figure could then be modified to r e f l e c t the sales volume of stores that the analyst judges to be below or above average. After the analyst has estimated the residual volume of business available for a proposed use, he can derive estimates . for future years';based on population or income trends i n the trade area. If population or income i s expected to increase, the residual volume of available 35 business w i l l also increase. The residual volume.of business available to a proposed use when compared with the t o t a l volume of business available i n the trade area w i l l indicate whether the proposed venture i s favorable or unfavorable. I f the residual amount i s small or non-existent, a state of saturation or overstoring may e x i s t and the proposed venture may be poor or next to impossible. Applebaum and Cohen define store saturation as, 65 a condition under which e x i s t i n g store f a c i l i t i e s are u t i l i z e d e f f i c i e n t l y and adequately meet customer needs. 36 When t h i s equilibrium condition does not p r e v a i l , a trade area can be either understored or overstored with respect to a p a r t i c u l a r use. Examples of conditions of under-storing are unusually high sales per square foot, customers t r a v e l l i n g further than they wish i n order to shop and crowded and slow shopping conditions. Overstoring exists when the reverse conditions occur. The objective of the analyst :is', , therefore, to i d e n t i f y uses f o r which states of understoring e x i s t . To estimate what percentage share of the residual volume of available business that a proposed use can capture, the analyst weighs several factors. These"factors include the size of the proposed f a c i l i t y , the merchandising value of the s i t e , and the strengths and weaknesses of competing stores i n r e l a t i o n to the proposed one. I f the residual volume of available business is large i n r e l a t i o n to the t o t a l volume of available business i n the trade area, the analyst might forecast higher than average sales per square foot depending on the size of the proposed store. For example, i f the area of a proposed sporting good store when multi p l i e d by the national average sales per .square foot figure ( i . e . $142.00) resulted i n a figure s u b s t a n t i a l l y less than the residual amount of available business, the analyst might forecast higher than average sales per square foot. Similar consideration could be given to the merchandising value of the 66 s i t e and to store image as these factors could p o s i t i v e l y or adversely a f f e c t the sales volume poten t i a l of the 3 8 proposed use. Calculation of the attainable sales volume poten t i a l  using the "market share" technique The "market share" technique i s generally used for 39 assessing department store or shopping centre opportunities. The technique assumes that a strong r e t a i l e r , regardless of competition, w i l l achieve a certain share of r e t a i l sales i n i t s own r e t a i l category. Application of the technique requires that an analyst has a thorough knowledge of the strengths and weaknesses of the proposed use(s) which ass i s t s him to determine the r e a l i s t i c share of the market that can be obtained. The "market share" technique begins by ca l c u l a t i n g the t o t a l volume of available business with respect to d i f f e r e n t trade area zones ( i . e . primary, secondary and t e r t i a r y ) . For-.each" zone, an estimate of the available business that the proposed use(s) can capture i s made. This estimate share i s based on judgement and or the performance of the proposed use(s) i n other areas. Based on judgement, the analyst considers the number, size and merchandising appeal of competing outlets when estimating market share. Market share i s then expressed as a lower and upper range. For example the analyst could calculate 67 the amount of sales represented by a 5%, 10% or 15% share of the market. Similar calculations could be made for future years r e f l e c t i n g population or income trends i n the area. I f operating results of the proposed use'(s) are available for other s i m i l a r areas, these results as expressed i n sales per square foot can also be used to estimate market s h a r e . ^ 68 3. 7 Footnotes Richard Nelson, The Selection of R e t a i l Locations (New York: F.W. Dodge Corporation, 1958), p. 45. 2 W. Applebaum and S. Cohen, "Store Trading Areas in a Changing Market," Journal of Reta i l i n g 37 ( F a l l 1961) : 21. 3 A detailed description and explanation of the use of marketing maps i s given i n Curt Kornblau ed. , Guide to  Store Location Research with an Emphasis on Supermarkets (Reading, Massachusetts: Addison-Wesley Publishing Company, 1968), pp. 143-206. 4 W. Applebaum and S. Cohen, "Trading Area Networks and Problems of Store Saturation," Journal of Reta i l i n g 37 ( F a l l 1961): 35. 5 J. Mertes, "A R e t a i l Structural Theory for Site Analysis," Journal of R e t a i l i n g 40 (Summer 1964): 19-30. ^ W. Applebaum and S. Cohen, "Store Trading Areas i n a Changing Market," p. 23. 7 For an example of how two analysts consider natural and a r t i f i c i a l barriers to movement see, Applebaum and Cohen, "Store Trading Areas i n a Changing Market," p. 23. g This patterning i s explained i n greater d e t a i l by Applebaum and Cohen, "Trading Area Networks and Problems of Store Saturation," pp. 32-35. 9 . William Applebaum, "Methods for Determining Store Trade Areas, Market Penetration and Potential Sales," Journal  of Marketing Research 3 (May 1966): 128. This technique i s described i n d e t a i l by Applebaum i n his a r t i c l e e n t i t l e d "Methods for Determining Store Trade Areas, Market Penetration, and Potential Sales," pp. 127-141. An application of t h i s technique can be found i n William Beaton, Real Estate Investment (Englewood C l i f f s , New Jersey: Prentice-Hall, Inc., 1971), pp. 175-176. 12 Walstein Smith J r . , "Ret a i l Locations and Consumer Sp a t i a l Behavior," The Real Estate Appraiser 32 (November 1966) 26 69 13 Michael Birnkrant, "Shopping Centre F e a s i b i l i t y Study: Its Methods and Techniques," Journal of Property  Management 35 (November-December 1960): 274-275. 14 . . William R. Davidson and Alton F. Doody, Retail i n g Management, 3rd ed. (New York: Ronald Press Company, 1966), p. 125. 15 S t a t i s t i c s Canada, "Census Tracts: Population and  Housing Characteristics Vancouver - Catalogue 95-82 8 (Ottawa: S t a t i s t i c s Canada, 1978). 16 This firm i s a branch of Compusearch. In Vancouver these services can be found at 740 Nicola Street, telephone 685-2295. 17 This publication i s published annually by Maclean-Hunter Limited, Toronto, Ontario. 18 This catalogue i s available free of charge from any S t a t i s t i c s Canada information centre. In Vancouver, the catalogues may be obtained at 1145 Robson Street. In addition, s t a f f members are available for consultation at these reference centres. 19 S t a t i s t i c s Canada, "Income Di s t r i b u t i o n by Size i n  Canada - Catalogue 13-20 7 (Ottawa: S t a t i s t i c s Canada, 1978) . 20 For more information, the reader could see Davidson and Doddy, Retailing Management, pp. 138-139. 21 For a thorough discussion on the importance of t r a f f i c flow for various kinds of r e t a i l a c t i v i t i e s , the reader i s directed to Richard Nelson, The Selection of R e t a i l  Locations, pp. 44-143. 22 J. Meirtes, "Site Opportunities for the Small Retailer," i n R e t a i l i n g Concepts, Ins t i t u t i o n s and Management, ed. J. Markin (New York: MacM.il lan Co., 1971), pp. 193-97. 2 3 The interested reader i s referred to S. Sands, "Improving the Accuracy of Pedestrian T r a f f i c Courts," Journal of  Retail i n g 37 (Summer 1961): 33. 24 Urban Land I n s t i t u t e , Parking Requirements for Shopping Centres (Washington, D.C: Urban Land Institute Technical B u l l e t i n No. 53,"l965), p. 9. 70 25 A Further description of how a s i t e ' s location can be evaluated i n r e l a t i o n to various uses i s given by J . Epstein, "Geography and the Business of R e t a i l Site Evaluation arid Selection," Economic Geography 47 (November 1971) : 195. 2 6 Richard Nelson, The Selection of Retai l i n g Locations, pp. 53-55 27 Davidson and Doddy, Retail i n g Management, pp. 127-128. 2 8 S t a t i s t i c s Canada, Urban Family Expenditures - Catalogue  62-547 (Ottawa: S t a t i s t i c s Canada, 1979). 29 Ibid., p. 6 7. 3 0 Ibid., pp. 84-85. 3 1 Ibid., p. 102. 3 2 Ibid., pp. 120-121. 33 S t a t i s t i c s Canada, R e t a i l Chain Stores Catalogue 63-210 (Ottawa: S t a t i s t i c s Canada, 1979). 34 Ibid., p. 17. 35 For an i l l u s t r a t i o n of how the "residual" technique i s applied, the reader i s directed to Michael Birnkrant, "Shopping Centre F e a s i b i l i t y : I t s ' Methods and Techniques," pp. and Bernard J. Kane, A Systematic Guide to Supermarket Location Analysis, (New York: F a i r c h i l d Publication Inc., 1977), pp. 75-86. 3 6 Applebaum and Cohen, "Trading Area Networks and problems of Store Saturation," p. 36. 37 Ibid., p. 36. 3 8 Michael Birnkrant, "Shopping Centre F e a s i b i l i t y : Its Methods and Techniques", pp. 277. 39 Ibid., p. 276. 40 The interested reader can refer to two sources that explain and i l l u s t r a t e how the "share of the market" technique i s used to estimate the sales volume poten t i a l of a r e t a i l 71 a c t i v i t y . W i l l l i a m Applebaum, "Methods of Determining Store Trade Areas, Market Penetration, and Potential Sales," pp. 127-141, gives a step by step procedure for implementing the technique. Harold Imus, "Projecting Sales Potentials for Department Stores i n Regional Shopping Centres," Economic  Geography 37 (January 1961): 34-41, i l l u s t r a t e s the use of the technique for department stores. CHAPTER FOUR METHODOLOGY 73 4.1 Introduction The survey instrument used i n t h i s study i s a questionnaire designed to survey commercial r e a l estate agents on t h e i r practices of trade area analysis. This chapter explains how the questionnaire was developed. I t then outlines the procedures used to administer the survey and interpret the re s u l t s . A description of the respondents' c h a r a c t e r i s t i c s concludes the chapter. 