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

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SURVEY  OF T H E R E A L T O R S U S E OF  TRADE A R E A  (LOCATION)  ANALYSIS  by ANDRE V I N C E N T B.Ed.,  THESIS  The U n i v e r s i t y  SUBMITTED  THE  BEAUREGARD of  Calgary,  IN PARTIAL  REQUIREMENTS  1972  FULFILMENT 0  F O R T H E - D E G R E E OF  MASTER OF S C I E N C E i n BUSINESS ADMINISTRATION in  THE  F A C U L T Y OF GRADUATE  Department  We  accept the  THE  of  this  Urban Land  thesis  required  UNIVERSITY  as  Economics  conforming  to  standard  OF B R I T I S H  July  ©  STUDIES  COLUMBIA  1979  Andre V i n c e n t  Beauregard,  1979  DE-6  In presenting t h i s thesis in p a r t i a l f u l f i l m e n t of the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y a v a i l a b l e for reference and study. I f u r t h e r agree that permission for extensive copying of t h i s thesis f o r s c h o l a r l y purposes may be granted by the Head of my Department or by his representatives.  It i s understood that copying or p u b l i c a t i o n  of t h i s thesis f o r f i n a n c i a l gain s h a l l not be allowed without my w r i t t e n permission.  Department of  Urban Land Economics  The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5  BP  75-51  I E  ABSTRACT  This  study  surveys  use  of trade area  and  selling)  definition of  real  and As  in  space.  of the b r o k e r  as  trade  the p r i m a r y  an  area  as  to i s o l a t e  of r e t a i l  the b a s i s f o r the  study  trade  importance o f trade area  (location) data  these  q u e s t i o n remains about the information realtors corporate  real  investment  and  use(s)  two  and  noting  the  importance  t h a t c o u l d be  analysis.  B a s e d on  g a i n an  insight  into  these the  the  together  strive  (2)  determining  to  the  for identifying  a  retail  i t s value.  F o r example, one  remarked t h a t out  area, o f f e r s  followed to develop observations, this realtors  few  investment  estate practitioner  of trade  procedures  should  r e c e i v e d from b r o k e r s ,  In a d d i t i o n , r e a l  processes.  points that  c u s t o m e r s and  s u f f i c i e n t market data to allow prudent making.  type  some  extent of trade area (location)  e s t a t e b u y e r has he  the purpose,  p o i n t s are w e l l r e c o g n i z e d ,  are p r o c e s s i n g .  proposals  a l l facets  (location) analysis  (1) b r o k e r s  clients  even though  broad  i s to determine  area  e m p h a s i z e s two  become a d v i s o r s t o t h e i r  Yet,  (leasing  space.  study:  p r o p e r t y ' s most b e n e f i c i a l  their  the  ( l o c a t i o n ) i n f o r m a t i o n he  practice  Real e s t a t e l i t e r a t u r e  study,  i n f o r m a t i o n a g e n t on  o b j e c t i v e of the  to which r e a l t o r s  t h e i r marketing  serve  Throughout the  e s t a t e i s narrowed i n o r d e r  such,  e s t a t e a g e n t s on  ( l o c a t i o n ) a n a l y s i s i n the marketing  of r e t a i l  scope o f the  extent  commercial r e a l  few  large  o f t h e many contain decision-  literature,  while  i f any  a trade study  area  attempts  p r a c t i c e s of trade  to  area a n a l y s i s  To a c c o m p l i s h reviewed  this  to identify  analysis,  and d a t a  o b j e c t i v e , trade area  trade  sources.  area  characteristics,  From t h i s  and u s e d t o s u r v e y  practices  analysis.  (1) t h e type analyses,  o f analyses  Data  developed,  developed literature.  literature that  realtors  on  of  their  from t h e s u r v e y  (2) the content  data  a d i s c r e p a n c y between t h e t r a d e a r e a  area  techniques  show:  of the  and ( 3 ) t h e p u r p o s e o f t h e 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  being  was  information a set of  q u e s t i o n s was d e v e l o p e d o f trade area  literature  i n d i c a t e s that there i s  analyses  that are c u r r e n t l y  and t h e " s t a t e o f t h e a r t " as e v i d e n c e d Recommendations  are that r e a l  estate  c o u l d d e v o t e more a t t e n t i o n t o i n c l u d i n g  r e a l t o r s might f o l l o w to^develop  that realtors  could increase t h e i r  a trade  use o f r e a l  by t r a d e practitioner  procedures  a r e a a n a l y s i s and estate  literature.  iv  TABLE OF CONTENTS PREFACE  Paqe  ABSTRACT TABLE OF CONTENTS L I S T OF TABLES L I S T OF FIGURES.. . ACKNOWLEDGMENT  •  ;  v  i i iv i i i i i ix v  CHAPTER 1  INTRODUCTION 1.1 1.2 1.3 1.4 1.5 1.6 1.7  Introduction Context o f Problem Statement o f t h e Problem Review o f P r i o r L i t e r a t u r e S i g n i f i c a n c e o f t h e Study O r g a n i z a t i o n o f t h e Study Footnotes  .  . . . . . . . .  2. CONTRIBUTIONS TOWARDS THE DEVELOPMENT OF TRADE AREA ANALYSIS 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3.  Introduction Trade Area Concept C e n t r a l P l a c e Theory . . . . : General review 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 Law o f R e t a i l G r a v i t a t i o n General review 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 S t u d i e s o f Consumer B e h a v i o r General review 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 M a r k e t i n g Geography General review 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 Footnotes  1 2 2 6 7 9 11 13 15  . . . .  TRADE AREA ANALYSIS: APPLICATION 3.1 Introduction 3.2 General Procedure f o r A n a l y s i n g a Trade Area 3.3 S t e p One - T r a d e A r e a D e l i n e a t i o n . . . R e t a i l l o c a t i o n tvpe o f the s u b j e c t site "". D a t a s o u r c e s and t e c h n i q u e s . . . Influence of a c c e s s i b i l i t y D a t a s o u r c e s and t e c h n i q u e s . . . I n f l u e n c e o f competing shopping areas and e s t i m a t i o n o f t r a d e a r e a D a t a s o u r c e s and t e c h n i q u e s . . .  16 . 16 17 17 . 21 22, 22 . 26 27 27 .28 29 29 . 30 32 34 35 35 . 36 37 . 40 40 .43 43 . 44  V  Chapter  Page 3.4  3.5  3.6  3.7 4  METHODOLOGY 4.1 4.2  4.3 4.4 4.5  4.6 5.  S t e p 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 Population trends " D a t a s o u r c e s and t e c h n i q u e s . . . 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 - D a t a s o u r c e s and t e c h n i q u e s Step Three - Merchandising Value o f t h e Site T r a f f i c flow Data s o u r c e s and t e c h n i q u e s . . . Business environment Data s o u r c e s and t e c h n i q u e s . . . S t e p F o u r - Use o f S a l e F o r e c a s t i n g T e c h n i q u e s f o r I d e n t i f y i n g t h e Most B e n e f i c i a l Uses Determining the value o f a v a i l a b l e business C a l c u l a t i o n o f the a t t a i n a b l e sales volume p o t e n t i a l u s i n g t h e " r e s i d u a l " technique C a l c u l a t i o n o f the attainable sales volume p o t e n t i a l u s i n g t h e "market share" approach Footnotes . . .  . .  53 54 55 56 58 5961 63 66 68 72  Introduction 73 D e s c r i p t i o n o f the Questionnaire 73 T y p e o f t r a d e d r e a a n a l y s e s d e v e l o p e d - . ' 74 Purpose o f trade a r e a analyses . . . . 74 Scope o f t r a d e a r e a a n a l y s e s 75 Use o f r e a l e s t a t e l i t e r a t u r e 76' Survey A d m i n i s t r a t i o n 76 Data A n a l y s i s . . . . . . . . . . . . . . 