4.2 Description of the Questionnaire From chapter three, trade area c h a r a c t e r i s t i c s and techniques that real t o r s could use to develop a trade area analysis were i d e n t i f i e d . Based upon th i s information, an i n i t i a l set of questions was formulated. These questions were pretested on 15 commercial r e a l estate agents who were also i n v i t e d to elaborate when questions were unclear. The f i n a l draft of the questionnaire was then developed (see appendix 1). Survey questions were designed to examine the type, scope and purpose of the trade area analyses developed by the respondents. Where appropriate, other questions not d i r e c t l y related to practices of trade area analysis were included i n the survey to obtain information about the respondent's o v e r a l l marketing practices and personal c h a r a c t e r i s t i c s . 74 Type of trade area analysis The type of trade analyses developed by the respondents was determined by three questions. Realtors were f i r s t asked i f they considered the surrounding area (trade area) i n t h e i r marketing of business/commercial properties. Realtors who indicated that they considered a property's trade area were then asked i f they normally li m i t e d t h e i r analyses to items of general importance to business/commer-c i a l properties or i f they developed analyses for s p e c i f i c uses such as fa s t food, hardware, drug store etc.. A further i n d i c a t i o n of the type of trade area analyses being developed was obtained by asking r e a l t o r s i f they prepared written analyses as opposed to r e l y i n g exclusively on mental notes. Purpose of trade area analysis Two sets of questions i n the survey were formulated to examine the purpose of the re a l t o r ' s trade area analysis. Aimed at obtaining an insight into the realtor's understanding of the relationship between trade area and value, one question asked real t o r s to i d e n t i f y factors that they believed to be major influences on value for business/commercial properties. Two related questions were included to discover who usually determined the asking prices of properties l i s t e d by real t o r s and i f they forecasted increases or decreases i n value for 75 c l i e n t s and customers of th e i r business/commercial l i s t i n g s . A second set of questions was devised to examine the rea l t o r ' s use of trade area analysis as a marketing t o o l for obtaining l i s t i n g s and prospects. An i n i t i a l question asking realtors to describe t h e i r three most e f f i c i e n t ways to locate (1) l i s t i n g s and (2) prospects was used to determine the sample's evaluation of trade area analysis as a l i s t i n g or prospecting t o o l . A second question asked r e a l t o r s i f they used information from t h e i r trade area analyses to i d e n t i f y prospects. The t h i r d question enquired into the rea l t o r ' s basis for deciding when to prepare a written trade area analysis. Scope of trade area analysis The scope of the respondents' trade area analyses was probed by four survey questions. Realtors r e l y i n g exclusively upon mental notes were asked to l i s t items they normally considered. Other r e a l t o r s , who at times prepare written analyses were surveyed on t h e i r use of twenty-five items related to the four major components of a trade area analysis outlined i n chapter three. Due to the many trade area c h a r a c t e r i s t i c s and techniques of analysis that might be used by r e a l t o r s , the l i s t of twenty-five items i s not ex-haustive. For the sake of designing a manageable survey, judgement was exercised i n selecting key items thought to be most relevant for the commercial r e a l t o r . The t h i r d question 76 asked realtors to outline the steps that they followed leading to the i d e n t i f i c a t i o n of s p e c i f i c prospects and the l a s t question explored the respondents^ use of related s t a t i s t i c a l data and sources of information. Use of r e a l estate 7 .literature Two questions probed the respondents' use of r e a l estate l i t e r a t u r e . Respondents were asked to l i s t the rea l estate magazines or journals that they or t h e i r of free subscribed to. In addition, they were asked to recommend books on commercial r e a l estate. 4 .3 Survey Administration On August 18, 1978, surveys were mailed to 461 brokers representing 181 r e a l t y o f f i c e s . Recipients of the survey were chosen from a comprehensive l i s t of 461 active I.C.I, realt o r s supplied by the Vancouver Real Estate Board. In an accompanying cover l e t t e r (see Appendix "A") re a l t o r s were asked to complete and return the survey before September 8,, 197 8, i f they had experience working with business/commer-c i a l property. If not, they were asked to indicate t h e i r non-involvement on the cover l e t t e r and to return the l e t t e r i n the postage-paid self-addressed envelope supplied with each survey. To encourage p a r t i c i p a t i o n , the covering l e t t e r , signed by a faculty member, b r i e f l y stated the purpose of the 77 study, appealed to the respondent's professionalism and guaranteed that his privacy and c o n f i d e n t i a l i t y would be safeguarded. In addition to the covering l e t t e r and as a further inducement to complete the survey, respondents were asked to indicate whether they wished to receive a copy of the results at a l a t e r date. A l l of the i n i t i a l mail surveys were b l i n d coded to f a c i l i t a t e follow-ups of non-respondents. From the i n i t i a l mailing, 64 real t o r s completed the survey and 104 r e p l i e s of non-involvement were received giving a response rate of 38.6%. Non-respondents were then contacted and mailed a second copy of the survey. This e f f o r t increased the response rate to 45.1 percent. 4.4 Data Analysis Data from the survey was coded and keypunched for com-puter analysis by the S t a t i s t i c a l Package for the Social Sciences (SPSS;)> .S"!")•, Two computer subprograms of SPSS': - - condescriptive and frequencies - - were used to analyse the data. Following t h i s i n i t i a l examination, contingency table tcrosstabulation) analyses were performed to investigate sets of relationships between selected variables. 78 4.5 Description of Respondents The group of respondents consisted of 74 member-realtors of the Vancouver Real Estate Board'who at the time of the survey were ac t i v e l y involved with marketing business/commercial property. Age and work experience with i n d u s t r i a l , commercial  and investment property, Table 4.1 presents the ages of the realtors who responded for selected age categories. AGE DIS Age Intervals In Years 2 4 - 3 4 35 - 44 4 5 - 5 4 5 5 - 6 7 (Missing data) Total From table 4.1, 33.8% of the realt o r s were between the ages of 35 and 44, 22.5% were under 35 and 43.7% were over 44. The mean age of the respondents was 43.8 years with the minimum Table 4.1 >TRIBUTION OF RESPONDENTS Absolute Relative Cumulative Frequency Frequency Frequency 16 22.5 22.5 24 33.8 56.3 13 18.3 74.6 18 25.4 100.0 71 3 74 79 age being 24 and the maximum 67. Over three-quarter of the respondents were more than 34 years of age. Table 4.2 shows that -.41.9% of the respondents had been working between one and f i v e years with I.C.I, (indus-t r i a l , commercial and investment) property with 8.2 being the mean number of years worked by a l l respondents. Table 4.2 YEARS WORKED WITH I d PROPERTY Absolute Relative Adjusted Cumulative Frequency Frequency Frequency Frequency Years (Pet.) (Pet.) (Pet.) ."1— 5 31 41.9 43.7 43.7 6 - 1 0 lv. 23 - 31.1 32.4 76.1 11 - 15 10 13.5 14.1 90.1 16 - 20 2 2.7 2.8 93.0 21 - 25 3 4.1 4.2 97.2 26 - 30 2 2.7 2.8 100.0 missing 3 4.1 missing 100.0 74 100.0 100.0 The number of years each respondent worked with I.'C.I. property was subtracted from his age to determine the age at which he began working with I.C.I, property. Forty-three percent of the respondents to this section began working with t h i s type of property aft e r the age of 35. This explains the d i s p a r i t y between the mean number of years respondents reported working with T.C.I, property (.8.2 years) and t h e i r average age C43.8 years). I t can be i n f e r r e d from these findings that working with I.C.I, property was a l a t e r 80 career choice for a large percentage of the respondents. Education" l e v e l arid professional r e a l estate designations Table 4.3 summarizes the education levels achieved by the respondents. Table 4.3 LEVEL OF EDUCATION Relative Adjusted Cumulative Absolute Frequency Frequency Frequency Frequency XPct.) (Pet.) Grade 6 to 12 15. Graduate to 12 11 Attended Post Secondary 20 Post Second-ary Graduate 2 3 Missing Data 5 Total 74 20.5 14.9 27.0 31.1 . 6.8 100.0 21.7 15.9 29.0 33.3 Missing 100.0 (Pet.) 21.7 37.7 66.7 100.0 100.0 As shown iri'. table 4.3, more than half df the respondents (62.3%) had either attended or were graduates of post second-ary i n s t i t u t i o n s and a further 15.9% were secondary school graduates. Although, a majority of the respondents had some post secondary education, t h i s t r a i n i n g was not necessarily related to r e a l estate since only a quarter of these realtors reported holding r e a l estate designations. 81 In the area of professional r e a l estate designations, 26.9% of the respondents reported holding one or more designations. The two most popular designations were being a member of the Real Estate Institutes, A of B.C. and a fellow of the Real Estate Instituteon of Canada. Other q u a l i f i c a t i o n s held by the respondents included appraisal and property management designations. Gross annual income and percent of income attributed  to business/commercial property Table 4.4 presents the frequency pf gross annual incomes for sample members i n selected income categories. Table 4.4 GROSS: ANNUAL INCOME IN THOUSANDS Relative Cumulative Absolute Frequency Frequency Income Range Frequency (Pet.) (Pet.) 0 - 1 5 17 23 23 16 - 25 16 ' 21.6 44.6 26 - 45 19 25.7 70.3 46 - 60 13 17.6 87.8 61 - 100 6 8.1 95.9 Over 100 3 . 4.1 100.0 74 100 From table 4.4 the modal income category was 26 to 45 thousand with 25.7% of a l l incomes f a l l i n g into t h i s range. The mean gross annual income of the respondents was 39.8 thousand. 82 The average percent of annual income accounted for by-various property c l a s s i f i c a t i o n s i s presented i n table 4.5, Table 4.5 MEAN PERCENT OF ANNUAL INCOME ACCOUNTED FOR BY SELECTED PROPERTY CLASSIFICATIONS Property C l a s s i f i c a t i o n (Developed/Undeveloped) Multi Residential Office Business/Commercial Ind u s t r i a l Other Mean Percent of Annual Income Represented by Property Type 21% 11% 41% 21% . . 6% 100% As was anticipated due to the focus of the study, respondents earned an average of 41% of th e i r gross annual income working with business/commercial property. Business/commercial properties' sold during the past two  years and type of l i s t i n g agreement I t could be assumed that realtors who work with low priced and/or non-exclusive l i s t i n g s may devote less time to developing a trade analysis. To account for th i s p o t e n t i a l influence on the qu a l i t y of th e i r analyses, respondents were asked to indicate the number and prices of business/commercial properties that were sold during the past two years.. In addition, they were asked what percent of t h e i r l i s t i n g s were 83 exclusive or exclusive r i g h t to s e l l . Table 4.6 presents the number of business/commercial properties, developed or undeveloped, that were sold i n d i f f e r e n t price ranges and the percent of realt o r s who reported s e l l i n g the properties over a two year period. Table 4.6 BUSINESS/COMMERCIAL PROPERTIES SOLD BY RESPONDENTS OVER A TWO YEAR PERIOD Developed Percent of Respondents Number Reporting Having Sold Price Range Sold Properties Less than $75,000 65 37 t .9 75,000 to 149,999 89 50 .0 150,000 to 499,999 117 67 .2 500,000 to 1,000,000 69 53 .4 Greater than 1,000,000 58 39 .7 Undeveloped Less than $75,000 53 27 .6 75,000 to 149,999 47 29 .3 150,00"to 499,999 78 36 .2 500,000 to 1,0007000 41 10 .7 Greater than 1,000,000 14 13 .8 Number reporting sales 58 Missing cases 16 74 From table 4.6, over half of the respondents reported s e l l i n g developed properties at prices i n excess of one-half m i l l i o n 84 dol l a r s and over 13 percent sold undeveloped properties at prices i n excess of one m i l l i o n d o l l a r s . Table 4.7 presents the percentage of exclusive l i s t i n g s worked by the respondents. Table 4.7 PERCENTAGE OF EXCLUSIVE LISTINGS WORKED BY RESPONDENTS Relative Cumulative Absolute Freq. Freq. Interval (Pet) Freq. (Pet) (Pet)  0 - 2 5 13 17.6 17.6 26 - 50 t \ . 18 24.3 41.9 51 - 75 11 14.9 56 .8 76 - 100 32 43.2 100.0 Total 74 100.0 Table 4.7 shows that 43 percent of the respondents indicated that over 75 percent of t h e i r l i s t i n g s were exclusive or exclusive r i g h t to s e l l . Realtors who work with both exclusive l i s t i n g s and high priced property would be more l i k e l y to perform a trade area analysis than realt o r s working with lower priced non-exclusive l i s t i n g s . Both tables 4.6 and 4.1 show that a large percentage of the respondents to the survey are i n the former category. These respondents, therefore, represent favorable subjects for the purpose of t h i s study. 85 4.7 Footnotes 1 Norman H. Nie et a l . f i P f t f i : fit.flfi - n3~ i Cfll Pfirkrigp fmt the S Q c r a J p H p n p p s , 2nd ed.,,- (New York: McGraw-Hill Book Company, 1975) . 9 -CHAPTER FIVE RESULTS 87 5.1 Introduction and Summary of the Main Findings Survey results are conveniently arranged to coincide with the format presented i n the preceding chapter as follows: - Section 1: Type df Trade Area Analysis - Section 2: Purpose of Trade Area Analysis - Section 3: Scope of Trade Area Analysis, and - Section 4: Use of Real Estate Literature The chapter begins with a summary of the main findings. This i s followed by a detailed description of the r e s u l t s . Summary of the Main Findings A. Consideration of trade area (location) and type of trade area analysis 1. Most of the respondents (87.8 percent) indicated that they consider trade area (location) i n t h e i r marketing of business/commercial properties. 2. Two thirds of the respondents who consider trade area (location) l i m i t t h e i r analyses to items of general importance rather than developing them for s p e c i f i c uses. 3. Close to half of the rea l t o r s who responded (49 percent) seldom or never prepare a written trade area (location) .analysis. B. Purpose of trade area analysis 1. Seventy-five percent of the brokers who responded determined the asking prices of properties they l i s t e d either by themselves or i n conjunction with the owner. 88 However, 40 percent of the respondents did not acknow-ledge trade area (location) as a major factor influencing the value of business/commercial property; and 76 percent indicated that they do not forecast increases or decreases i n the value of t h e i r l i s t i n g s for c l i e n t s or customers. 2. Twenty percent of the real t o r s who responded outlined steps that they followed i n t h e i r trade area (location) analysis leading to the i d e n t i f i c a t i o n of prospects while 80 percent did not. 3. Over 30 percent of the respondents did not l i s t t h e i r t h e i r most e f f e c t i v e way to locate: (1) l i s t i n g s or (2) prospects, and 4 percent mentioned that a trade area (location) analysis was among t h e i r three most e f f e c t i v e ways for locating prospects. 4. Over one t h i r d of the respondents who prepare written trade area (location) analyses did not state t h e i r reason for doing so. The most popular reasons given by the remaining r e a l t o r s were sales t o o l , c l i e n t request and s u i t a b i l i t y of a property for a s p e c i f i c use. C. Scope of trade area analysis 1. Six percent of the respondents whos cons i deri- trade- are a (location) r e l y exclusively upon mental notes. These realtors mainly consider items related to the merchan-dising value of a s i t e . 2. Respondents who develop written analyses most frequently 89 consider items related to the merchandising value of a s i t e followed by trade area delineation, population and income c h a r a c t e r i s t i c s , and, l a s t l y , sales fore-casting techniques for determining the most b e n e f i c i a l uses. Related to sales forecasting techniques, the three least frequently considered items out of the 25 items surveyed were - sales forecasts for present or potential users, conducting consumer surveys and determining household expenditure patterns i n a trade area. 3. Half of the realtors who responded seldom or never use s t a t i s t i c a l data to a s s i s t i n t h e i r trade area (.location) analyses. 4. Thirteen percent of the respondents l i s t e d S t a t i s t i c s Canada as a data source and one r e a l t o r mentioned tetrad. 5. Most of the respondents (80 percent) who use t h e i r analysis to i d e n t i f y prospects did not outline the steps that they followed for t h i s purpose. Of the steps that were outlined, evaluating the merchandising value of a s i t e was the most popular one. No r e a l t o r mentioned steps that could be used to forecast sales for e x i s t i n g or pot e n t i a l users of a r e t a i l space. Use of r e a l estate l i t e r a t u r e 1. Over 78 percent of the respondents did.not l i s t any-r e a l estate magazines or journals that they or t h e i r o f f i c e subscribed to and no respondent l i s t e d a book or author on commercial r e a l estate. 90 The above f i n d i n g s are presented i n g r e a t e r d e t a i l i n the f o l l o w i n g s e c t i o n s . 5.2 S e c t i o n 1 - Type of Trade Area Analy s i s C o n s i d e r a t i o n o f trade, area ( l o c a t i o n ) i n the marketing  of r e t a i l space R e a l t o r s were asked whether they c o n s i d e r e d trade area ( l o c a t i o n ) i n t h e i r marketing of r e t a i l space. Table 5.1 presen t s the f i n d i n g s . Table 5.1 CONSIDERATION OF: TRADE. AREA (LOCATION) Category L a b e l Consider L o c a t i o n Never Consider L o c a t i o n Absolute Frequency 65 9 74 R e l a t i v e Frequency (Pet) 87.8 12.2 100.0 Cumulative Frequency (Pet) 87.8 100.0 From t a b l e 5.1, 12.2% of the respondents d i d not c o n s i d e r trade area ( l o c a t i o n ) i n t h e i r marketing of r e t a i l space and 87.7% d i d . Type of trade area ( l o c a t i o n ) a n a l y s i s developed: g e n e r a l  or f o r s p e c i f i c uses Table 5.2 shows the number of respondents who developed 91 analyses for s p e c i f i c uses such as fast food, hartware etc. as opposed to those who only analysed items of general importance or who never considered trade area (location). Table 5.2 TYPE OF TRADE AREA (LOCATION) ANALYSES DEVELOPED  Absolute Relative Adjusted Cumulative Frequency Frequency Frequency Frequency Category Label (Pet) (Pet) (Pet) Analysis .for S p e c i f i c uses 22 29.7 33.8 33.8 General Analyses 43 58.1 66.2 100.0 Never Consider Location _9 12.2 Missing 74 100.0 100.0 Of the realtors who considered trade area (location), 33.8% normally developed analyses for s p e c i f i c uses and 66.2% limited t h e i r analyses to items of general importance to business/commercial properties. Other survey findings indicate that 7 3% of the realtors who developed analyses for s p e c i f i c uses were able to describe how they used th e i r analyses to i d e n t i f y prospects. In contrast, real t o r s who lim i t e d t h e i r analyses to items of general importance were not able to do so. Also, realtors who considered s p e c i f i c uses while developing t h e i r analyses were more frequent users of the 25 trade area items included i n the survey and generally worked with more exclusive l i s t i n g s than other rea l t o r s . Form of trade area (location) analysis: written or  mental notes Realtors were asked how often they prepared written analyses as opposed to making mental notes. Table 5.3 presents the findings. Table 5.3 FREQUENCY OF WRITTEN TRADE AREA (LOCATION) ANALYSES Category Label Always Often Seldom Never Consider Location Mental Notes Only Absolute Frequency 16 22 23 9 4 7 4 Relative Frequency (Pet) 21.6 29.7 31.1 12.2 . 5.4 100.0 Cumulative Frequency (Pet) 21.6 51.4 82.4 94.6 100.0 Table 5.3 shows that 21.6% of the respondents always prepare a written analysis, 29.7% often did so, 31.1% seldom wrote analyses, 12.2% never considered trade area (location) and 5.4% r e l i e d exclusively on mental notes. 93 5.3 Section 2 - Purpose of Trade Area Analysis Trade area analysis as a value determinant: Realtors i n the sample were asked to l i s t factors that they believed to be the major influence on value for business/commercial property. Sixty-eight rea l t o r s from the sample each l i s t e d from one up to six factors. Table 5.4 presents the findings. Table 5.4 FACTORS LISTED AS MAJOR INFLUENCES ON VALUE FOR BUSINESS/COMMERCIAL PROPERTIES Category Label Location Location & Financial F i n a n c i a l Economic Missing Absolute Frequency 24 17 . 