77 D e s c r i p t i o n o f Respondents 78 Age and work e x p e r i e n c e w i t h i n d u s t r i a l , c o m m e r c i a l , and i n v e s t m e n t p r o p e r t y . . 78 E d u c a t i o n 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 G r o s s a n n u a l income and p e r c e n t o f income a t t r i b u t e d t o b u s i n e s s / c o m m e r c i a l property . . . . . 81 Business/commercial p r o p e r t i e s sold d u r i n g t h e p a s t two y e a r s and t y p e o f l i s t i n g agreement 82 Footnotes , . 85  RESULTS 5.1  47 47 . 47 . 51' 52  I n t r o d u c t i o n and Summary o f t h e M a i n Findings  86 87  vi Page  Chapter  5.2  5.3  5.4  5.5 6  S e c t i o n 1 - Type o f T r a d e A r e a A n a l y s e s Developed 90 Consideration of trade area (location) i n t h e marketing o f r e t a i l space . . . . 90 Type o f t r a d e a r e a ( l o c a t i o n ) a n a l y s e s • developed: general or f o r s p e c i f i c uses 90 Form o f t r a d e a r e a ( 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 92 S e c t i o n 2 - Purpose o f Trade Area Analyses:-; . . 93 T r a d e a r e a a n a l y s i s as a v a l u e determinant 93 T r a d e a r e a a n a l y s i s as a m a r k e t i n g tool f o r locating l i s t i n g s or prospects. 9 5 S e c t i o n 3 - Scope o f Trade A r e a Analyses Developed . 98 Items c o n s i d e r e d by r e s p o n d e n t s r e l y i n g e x c l u s i v e l y on m e n t a l n o t e s . . 98 Items c o n s i d e r e d by r e s p o n d e n t s who do w r i t t e n a n a l y s e s 99 Steps used t o i d e n t i f y s p e c i f i c prospects .' 102 Use o f s t a t i s t i c a l d a t a and r e l a t e d sources 104 S e c t i o n 4 - Use o f R e a l E s t a t e Literature 105  DISCUSSION AND 6.1 6.2  6.3  6.4  CONCLUSION  Introduction P r e p a r a t i o n o f Trade Area Analyses . . . . Form o f a n a l y s i s : w r i t t e n o r m e n t a l notes Type o f a n a l y s i s : g e n e r a l o r f o r s p e c i f i c uses . Steps used t o develop a n a l y s i s Trade area c h a r a c t e r i s t i c s S t a t i s t i c a l d a t a and d a t a s o u r c e s / . . Use o f T r a d e A r e a A n a l y s i s as a Marketing A i d D e t e r m i n i n g "value . . . . . . . . . . . L o c a t i n g l i s t i n g s and p r o s p e c t s . . . . C o n c l u s i o n and Recommendations f o r Further Research . . .  107 108 109 110 I l l 113 114 115 117 118'. 120 121  SELECTED BIBLIOGRAPHY APPENDIX  flSO^  vii  L I S T OF  TABLES  Number  Page  1.1  Checklist  3.1  Classification  4.1  Age  4.2  Y e a r s worked w i t h I . C . I . P r o p e r t y . . . .  79  4.3  Level of Education  80  4.4  Gross Annual  . . . .  81  4.5  Mean P e r c e n t o f A n n u a l Income A c c o u n t e d 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  Business/Commercial P r o p e r t i e s Sold R e s p o n d e n t s Over a Two Y e a r P e r i o d  83  4.6 4.7  of Property C h a r a c t e r i s t i c s  o f R e t a i l L o c a t i o n Types  Distribution  C o n s i d e r a t i o n o f Trade Area  5.2  Type o f T r a d e A r e a Developed  5.4 5.5 5.6 5.7 5.8  5.9  .  38 78  Income i n T h o u s a n d s  Percentage of E x c l u s i v e L i s t i n g s by R e s p o n d e n t s  Frequency Analyses  5•  o f Respondents  5.1  5.3  . .  by . . .  Worked 84  (location).  (location)  .  90  Analyses 90  of W r i t t e n Trade Area  (location) 92  F a c t o r s L i s t e d as M a j o r 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  Who D e t e r m i n e s t h e A s k i n g P r i c e Business/Commercial P r o p e r t i e s  94  of  Use o f T r a d e A r e a ( l o c a t i o n ) A n a l y s i s Identify Prospects B a s i s f o r D e c i d i n g When t o P r e p a r e Written Analysis  to 96  a 97  Trade Area„(location) Items C o n s i d e r e d by R e s p o n d e n t s who R e l y E x c l u s i v e l y on M e n t a l Notes . 