20 6 Relative Frequency (Pet) 32.4 22 .9 2 7.0 9.5 8.2 74 100.0 Adjusted -' Frequency (Pet) 35.3 25.0 29.4 10.3 Missing 100.0 Survey results show that 39.7% of the respondents did not acknowledge location (trade area) as a major factor influencing the value of business/commercial property. This group l i s t e d such factors as lease terms, i n t e r e s t rates, money supply, cash flow etc.. Other respondents who acknowledged location as a major factor l i s t e d items such as surrounding trade area, a c c e s s i b i l i t y etc.. A second question asked realt o r s who determined the 94 asking price of properties they l i s t e d . Table 5.5 shows' who usually determined the asking price of properties l i s t e d by the realto r s who responded. Table 5.5 WHO DETERMINES THE ASKING PRICE OF BUSINESS/COMMERCIAL- PROPERTIES Category Label Owner Fee Appraiser Realtor Realtor and Owner Realtor and In-House Appraiser Missing Data Total Absolute Frequency 11 4 21 34 3 1 74 Relative Frequency (Pet) 14.9 5.4 28.4 45 .9 4.1 1.4 100.0 Adjusted Relative Frequency (Pet) 15.1 "5:5 28:8 4616 4.1 Missing 100.0 From table 5.5, 2 8.8% of the respondents determined asking prices by themselves, 46.6% i n conjunction with the owner, and 4.1% with an in-house appraiser. Over 15.1% of the respondents indicated that the asking price was determined by the owner and 5.5% state i t was determined by a fee appraiser. These results show that 79.5% of the respondents determined the asking price of l i s t e d properties either by themselves or i n conjunction with other p a r t i e s . The relationship between who determines asking price and the respondents' consideration of trade area' (location) was also examined. I t was found that a l l of the realtors who indicated that they, never considered trade area (location) 95 determined the asking prices of properties they l i s t e d without the assistance of appraisers. Members of the sample were asked i f they sometimes fore-casted increases or decreases i n the value of t h e i r business/ commercial l i s t i n g s for c l i e n t s or customers. Thirteen percent of the respondents indicated they did and 87% indicated they did not do so. Trade area analysis as a marketing tool for locating  l i s t i n g s or prospects Respondents were asked to describe t h e i r three most ef f e c t i v e ways to locate: (1) l i s t i n g s , and (2) prospects. A l l of the ways given related to canvassing, s o c i a l contacts, o f f i c e f l o o r days and advertising with the exception of three realtors who stated that they assessed possible uses to locate prospects. I t i s s i g n i f i c a n t to note that 35.1% of the respondents did not l i s t a t h i r d way to locate l i s t i n g s and 31.1% did not l i s t a t h i r d way to locate prospects. A related question asked respondents i f they used th e i r trade area (location) analyses to help i d e n t i f y s p e c i f i c prospects for i n d i v i d u a l properties. Table 5.6 shows the findings. 96 Table 5.6 USE OF TRADE AREA (LOCATION) ANALYSIS TO IDENTIFY PROSPECTS Category Label Use Location Analysis to Identify Prospects Don't Use Location Analysis to Identify Prospects Never Consider Location Missing Data Absolute Frequency 49 12 9 4 Relative Frequency (Pet) 66.2 14.2 12.2 5.4 Adjusted Frequency (Pet) 80.3 19.7 Cumulative Frequency (Pet) 80.3 100.0 Total 74 100.0 100.0 From table 5.6, 80.3% of the brokers who considered location indicated that they used th e i r trade area (location) analysis to i d e n t i f y prospects and 19.7% do not. Four of the brokers who considered trade area (location) did not respond to the question. When the group who used t h e i r analyses to i d e n t i f y prospects were asked to outline the steps that they followed for this purpose, 67% did not respond. The 33% who responded also belong to the group who develop t h e i r analyses for s p e c i f i c uses as opposed to only considering items of general importance. The steps that were l i s t e d are more conveniently discussed under Section 3 - Scope of trade area analyses. Another question to determine the purpose of the 97 respondents' trade area analyses, asked realt o r s to give t h e i r reason for deciding when to prepare a written trade area (location) analysis. Table 5.7 l i s t s the reasons that were given. Table 5.7 BASIS FOR DECIDING WHEN TO PREPARE A WRITTEN ANALYSIS Basis Sales Tool C l i e n t Request Property Well Suited for a Sp e c i f i c Use Major Property Depends on Own Judgement Out of Town Buyer Serious Buyer Corporate C l i e n t Always Do One Prospect Requires T r a f f i c Count Total Absolute Frequency 10 6 6 4 3 3 2 2 2 39 Relative Frequency (Pet) 25.7 15.4 15.4 10.3 7.7 7.7 5.1 5.1 5.1 2.6 100.0 The most popular reasons are sales t o o l , c l i e n t request, s u i t a b i l i t y of a property for a s p e c i f i c use and major property. Two of the realto r s who mentioned sales t o o l further explained that a written analysis was prepared i f the property was d i f f i c u l t to s e l l or lacked general interest. T h i r t y - s i x percent of the respondents who do written analyses did not respond to the question. 98 5.4 Section 3 - Scope of Trade Area Analysis Items considered by respondents r e l y i n g exclusively  on mental notes Table 5.8 l i s t s the items that are normally considered by respondents, who r e l y exclusively on mental notes. Table 5.8 TRADE AREA (LOCATION) ITEMS CONSIDERED BY RESPONDENTS WHO RELY EXCLUSIVELY ON MENTAL NOTES Location Item Realtor 1 Realtor 2 Realtor 3 Realtor 4 Population X A c c e s s i b i l i t y X X X T r a f f i c Counts X X Zoning X X Neighboring Businesses X Neighborhood Appearance X Business Trends X Type of Street X X Surrounding Area X Of the nine items l i s t e d , noting the s i t e s a c c e s s i b i l i t y i s the most popular item followed by t r a f f i c counts, zoning and type of street. Other items were each chosen by only one r e a l t o r . 99 Items considered by respondents who do writfeen^analyses The trade area (location)'.'.items that respondents considered useful for t h e i r written analyses are presented i n table 5.9 according to major trade area analysis com-ponents, frequency of use and o v e r a l l rank order of use. The rank order of use for each of the 25 items was deter-mined by the following procedure. For each respondent, an item that was always used was given a one, sometimes used: 2, and i f infrequently or never used: 3. A weighted score for the item was obtained by adding i t s weight on each survey. For the s i x t y respondents to t h i s section of the survey, possible scores that.an item could receive ranged from 60 i f the item was always used by each member to 180 i f i t was infrequently or never used by any agent. 100 Table 5.9 OVERALL RANK ORDER AND FREQUENCY OF USE OF ITEMS INCLUDED IN WRITTEN TRADE AREA (LOCATION) ANALYSES BY MAJOR COMPONENTS Infrequently Weighted Always Sometimes or never score (Pet) (Pet) (Pet) on 18 0 Trade Area Delineation A c c e s s i b i l i t y of s i t e 68.3 25.0 6.7 80 Type of street 71.7 18.3 10.0 84 L i s t i n g existing/proposed 108 competing shopping area 41.7 40.0 18.3 Changing land uses i n area 36.7 . 35.0 2 8.3 115 Definition/delineation of trade area 30.0 35.0 35.0 123 Time/distance contours 16.7 43.3 36.7 134 Conducting consumer surveys 1.7 21.7 76.7 165 Average Weighted Score 116 Population and Income Characteristics Economic outlook of trade area 41.7 31. 7 2 6 .7 111 Population of trade area 36.7 41. 7 21 .7 111 Rate of trade area population growth 26.7 51. 7 21 .7 117 Income levels i n trade .-area 16.7 53. 3 30 .0 128 Conducting consumer1 Surveys 1.7 21. 7 76 .7 165 Average Weighted Score 126 Merchandising Value of Site A c c e s s i b i l i t y of s i t e 68.3 25.0 On-site parking 68.3 25.0 Type of street 71.7 18.3 Street location 66.7 25.0 V i s i b i l i t y of s i t e 6 8.3 18.3 Neighborhood appearance 5 8.3 26.7 O f f - s i t e parking 43.3 41.7 6.7 6.7 10.0 8.3 13 .3 15.0 15.0 80 83 84 85 87 94 103 101 Table 5.9 (Continued) Always Sometimes Infrequently Weighted or never score Merchandising Value of Site (Pet) (Pet) (Pet) on 180 (Cont •d) L i s t of neighboring uses 43. 3 36. 7 20 .0 106 Pedestrian t r a f f i c count 30.0 55. 0 15 .0 111 Vehicular t r a f f i c count 15.0 35. 0 50 .0 113 Origin/destination of l o c a l t r a f f i c 16.7 46. 7 36 .7 132 Average Weighted Score 98 Sale Forecasting Techniques for Determining the Most B e n e f i c i a l Uses L i s t i n g competing stores i n area Vacancy rates i n area Absorption rate Household expenditure patterns i n trade area Sales forecast for present/potential users of s i t e Conducting eonsumer Surveys 30.0 35.0 15 .0 6.7 8, 1, 50.0 51.7 35 .0 38.3 33.3 21.7 20.0 13.3 50.0 55.0 58, 76, 98 107 141 149 150 165 Average Weighted Score 135 Number of Respondents: 60 Missing data : 14 Total 74 Examining the average weighted scores of each of the major components of a trade area analysis shows that items related to sale forecasting techniques for determining the most b e n e f i c i a l uses are generally the least frequently used followed by items concerned with population and income 102 c h a r a c t e r i s t i c s . Evaluating the merchandising value of the s i t e i s the most popular component followed by trade area delineation. Steps used to i d e n t i f y s p e c i f i c prospects Realtors who stated that they used t h e i r analysis to i d e n t i f y prospects were asked to outline the steps that they followed for t h i s purpose. Twenty percent of t h i s group outlined steps and 80% did not. Table 5.ID presents the steps that were outlined and groups them under the four major components of a trade area analysis as discussed i n chapter three. 103 Table 5.10 STEPS USED TO IDENTIFY SPECIFIC PROSPECTS GROUPED UNDER THE MAJOR COMPONENTS OF A TRADE AREA ANALYSIS Steps Outlined Realtor Number 1 2 3 4 5 6 7 8 9 10 111213 14 15, Trade Area Delineation -Overall Examination of Area X X X - A c c e s s i b i l i t y X " X X Population and Income  Characteristics -Population Analysis X X X X -Past trends i n area X Merchandising Value of Site -Pedestrian counts X X X X X X X X X X X -Vehicle counts X X X X X X X X X X X -Neighboring Businesses X X X X X - A c c e s s i b i l i t y X X X - V i s i b i l i t y X X Sale Forecasting Techniques  f ° r Identifying Users -Location needs of prospects X -Business trends X X X X X -Survey of competition within trade area X X X X X From table 5.10, f i v e r e a l t o r s outlined steps related to trade area delineation but. did not mention steps for describing population or income c h a r a c t e r i s t i c s . S i m i l a r l y , four other realtors l i s t e d steps for describing population c h a r a c t e r i s t i c s but omitted steps for delineating a trade area. The most popular trade area component analysed was the merchandising value of the s i t e with t r a f f i c flow analysis being the most frequently l i s t e d item. Nine realtors 104 outlined steps that related to techniques for i d e n t i f y i n g users/prospects. No r e a l t o r mentioned that he did a sales forecast for thi s purpose. Use of s t a t i s t i c a l data and related sources Respondents were asked to indicate the frequency with which they used s t a t i s t i c a l data and to name t h e i r sources of information. Table 5.11 shows that 17.9% of the realto r s always use s t a t i s t i c a l data, 31.3%: often and 50.7%: seldom or never. Table 5.11 USE OF STATISTICAL DATA Relative Adjusted Cumulative Absolute Frequency Frequency Frequency Category Label Frequency (Pet) (Pet) (Pet) Always Often Seldom or Never Missing Data 12 21 34 7 16 .2 28.4 45.9 9.5 17.9 31.3 50.7 missing 17.9 . 49.3 100.0 Thirty-nine of the respondents who use s t a t i s t i c a l data l i s t e d t h e i r sources. Of these r e a l t o r s , thirteen l i s t e d one source, f i f t e e n : two sources and eleven: three sources. The names of these sources and t h e i r frequency of selection by respondents to thi s section are presented i n Table 5.12. 105 Table 5.12 NAMES OF STATISTICAL SOURCES AND FREQUENCY OF SELECTION BY RESPONDENTS Relative Absolute Frequency Name Frequency (Pet)  City of Vancouver Reports 22 56.4 Market Trends 18 46.2 Teela Reports 9 2 3.0 S t a t i s t i c s Canada 9 23.0 Previous Sales L i s t i n g s 15 12.8 Reports 4 10.3 In-House Reports 2 5.1 Greater Vancouver Regional D i s t r i c t 2 5.1 Chamber of Commerce 2 5.1 Dollars and Cents Shopping Centres 1 2.3 Assessment Role 1 2; 3., Tetrad 1 2.3 From table 5.12, i t i s s i g n i f i c a n t to note that three sources of data described i n chapter three ( S t a t i s t i c s Canada, Tetrad and Consumer Surveys) were mentioned by few realtor s or not at a l l . 5.5 Section 4 - Use of Real Estate Literature Realtors were asked to l i s t r e a l estate magazines or journals that were subscribed to by themselves or the i r o f f i c e . Real estate magazines and journals were l i s t e d by 21.6 percent the respondents. The remaining 7 8.4 percent either did not respond or l i s t e d publications such as the Province, Business Week, and Real Estate Trends which could not be c l a s s i f i e d as 106 journals or magazines. A second question asked realtors to l i s t the t i t l e s or authors of books on commercial r e a l estate that they could recommend to others. No book or author on commercial r e a l estate was l i s t e d by the respondents. CHAPTER SIX DISCUSSION AND CONCLUSION 108 6.1 Introduction The primary aim of t h i s study was to gain some p r a c t i c a l insights into how r e a l t o r s develop and use trade area analyses i n the marketing of r e t a i l properties. Survey results indicate - that there i s a discrepancy between the importance of trade area information as emphasized by r e a l estate l i t e r a t u r e and the respondents consideration of trade area (location). As discussed i n chapter one, r e a l estate l i t e r a t u r e emphasizes that commercial property succeeds or f a i l s depending on i t s trade area; a knowledge of a r e t a i l property's surrounding area i s e s s e n t i a l to i d e n t i f y the most b e n e f i c i a l use(s) for the space and determine i t s value. In contrast, table 5.1 shows that over 12 percent of the real t o r s i n the study never consider trade area (location). Looking at the r e a l t o r s who do consider trade area (location), survey results indicate that for most of these r e a l t o r s , a substantial gap exists between t h e i r analyses and the "current state of the a r t " as revealed by the trade area l i t e r a t u r e reviewed i n chapter three. Two observations help to explain t h i s discrepancy. The f i r s t observation concerns the lack of attention given i n r e a l estate l i t e r a t u r e to steps and techniques that real t o r s could use for developing t h e i r trade area analyses. Examples of t h i s omission were presented i n chapter one. Without adequate guidelines or procedures to follow, real t o r s w i l l have d i f f i c u l t y developing comprehensive analyses. 109 The second observation i s that r e a l t o r s are generally unaware of the benefits that could be obtained from using a trade area analysis as a marketing t o o l for determining value or locating l i s t i n g s and prospects. As a r e s u l t , they may be devoting less time than they otherwise would to preparing t h e i r analyses. This observation i s supported by r e a l t o r s 1 responses to survey questions that probed t h e i r basis for developing a trade area analysis. For example, table 5.4 shows that 40 percent of the realtors i n the study did not acknowledge trade area (location) as a major factor influencing the value of business/commercial property. Another example i s that only 4 percent mentioned that a trade area analysis was an e f f e c t i v e way to locate prospects. Stemming from these observations, shortcoming's found by the survey are discussed under two areas. The f i r s t area concentrates on weaknesses found i n the sample's preparation of trade area analyses. The second describes how information from a trade area analysis could be used as a marketing aid to determine value and to locate l i s t i n g s or prospects. 6.2 Preparation of Trade Area Analyses Realtor practices of preparing t h e i r analyses are examined under f i v e interdependent areas: (1) Form of analysis: written or mental notes, (2) Type of analyses: general or developed for s p e c i f i c uses, (3) Steps used to develop analyses, (4) Trade area c h a r a c t e r i s t i c s , and (5) S t a t i s t i c a l data and date sources. For each of these areas, 110 shortcomings are i d e n t i f i e d and suggestions for improvement are offered. I t i s hoped that these recommendations should a s s i s t realtors to enhance the c a l i b r e of t h e i r analyses and thereby upgrade t h e i r l e v e l of professional services to c l i e n t s and customers of t h e i r business/commercial l i s t i n g s . Form of analyses: written or mental notes Table 5.3 shows that half of the real t o r s i n the study seldom or never prepared a written trade area (location) analysis, but usually r e l i e d upon mental notes. A compre-hensive analysis cannot be developed by r e l y i n g e n t i r e l y upon mental notes. As i l l u s t r a t e d i n chapter three, each of the four major trade area analysis steps or components ( i e . trade area delineation, population and income c h a r a c t e r i s t i c s , merchandising value of a s i t e , and sales forecasting techniques) requires the gathering of s p e c i f i c data. This data i s then synthesized to select and screen uses so that the most b e n e f i c i a l use(s) of a r e t a i l space can be i d e n t i f i e d . Because of the variety and breadth of data that i s gathered andh.synthesized, real t o r s r e l y i n g upon mental notes could, \': at best, only i n t u i t i v e l y i d e n t i f y prospects and determine value. Furthermore, these real t o r s would be at a compet-i t i v e disadvantage i n t h e i r sales/lease presentation compared to real t o r s who can j u s t i f y t h e i r assumptions with substan-t i a t i n g data from a c a r e f u l l y prepared written analysis. As discussed i n chapter one, investors require pertinent market I l l data upon which to base th e i r investment decisions. Realtors who provide investors/users with t h i s type of data i n written form w i l l have demonstrated t h e i r expertise about the subject property, thereby increasing t h e i r chances of a successful presentation. Type of analysis: general or for s p e c i f i c uses A trade area analysis i s developed by analysing a r e t a i l space and i t s surrounding trade area i n r e l a t i o n to a s p e c i f i c use. During each major step of the analysis ( i e . trade area delineation, etc.) trade area c h a r a c t e r i s t i c s are evaluated i n r e l a t i o n to the s p e c i f i c trade area (location) needs of potential uses. By not considering s p e c i f i c uses and t h e i r trade area (location) requirements while developing an analysis, the whole purpose of the exercise i s l o s t ; namely the i d e n t i f i c a t i o n of a s i t e ' s most b e n e f i c i a l use(s). Yet, 'table 5.2 shows that two thirds of the real t o r s who consider trade area (location) normally limited t h e i r analyses to items of general importance. These findings suggest that a refinement i n the type of analyses generally being developed i s required. Realtors who l i m i t t h e i r analyses to items of general importance r are assuming that a trade area can be q u a l i f i e d as either good or poor without r e f e r r i n g to a s p e c i f i c use. This assumption i s faulty since each d i f f e r e n t r e t a i l use 112 possesses unique trade area (location) needs. Trade area c h a r a c t e r i s t i c s may be very suitable for one use and not suitable for another. For example, a trade area comprised mostly of single adult households would be poor for a children's clothing^store. S i m i l a r l y , the educational l e v e l achieved by trade area residents would be an important consideration for a proposed use such as a bookstore. Furthermore, an i n t e g r a l part of a trade area analysis i s a sales forecast which necessitates the consideration of s p e c i f i c uses. Unless the r e a l t o r forecasts sales for proposed uses, his trade area analysis w i l l be incomplete. It w i l l not provide him with s u f f i c i e n t information to i d e n t i f y the most b e n e f i c i a l use(s) and to target market his product ( r e t a i l space) at a price r e f l e c t i n g the sales volume potential of these uses. In addition, realtors who l i m i t t h e i r analyses to items of general importance are not attaining the depth of analyses necessary for i d e n t i f y i n g a property's most b e n e f i c i a l use(s). This conclusion i s supported by survey findings showing that t h i s group of real t o r s could not outline steps that they followed leading to the i d e n t i f i c a t i o n of prospects. Clearly, i n the future, realtors should develop t h e i r trade area analyses for s p e c i f i c uses as opposed to gathering data only on items of general importance. 