1 1  ,;  98  O v e r a l l Rank O r d e r and F r e q u e n c y o f Use o f Items I n c l u d e d i n W r i t t e n T r a d e A r e a ( l o c a t i o n ) A n a l y s e s by M a j o r Components  100  Steps used t o I d e n t i f y S p e c i f i c P r o s p e c t s G r o u p e d Under t h e M a j o r Components o f a Trade A r e a A n a l y s i s  103  5.11  Use  104  5.12  Names o f S t a t i s t i c a l S o u r c e s Frequency of S e l e c t i o n .  5.10  of S t a t i s t i c a l  Data  . and  , „ „ 105  viii  L I S T OF  FIGURES  Number 2.1  Page H i e r a r c h y o f T r a d e C e n t r e s and R e s p e c t i v e Trade Areas . . . .  2.2  Breaking Point  of Trade Area  2.3  Trade Area o f Shopping  3.1  V a n c o u v e r Census T r a c t s  Center  Their  for City  20 . . .  24 26 50  ix  ACKNOWLEDGEMENT  I would Eldred, this  l i k e t o t h a n k my t h e s i s a d v i s o r , P r o f e s s o r  f o r h i s patience  and g u i d i n g  s t u d y c o u l d not-have been  t h a n k t h e members o f t h e I . C . I . Board,  f o r their  cooperation.  c r i t i c i s m , without  completed.  I would  Gary which  also like to  D i v i s i o n , Vancouver Real  Estate  CHAPTER ONE  INTRODUCTION  2 1.1  Introduction  This  study  surveys  the  realtor's  use  of trade  (location)  information i n h i s marketing  properties  ( 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  a m a r k e t i n t e r m e d i a r y who all  f a c e t s of t h e i r  real  been n a r r o w e d t o f o c u s on (location)' analysis. of a r e t a i l population value with  of the  definition  assists  clients  of the b r o k e r and  e s t a t e investment realtor  ( i . e . size  and  decisions  i s essential  i t s most b e n e f i c i a l  the  and  literature  1.2.  practice;  f o r matching a  uses o r d e t e r m i n i n g  and  Context  Real  the  role  of the broker  intermediary  should  serve  and  a d v i s e and  o f the  area,  property  value.  of trade  between  area  broker.  e m p h a s i z e s two  as t h e b a s i s f o r t h i s as  (2)  an the  research:  (1)  property.  for  With r e s p e c t to  stresses that  their clients  the  market  importance of trade area data  estate literature counsel  major p o i n t s  i n f o r m a t i o n a g e n t and  business/commercial  point, real  realm  area  Problem  estate literature  together  first  activities  o f the  that  marketing  between t h e  area  merchandising  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 theory  has  trade  shape o f t r a d e and  as  customers i n  p r a c t i c e s of trade  income c h a r a c t e r i s t i c s  site)  business/commercial  D e t a i l e d i n f o r m a t i o n on  property and  of  area  and  the  realtors  c u s t o m e r s on a l l  3  aspects  of t h e i r  investment  decision.  For example, G i r a r d  states, b e c o m i n g an a d v i s o r and c o u n s e l o r t o y o u r c l i e n t s and c u s t o m e r s i s an a c h i e v e m e n t w h i c h y o u as a commercial ( r e a l e s t a t e ) salesman should s t r i v e t o o b t a i n . . . t h e a r t o f b e c o m i n g an a d v i s o r and c o u n s e l o r i s b e i n g a b l e t o c o n v i n c e t h e b u y e r ^• and s e l l e r t h a t y o u know a l l f a c e t s o f r e a l e s t a t e . Similarly,  Hoagland  mentions,  Few b u y e r s o r s e l l e r s o f p r o p e r t y know i t s v a l u e o r can a c q u i r e t h e f a c i l i t y , i n a s h o r t t i m e , o f l e a r n i n g i t . They must l e a n h e a v i l y upon t h e r e p r e s e n t a t i o n s of the b r o k e r . 