113 Steps used to develop analyses A trade area analysis can be divided into four major components or steps. These steps are: (1) trade area delineation, (2) population and income c h a r a c t e r i s t i c s , (3) merchandising value of a s i t e , and (4) sales forecasting techniques for i d e n t i f y i n g the most b e n e f i c i a l use(s). Together, these four major steps comprise the basic procedure for developing a comprehensive analysis. When realto r s who consider trade area (location) were asked to l i s t the steps that they followed i n t h e i r analysis, over 69 percent f a i l e d to respond. As shown i n table 5.10, steps l i s t e d by responding real t o r s were mainly related to evaluating the merchandising value of the s i t e . For t h i s step, the most popular trade area c h a r a c t e r i s t i c evaluated was t r a f f i c flow (ie. pedestrian and vehicle t r a f f i c counts). However, steps that could be used to analyse the three other trade area components were mentioned by few real t o r s or not at a l l . For example, the few realtors who l i s t e d steps related to trade area delineation did not indicate that they also examined population or income c h a r a c t e r i s t i c s within the defined trade area. Other realt o r s who stated that they considered population and income c h a r a c t e r i s t i c s did not mention steps to delineate the trade area. Regarding the fourth trade area analysis component (sales forecasting techniques), a l l realtors f a i l e d to l i s t steps related to 114 either the "residual" or "share of the market" techniques discussed i n chapter three. These findings suggest that r e a l t o r s are concentrating their analyses on evaluating the merchandising value of a s i t e while neglecting the three other trade area analysis components. To remedy th i s deficiency, r e a l t o r s should expand the scope of t h e i r analyses. This w i l l involve learning about the major steps of a trade area analysis, the data that can be gathered during each step and f i n a l l y how this data can be interpreted for the purpose of matching r e t a i l spaces with t h e i r most b e n e f i c i a l uses. Trade area c h a r a c t e r i s t i c s Several trade area c h a r a c t e r i s t i c s and techniques are associated with the four major steps of a trade area analysis. Under trade area delineation, r e a l t o r s could record data about the street network and competing shopping areas on a marketing map. To describe population and income character-i s t i c s , r e a l t o r s could i d e n t i f y growth trends and segment the population according to various demographic variables by conducting consumer surveys or using information from S t a t i s t i c s Canada. To gain further insight into t h e i r practices of trade area analysis, r e a l t o r s were asked how often they used items related to each of the four major steps of a trade area analysis. Table-; 5.9 shows that items used for evaluating the merchandising value of a s i t e were the most popular followed by items for delineating a trade area and describing 115 population and income characteristics.. Items related to sales forecasting techniques were the least frequently used of a l l the items. These findings are consistent with e a r l i e r observations concerning the respondents omission of steps to develop t h e i r analyses. I t was then noted that steps l i s t e d by real t o r s concentrated on evaluating the merchandising value of a s i t e with l i t t l e or no attention given to other trade:; area components. Realtors may upgrade t h e i r practices of trade area analysis by learning that items related to trade area delineation, population and income c h a r a c t e r i s t i c s and sales forecasting techniques are i n t e g r a l parts of a trade area analysis. If these items are not considered, the r e s u l t i n g analysis w i l l be s u p e r f i c i a l and of l i t t l e use as a marketing a i d . By reviewing chapter three of t h i s study, realt o r s w i l l receive an introduction to the various items and techniques associated with each of the four major steps. S t a t i s t i c a l Data and Data Sources Several items that are e s s e n t i a l for developing a trade area analysis require the gathering of s t a t i s t i c a l data. For example, items such as population, income, and household expenditure patterns cannot be adequately analysed without using related s t a t i s t i c a l data. S i m i l a r l y , sales fore-casting techniques are also based on s t a t i s t i c a l data. Yet, table 5.11 shows that half of the real t o r s i n the study 116 seldom or never used s t a t i s t i c a l data. Looking at the data sources i n table 5.12 that were l i s t e d by respondents finds that 2 3 percent named S t a t i s t i c s Canada, 10.3 percent named Central Mortgage and Housing, 5.1 percent named the Greater Vancouver Regional D i s t r i c t and 2.3 percent mentioned Tetrad. No r e a l t o r indicated that he used consumer surveys or marketing maps as data sources. Most of the other data sources named by realtors contain data that i s too general for the purpose of de-veloping a trade area analysis. For example, the most popular data source, Real Estate Trends, (published by the Vancouver Real Estate Board) contains only aggregated data about Vancouver. Its purpose i s to present a capsule summary of market, demographic and other trends that have occurred i n Vancouver over the past year; i t i s not an adequate data source that can be used for the purpose of analysing a s p e c i f i c trade area. S i m i l a r l y , publications and data sources such as Teela, the Chamber of Commerce, the assess-ment role and previous sales l i s t i n g s , a l l contain l i t t l e or no data of use for a trade area analysis. These findings point to a serious deficiency i n the respondents'use of s t a t i s t i c a l data and related data sources. This deficiency i s pa r t l y explained by the respondents' omission of major trade area steps requiring the use of s t a t i s t i c a l data. By devoting l i t t l e or no attention to population and income c h a r a c t e r i s t i c s or sales forecasting techniques, these realtors did not have a reason for using 117 s t a t i s t i c a l data. Therefore, an improvement i n the realto r s use of s t a t i s t i c a l data should r e s u l t from expanding the scope of t h e i r analyses 6.3 Use of Trade Area Analysis as a Marketing Aid A number of survey questions examined the purpose of the realtor's trade area analysis. For example, respondents who prepared written analyses were asked to state t h e i r basis for deciding when to prepare them. T h i r t y - s i x percent of these realtors f a i l e d to give a basis for t h e i r decision. As shown i n table 5.7, most of the other r e a l t o r s l i s t e d such reasons as out of town buyer, serious buyer, corporate c l i e n t and c l i e n t request. Only 25 percent of these respondents stated that they prepared written analyses for use as a sales t o o l . The general lack of an adequate basis for preparing written analyses suggests that most re a l t o r s are unaware of the potential benefits that can be obtained by using t h e i r analysis as a marketing t o o l . As alluded to e a r l i e r , t h i s condition helps to explain why most realto r s are devoting l i t t l e or no attention to preparing t h e i r analyses. The poten t i a l marketing benefits that can be obtained from a trade area analysis are best discussed i n connection with the realtor's primary functions as an information agent and market intermediary. 118 Determining value One of the primary functions performed by real t o r s i s determining the asking price of properties they l i s t and a s s i s t i n g i n negotiations that lead to a transaction p r i c e . Table 5.5 indicates that 75 percent of the real t o r s i n the study determined the asking prices of properties they l i s t e d by themselves or i n conjunction with the owner. Other r e s u l t s , however, suggest that real t o r s are not performing t h i s marketing function with s u f f i c i e n t depth of analysis. For example, a l l of the realtors (10.9 percent of the sample) who never consider trade area (location) stated that they determined the asking price of properties they l i s t e d . Also related to valuation, table 5.4 shows that over 39 percent of the real t o r s f a i l e d to acknowledge that trade area (location) i s a major factor influencing the value of business/commercial property. In addition, over 76 percent of the sample indicated that they never had forecasted increases or decreases i n the value of t h e i r l i s t i n g s for c l i e n t s or customers. These findings indicate a major shortcoming i n the procedure most realto r s use to determine value and therefore asking price since l i t e r a t u r e concerned with valuation has established the key role of trade area (location) i n setting a property's value. For example, realtors who overlook trade area (location) and concentrate only on f i n a n c i a l factors to determine value and asking price are making faulty assumptions. Their 119 assumptions are faulty since they are using a s t a t i c rather than dynamic approach for estimating value. A s t a t i c approach presents value as i t i s at a given point i n time; i t does not consider r i s k s attached to a property's present or expected income stream that may cause t h i s stream to change i n the future. To reduce this uncertainty thereby obtaining a more accurate assessment of value, trade area (location) information i s gathered. From t h i s information, realtors could i d e n t i f y trends such as population growth or changing income l e v e l s . A knowledge of these types of trends enables the r e a l t o r to evaluate-, the future productivity of a property i n terms of i t s sales volume p o t e n t i a l . By evaluating the future productivity of a property i n t h i s manner, the r e a l t o r w i l l be able to forecast increases or decreases i n value thereby obtaining a more accurate assessment of present value. A d d i t i o n a l l y , he w i l l benefit by having the data at hand, so s e l l e r s or buyers can see the basis for his assumptions. Information from a trade area analysis can also be used to negotiate rental rates. Using sales forecasting techniques, realtors can i d e n t i f y the most b e n e f i c i a l use(s) for a s i t e with respect to t h e i r sales volume p o t e n t i a l . I f a state of understoring exists for a p a r t i c u l a r use, then sales per square foot w i l l be above average r e s u l t i n g i n higher than normal p r o f i t s for the p a r t i c u l a r use. Based on t h i s trade area data, a space supplier could negotiate to receive a percentage share, of t h i s p r o f i t . 120 Locating l i s t i n g s and prospects A second primary function of realtors i s to locate buyers and s e l l e r s . The survey asked r e a l t o r s to l i s t t h e i r three most e f f e c t i v e ways to locate: (1) listings,- and (2) prospects. Realtors named methods such as phoning, -mass mail-outs, knocking on doors, signs, newspaper*:'ad-v e r t i s i n g , and s o c i a l gatherings. From the number and type of responses given by each r e a l t o r , i t i s s i g n i f i c a n t to note that over 31 percent of the sample did not name more thanttwo ways for e i t h e r . l o c a t i n g l i s t i n g s or prospects while only 4 percent considered a trade area analysis as an e f f e c t i v e method for locating prospects. By r e f i n i n g t h e i r practices of trade area (location) analysis, r e a l t o r s should be able to use t h e i r analyses as e f f e c t i v e ways to locate l i s t i n g s and prospects. For example, a trade area analysis can be used to i d e n t i f y properties that have development or redevelopment p o t e n t i a l . If an area i s understored, property owners could be contacted to determine i f they wished to develop vacant land or redevelop older improvements. During these meetings, the r e a l t o r would state his findings and support the same with substantiating data. The outcome may be instructions to s e l l or lease, depending on the owner's investment objectives. S i m i l a r l y , a r e a l t o r who i s asked to lease/sell r e t a i l 121 space, can use information from a trade area analysis to i d e n t i f y prospects. His trade area analysis w i l l a s s i s t him to i d e n t i f y uses which p o t e n t i a l l y could derive maximum p r o f i t s i n the space compared to other uses. These uses are prospects that the r e a l t o r can contact. In t h i s manner, the r e a l t o r can reduce his search time for a buyer/user by transferring his concentration of s e l l i n g e f f o r t s from the general market to s p e c i f i c buyer/users. This reduction i n search time w i l l enable the broker to improve his producti-v i t y by allowing him more time to spend on other projects. In addition, his successful sales/leasing record may!, cause more suppliers to demand his services. 6.4 Conclusion and; Recommendations for Further Research In conclusion, t h i s study has drawn' attention to short-comings i n the trade area analyses being developed by r e a l t o r s . As i n i t i a l steps towards improving these d e f i c i e n c i e s , two recommendations are offered. F i r s t , r e a l estate marketing l i t e r a t u r e should d i r e c t more attention to including pro-cedures that a" broker could follow to develop a trade area analysis rather than simple statements such as "trade area i s important" or "trade area should be considered." These procedures would.encompass a l l of the major trade area components from trade area delineation through to sales forecasting techniques. Second, realt o r s could increase t h e i r use of r e a l estate 122 l i t e r a t u r e . The survey found that no r e a l t o r was able to recommend a book on commercial r e a l estate and that few respondents or t h e i r o f f i c e s subscribed to r e a l estate magazines or journals. In a f i e l d as technical as r e a l estate, reading related l i t e r a t u r e could a s s i s t professional^realtors to improve t h e i r a n a l y t i c a l s k i l l s . Through reading, real t o r s could become increasingly aware of the importance of trade area, how to develop a compre-hensive trade area analysis and how t h e i r analysis could be used as a marketing a i d . This increased awareness may, i n turn, help them to o f f e r a higher l e v e l of professional services to t h e i r c l i e n t s and customers. The results of t h i s study also suggest a need for further research c l a r i f i c a t i o n of r e a l t o r marketing practices. Here some important questions remain. To what extent do investor/users conduct t h e i r own trade area (location) research? Do e x i s t i n g cost/benefit relationships preclude an increased l e v e l o f . r e a l t o r services with respect to trade area (location) analysis? What i s the l e v e l of r e a l t o r services for other types of property? Answers to these questions w i l l not be easy to f i n d , and some of the questions seem to open;up e n t i r e l y new f i e l d s of inve s t i g a t i o n . It i s apparent, however, that such research may have potential significance i n developing i n s t r u c t i o n a l curriculum for realtors and, perhaps, setting.higher professional standards. 123 SELECTED BIBLIOGRAPHY Allan John B. Commercial and Industrial Real Estate. Los Angeles, C a l i f o r n i a : CAR, 1973. Allan John B. S e l l i n g Income Property Successfully. Los Angeles, C a l i f o r n i a : CAR, 1976. Applebaum W. "Measuring R e t a i l Market Penetration for a Discount Food Supermarket: A Case Study." Journal of  Retail i n g 41 (Summer;, 1965): 1-15. . "Methods of Determining Store Trade Areas, Market Penetration, and Potential Sales." Journal  of Marketing Research 3 (May 1966): 127-141. . "Guidelines for a Store Location Strategy." Journal of Marketing 30 (October 1966): 42-45. Applebaum W. and Cohen S. "Evaluating Store Sites and Determining Store Rents." Economic Geography 36 (January 1960): 1-35. Applebaum W. and Cohen S. "The Dynamics of Store Trading Areas and Market Equilibrium." Annals of Association  of American Geographers 51 (March 1961): 73-101. Applebaum W. and Cohen S. "Trading Area Networks and Problems of Store Saturation." Journal of R e t a i l ing 37 ( F a l l 1961): 32-43. Applebaum W. and Cohen S. "Store Trading Areas i n a Changing Market." Journal of Retai l i n g 37 ( F a l l 1961): 14-25. Arthur David. "Real Estate Investment Analysis: Current Practice." Working Paper No. 1, Urban Land Economics Publications, University of B r i t i s h Columbia, 1977. Beaton William. Real Estate Investment. Englewood C l i f f s , New Jersey: Prentice-Hall Inc., 1961. Becker B. Economic Aspects of Real Estate Brokerage:  U t i l i z a t i o n , Performance, Structure and Price Competition. Berkeley, CA..: The Centre for Real Estate and Urban Economics,»University of C a l i f o r n i a . Berry B.J. Geography of Market Centres and R e t a i l D i s t r i b u t i o n . Englewood C l i f f s , New Jersey: Prentice-H a l l Inc., 1967. 124" Berry B.J. and Garrison W.L. "The Functional Basis of the Central Place Hierarchy." Economic Geography 34 (April 1958): 145-154. Birnkrant Micheal. "Shopping Centre F e a s i b i l i t y Study: Its Methods and Techniques." Journal of Property  Management 35 (November-December 1970): 272-279. Brunner J. and Mason J. "The Influence of Driving Time Upon Shopping Centre Preference." Journal of Marketing 32 (April 1968): 57-61. Busch P. and Wilson D. "An Experimental Analysis of a Salesman's Expert and Referent Bases of Social Power in the Buyer-Seller Dyad." Journal of Marketing  Research 13 (February 1976): 3-11. Case F. The Process of Real Estate Investment Analysis. Berkeley, C.A.: Graduate School of Management, University of C a l i f o r n i a , 1976. C h r i s t a l l e r W. Central Places i n Southern Germany. Englewood C l i f f s , New Jersey: Prentice-Hall Inc., 1966. Clawson J. " F i t t i n g Branch Locations, Performance Standards and Marketing Strategies to Local Conditions. Journal  of Marketing 38 (January 1974) : 8-14. Connett Russell and Sawatzky Jasper. The Public image of  the Real Estate Agent. Sacramento"^ C.A. : Division of Real Estate, State of C a l i f o r n i a , 1963. Converse P.D. "New Laws of Reta i l Gravitation." Journal of  Marketing 14 (October 1949): 379-384. Cooper James R. and Gunterman Karl L. Real Estate and Urban Land Analysis. Lexington, Mass.: D.C. Heath and Co., 1974. Cox W. and Cooke E. "Other Dimensions Involved in Shopping Centre Preference." Journal of Marketing 34 ' (October 1970) : 12-17. Davidson W. and Doddy A. R e t a i l i n g Management. New York: The Ronald Press Co., 19.66. Dilmore G. The New Approach to Real Estate Appraising. Englewood C l i f f s , New Jersey: Prentice-Hall Inc., 1971. Dorfman Robert. Prices and Markets. 2nd ed., Englewood C l i f f s , New Jersey: Prentice-Hall Inc., 1972. • 125 Downing Paul B. "Factors Affecting Commercial Land Values: An Empirical Study of Milwaukee, Wisconsin." Land  Economics 49 (February 1973) : 44-56 . Eldred G. and Zerbst R. "Consumer Research and the Real Estate Appraiser." The Appraisal Journal 44 (October 1976): 510-522. Epstein J. "Geography and the Business.of R e t a i l Site Evaluation and Selection." Economic Geography 47 (November 1971): 192-199. Girard Weldon. How to Make Big Money S e l l i n g Commerical and Industrial Property. Englewood C l i f f s , New Jersey: •' Prentice-Hall Inc., 1977. Greenberg C. How to Become a Successful Store Leasing Broker. Englewood C l i f f s , New Jersey: Prentice-Hall Inc., 1971. Gross Sheldon A. "A Model for E f f e c t i v e Site Selection." Real Estate Today, May-June 1975, pp. 56-63. Gruen J. and Gruen C. "A Behavioral Approach to Determining Optimum Location for the R e t a i l Firm. Land Economics 43 (August 1967): 320-327. Hanford L. Analysis and Management of Investment Property. 3rd ed., Chicago: Institute of Real Estate Management of the National Association of Real Estate Boards, 1971. Harrison A.J. Economic and Land Use Planning. New York: St. Martin's Press Inc., 1977. Herzfeld Herbert. "Quo Vadis, Broker, What Is Your Role?" Real Estate Review 2 CSummer 1972): 24-30. Hoagland H. Real Estate P r i n c i p l e s . 3rd ed., New York: McGraw-Hill Book Co., 1955. Houston M.J. et a l . " Real Estate Agents as a Source of Information for Home Buyers." The Journal of Consumer  A f f a i r s 11 (Summer 1977): 111-122. Huff D. Determination' of(ii^/tra-Urbari R e t a i l Trade Areas. Berkeley, C.A.: Graduate School of Business Administration, University of C a l i f o r n i a , 1962. . "Defining and Estimating a Trade Area." Journal of Marketing 28 (July 1964) : 34-38. 