2 The area  second major p o i n t i s the v i t a l  (location) information  Maisel  tells  importance of  f o r marketing r e t a i l  trade  property.  realtors,  L o c a t i o n i s of prime importance f o r r e t a i l space . . . t h e key t o t h e a n a l y s i s o f s t o r e s i s t h e f a c t t h a t t h e i r v a l u e depends on t h e volume o f s a l e s t h e y g e n e r a t e . . . s a l e s depend on t h e number o f c u s t o m e r s and t h e i r i n c o m e s . . . 3 and  Allen  claims,  C o m m e r c i a l p r o p e r t y s u c c e e d s o r f a i l s d e p e n d i n g on i t s trading area. You must know t h e a r e a i f you e x p e c t t o have a s u c c e s s f u l s h o w i n g o f a c o m m e r c i a l property. 4 These c l a i m s  are  measured the  i n f l u e n c e of v a r i o u s trade  factors  on  supported  the.value  by  of commercial  show t h a t s u c h c h a r a c t e r i s t i c s accessibility positive  and  a recent e m p i r i c a l study  traffic  i n f l u e n c e on  land.  levels  commercial  (location)  Results  as p o p u l a t i o n ,  of the  income  a l l have a h i g h l y  study  levels,  significant  l a n d v a l u e s . ~*  I n a d d i t i o n t o u n d e r l i n i n g t h e key (location)'information  area  that  f o r determining  role value,  of trade the  area  literature  4  mentions t h a t t h i s marketing Girard  i n f o r m a t i o n can be  stratagies  tells  used to  for obtaining listings  realtors  that a trade  area  design  and  prospects.  analysis,  w i l l d e t e r m i n e t h e h i g h e s t and most b e n e f i c i a l use f o r t h e p r o p e r t y . This analysis w i l l also i n d i c a t e who m i g h t 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 Herzfeld  the  tells  type  brokers  o f a n a l y s i s t h a t s h o u l d be  performed,  t o o b t a i n i n f o r m a t i o n t h a t can  be  used, t o s e a r c h the market not i n terms o f a g e n e r a l r a n g e o f u s e s (such as a u t o m o b i l e distribution 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, S h a k e y ' s P i z z a o r D u n k i n Donuts w o u l d f i n d t h e site attractive. 7 The  preceding  has  illustrated  emphasizes t h a t r e a l t o r s could, use  in this  o r v a l u e by  role,  performing  estate practitioner  that  can be  tells  realtors  a trade  literature  author  beneficial  area a n a l y s i s .  And  o u t l i n e s few  i f any  o f a book on  be  yet, steps  commercial  real  "  d e s c r i b e d as e x c e l l e n t ,  advise  Good f o r what u s e ? "  directives  fail  (location)  characteristics  uses.  and  that,  However, t h e w r i t e r does n o t  specific  literature  purpose.  L o c a t i o n ( t r a d e a r e a ) may g o o d o r minimum. 8  f o r what use?  estate  become a d v i s o r / c o u n s e l o r s  followed for this  F o r e x a m p l e , one  real  d e t e r m i n e a p r o p e r t y ' s most  real  estate  can  how  t o show b r o k e r s  how  realtors  to ask: " E x c e l l e n t  I n t h i s manner, t o match t h e  of a property with  A n o t h e r s i m i l a r book m e n t i o n s ,  the  trade  t h e needs  area of  5  I f your (sic) showing small commercial s t o r e s , you 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 immediate trading area. 9 Yet, trade  this  author  area  or  illustrates  a  did  how  to  not  realtors  evaluate  checklist  characteristics  tell  of  presented  its  a  to  define  characteristics.  