126' " A Programmed Solution for Approximating an Optimum R e t a i l Location." Land Economics XLII (August 1966) 293-303. Huff D. and B a t s e i l R. "Delimiting the Areal Extent of a Market Area." Journal of Marketing Research XIV (November 197 7): 581-585. Imus H. "Projecting Sales Potentials for Department Stores i n Regional Shopping Centres." Economic Geography 37 (January 1961): 33-41. Kane Bernard. A Systematic Guide to Supermarket Location  Analysis. New York: F a i r c h i l d Publications, 1966. Kaplan Jay M. "Transaction Tips: Putting Together a Successful Real Estate Package." Real Estate Today, March 1979, pp. 15-17. Kornblau Curt ed. Guide To Store Location Research With An Emphasis on Supermarkets. Reading, Mass.: Addison-Wesley Publishing Co., 1968. Lee Y. and Koutsopoulos K. "A Locational Analysis of Convenience Food Stores i n Metropolitan Denver." The  Annals of Regional Science 10 (March 1976) : 104-117 Lewison D. and Zerbst R. "Trade Area Mix and Intensity Concepts for Evaluating R e t a i l Site Alternatives." The Annals of Regional Science 11 (July 1977) : 86-96. Losch A. The Economics of Location. New Haven, Conn.: Yale University Press, 1954. Lowden James A. "Valuation of Shopping Centres." The  Appraisal Journal 35 (April 1967) : 233-243. Lyle Jack and Burns Leland. Communi.cation Problems of the  Real Estate Industry — The image of the Real Estate  Agent. Los Angeles: Graduate School of Business Admin-i s t r a t i o n , University of C a l i f o r n i a , 1967. Mackay D. "Spatial Measurement of R e t a i l Store Demand." Journal of Marketing Research 10 (November 197 3): 447-453. Maisel Sherman J. and Roulac Stephen E. Real Estate  Investment and Finance New York: McGraw-Hill Book Co., 197 6. Markin R.J. Consumer Behavior. New York: Macmillan Publishing Co. Inc., 1974. Mason J. and Moore C. "An Empirical Reappraisal of Behavior-i s t i c Assumptions i n Trading Area Studies." Journal of R e t a i l i n g 46 " (Winter 1970-71) : 31-38. Mayer Kurt and Goldstein Sidney. The F i r s t Two Years: Problems  of Small Business Growth and Survival. Washington D.C: Dept of Small Business Administration, 1961. Mertes J. "A R e t a i l Structural Theory for Site Analysis." Journal of Retai l i n g 40 (Summer 1964) : 19-30. Mertes J. "Site Opportunities for the Small Retailer." In Retailing Concepts, Edited by J. Markin. New York: The Macmillan Publishing Co., 1971, pp. 193-197. Nelson Richard. The Selection of R e t a i l Locations. New York: F.W. Dodge Corporation, 195 8. Nie Norman H. et a l . SPSS: S t a t i s t i c a l Package for the  Social Sciences. 2nd ed., New York: McGraw-Hill Book Co., 19 75. Rams Edwin M., ed. Analysis and Valuation of R e t a i l Locations. Reston, V i r g i n i a : Reston Publishing Co. Inc., 1976. Revzan D. A Geography of Marketing: Integrative Statement Berkeley, CA.: University of C a l i f o r n i a Press, 1968. Rotenberg Ronald and Hatton Beth. "Sources of Marketing Information i n Canada." The Canadian Marketer, Spring:1974, pp. 35-41 Sands S. "Improvising the Accuracy of Pedestrian T r a f f i c Counts." Journal of R e t a i l i n g 37(Summer 1961) : 33-39. Schneider J.B. "Reta i l Competition Patterns i n a Metro-pol i t a n Area." Journal of R e t a i l i n g 45 (Winter 1969-1970) : 67-74. Schreiber Arthur F. et a l . Economics of Urban Problems New York: Houghton M i f f l i n Co., 1971. Scott P. Geography and R e t a i l i n g . 3rd ed..London, U.K.: Hutchinson and Co. Ltd., 1973. Shenkel Dr. William. "Refining Valuation Estimates with Census Data. The Real Estate Appraiser 39 (September -October 1973): 11-20. •128 Simons P.L. "The Shape of Suburban R e t a i l Market Areas: Implications from a Literature Review." Journal of  Retail i n g 49 ( Winter 1973-1974): 65-79. S t a t i s t i c s Canada. Urban Family Expenditures - Catalogue  62-547. Ottawa: S t a t i s t i c s Canada, 1979. . R e t a i l Chain Stores - Catalogue 6 3-210. Ottawa: S t a t i s t i c s Canada, 1979. . Income D i s t r i b u t i o n by Size i n Canada -Catalogue 13-207. Ottawa: S t a t i s t i c s Canada, 1978. . Census Tracts: Population and Housing C h a r a c t e r i s t i c s -Catalogue 95-82 8. Ottawa: S t a t i s t i c s Canada, 1978. _. 1978-1979 S t a t i s t i c s Canada Catalogue. Ottawa: S t a t i s t i c s Canada, 1979. . How a Retailer Can P r o f i t from Facts. Ottawa: S t a t i s t i c s Canada, 1978. Sevango Dan. "Direct Market Data Comparison Approach for Investment and Commercial Properties: Be Careful." The Real Estate Appraiser 40 (May-June 1974) :.13-16. Thompson Bryan. Intraurban R e t a i l Structured The Supermarket Sector." Journal "o f" Rfe t i l l i n g 45" "(Fall 1969 )•: ""69-80" Thompson D. "New Concept: Subjective Distance." Journal  of Reta i l i n g 39 (Spring 1963) : 1-6. Thompson D. "Future Directions i n R e t a i l Trade Area Research." Economic -Geography 42 (January 1966) : 1-18". Tucker Grady. "Site Selection for Suburban Shopping Centres." Real Estate Review 4 (Winter 1975): 70-76." Urban Land I n s t i t u t e . Parking Requirements for Shopping  Centres. Washington, D.D.: Urban Land In s t i t u t e (Technical B u l l e t i n No. 53), 1965. Walstein Smith J r . "R e t a i l Locations and Consumer Sp a t i a l Behaviour." The Real Estate Appraiser 32 (November 1966): 21-27. Watkins E. and Vandemark V. "Customer Information Strengthens '" Market Information Systems." Journal of Re t a i l i n g 47 (Spring 1971): 49-54. Weal W. "Measuring the Customer's Image of a Department Store." Journal of Retail i n g 37 (Summer 1961) : 40-48. Weimer A. and Hoyt H. Pri n c i p l e s of Real Estate. 4ed. New York: The Ronald Press Co., 1960. Zaloudek Robert F. " P r a c t i c a l Location Analysis i n Market Areas." The Re a l Estate Appraiser 38 (May-June 1972): 47-50. 132 SURVEY OF PROFESSIONAL REAL ESTATE AGENTS Page 1 of 5 SECTION I (This section helps us learn about your listing and prospecting methods for business/ commercial properties.) J. About what percent of the properties you work are exclusive or exclusive right to sell listings? % 2. In order of importance, please describe your three most effective ways to locate: I (1) listings and (2) prospects. L i s t i n g s 1/ 2/ 3/ Prospects 1/ 2/ ; ; 3/ ?. Please estimate what percent of your prospects result from: a. Newspaper a d v e r t i s i n g % b. On premise signs .... % SECTION II (This section will assist us in determining when location analyses for business/ corrmercial properties are helpful to you.) 1. If you never consider location (the surrounding area) in your marketing of business/commer-cial properties please check here and skip to SECTION III. 2. When you prepare location analyses, do you normally limit the analyses to locational items of general importance to business/commercial properties rather than develop analyses for specific uses, e.g., fast food, hardware, drug store, etc.? Please comment Yes No . 3. Do you use location analysis to help you identify specific propsects for individual properties? Yes No 1 3 3 Page 2 of 5 If yes, please outline the steps that you follow in your location analysis that lead to the identification of specific prospects. Do you use a computer (in-house or outside) to assist in your location analysis? Yes No If yes, how does the computer assist you? Do you use statistical data to assist in your location analysis? Always Often z Seldom ' Never If you use statistical data, please tell us as specifically as possible the reports and publications that contain these data. Do you prepare a written analysis of location (as opposed to making mental notes only) to aid in your sales efforts? Always Often Seldom • Never If you rely exclusively on mental notes in your location analyses, please list below those items you normally consider and then skip to SECTION III. If you do at times prepare written analyses please proceed to questions 11 and 12. 11. On what basis do you decide to prepare a written location analysis? 134 Page 3 of 5 Geographers often evaluate retail locations by considering many of the items listed below. Please indicate whether you find it useful to provide any of these items in your written lo-cation analyses by using the following code. Code Always Sometimes = A = S Infrequently or never = leave space blank a. b. c. d. e. f. g-h. J-k. 1. m. On-site parking Off-site parking Time/distance contours Neighborhood appearance Pedestrian t r a f f i c count Vehicular t r a f f i c count Absorption rate Definition/delineation of trade area Listing existing/proposed com-peting shopping areas Conducting consumer surveys Listing competing stores in area . Changing land uses in area Origin/destination of local t r a f f i c n. o. P-q-r. t. u. v. w. X. Accessibility of site V i s i b i l i t y of site List of neighboring uses Vacancy rates in area Street location, i.e., corner, middle, etc Type of street, i.e., main, side, etc Population of trade area Income levels in trade area ... Household expenditure patterns in trade area Economic outlook of trade area Sales forecast for present or potential users of site Rate of trade area population growth SECTION III (This section deals with pricing and financial returns.) 1. Who usually determines the asking price of properties that you list? Please comment a. Owner b. Fee appraiser.... c. In-house appraiser d. Myself \ 2. What factors do you believe are the major influences on value for business/commercial properties? 135-Page 4 of 5 3. In the last two years approximately how many properties zoned business/commercial (developed and undeveloped) have you sold in each of the following price ranges? Developed Undeveloped a. Less than $75,000 b. $75,000 to $149,999 c. $150,000 to $499,999 d. $500,000 to $1,000,000 e. Greater than $1,000,000 4. If you sometimes find it useful to forecast sales value potential for clients of your business/commercial listings, please outline the steps that you use to make the forecast. SECTION IV (This next to last section concerns your use of real estate publications.) 1. Are real estate books and magazines useful to you as a practitioner? 2. What real estate magazines or journals do you or your office subscribe to? 3. Can you tell us the titles and/or authors of books on commercial real estate that you could recommend to other agents or students? 4. Do you think there is a need for a real estate magazine featuring Canadian content? 136 Page 5 of S SECTION V (Statistical data to help us analyse our survey.) 1. What is your age? 2. What is your approximate gross annual income for I.C.I, work? $ 3. How many years have you been working with I.C.I, property? 4. What is your highest level of formal education? (please check) a. Under grade 6 b. Grade 6-12 c. Secondary school graduate . d. Attended post-secondary ... e. Post-secondary graduate ... 5. Approximately what percentage of your annual I.C.I, earnings are accounted for by proper-ties (developed/undeveloped) with the following highest and best uses? a. Multi-residential , % b. % c. % d. % e. Other % Please specify 6. Please list any professional designation(s) you have. Thank you for taking the time to assist us. The information you have provided will be very helpful and will be kept in the strictest confidence. If you would like a copy of the results oj this study, enclose your business card in the return envelope or return it separately to me. Thank you. Gary W. Eldred Division of Urban Land Economics University of British Columbia Vancouver, B.C. 

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