property in  how  and  third  trade  book  on  a Table  area  1.1  (location)  commercial  real  estate. Table Checklist 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.  of  1.1.  Property  Characteristics  Description o f Property Location o f Property Type o f C o n s t r u c t i o n Land A r e a - D i m e n s i o n s - s q . ft.-acres P r e s e n t Zoning Size o f Building-Rentable Area Number o f U n i t s - T y p e P a r k i n g F a c i l i t i e s - N u m b e r o f Spaces Services Provided Furnishings Income and O p e r a t i n g Expenses Taxes and Insurance Encurnbran<3e-Where-Hcw Much Amortization-Term-Rate o f I n t e r e s t Tenants-Leases-Rate-Term  16. 17. 18.  19. 20. 21. 22. 23. 24.  L o c a t i o n o f E x i s t i n g WaterSewar-Power Q u a l i t y o f Area-Surrounding Developments Distances t o : C i t y Business AreaEmployment C e n t e r s Airport Rail-BusHighway-Freeways Public Transportation N e a r e s t Shopping C e n t e r - D e s c r i b e Schools: Nursery-Elementary• High-College-Parochial C h u r c h e s : EJencmination-Distance E x i s t i n g Easements on t h e P r o p e r t y Population Within: 1 mile 2 miles 3 miles  Source: W e l d o n G i r a r d , How t o M a k e B i g M o n e y 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 Inc., 1977), pp. 34-35. An  examination  necessary other  for  of  the  checklist  analysing  demographic Recognizing  a  trade  variables, this  gap  in  finds  that  several  area,  such  as  are  missing.  the  literature,  items  income  Gross  and  states,  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 the 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 hit-or-miss b a s i s , e s p e c i a l l y i n t o d a y ' s complex market. To  6  c o n s i s t e n t l y 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 T h i s r e c o g n i t i o n o f a need f o r e f f i c i e n t techniques  that  realtors  best  can use f o r matching p r o p e r t i e s w i t h t h e i r  uses together w i t h the o b s e r v a t i o n t h a t r e a l e s t a t e l i t e r a t u r e f o r p r a c t i t i o n e r s provides minimal d i r e c t i o n  for this  purpose r a i s e s an important q u e s t i o n : "What steps are realtors  f o l l o w i n g t o determine a r e a l p r o p e r t y ' s most  beneficial  use and t h e r e f o r e v a l u e ? " .  One l a r g e corporate  r e a l e s t a t e buyer remarks, Of t h e p r o p o s a l s t h a t I r e c e i v e , only one i n f i f t y contains s o l i d i n f o r m a t i o n t h a t allows prudent investment d e c i s i o n s . . . Brokers g i v e me p r o j e c t i o n s based upon a p r o forma w h i l e n e g l e c t i n g to i n c l u d e p e r t i n e n t market data t o s u b s t a n t i a t e t h e i r p r o j e c t i o n s . . . I t i s the r a r e case where the broker has made the e f f o r t t o know h i s p r o p e r t y and t h e market. 11 Based upon the f o r e g o i n g statement  there appears t o be  a c o n t r a s t between the a n a l y s i s o f i n f o r m a t i o n brokers c o u l d be p r o v i d i n g and the analyses t h a t are being performed.  1.3  Statement o f the Problem  As a r e s u l t o f t h i s apparent  contrast, this  study  attempts t o answer the q u e s t i o n : "To what extent do r e a l t o r s perform  and use trade area analyses i n the marketing  ( l e a s i n g and s e l l i n g ) o b j e c t i v e , the broad  o f r e t a i l space?".  To accomplish  d e f i n i t i o n o f the broker as an a d v i s o r /  counselor on a l l f a c e t s o f r e a l e s t a t e was narrowed t o isolate  this  the type, purpose, and scope o f 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 . q u e s t i o n n a i r e was  B a s e d upon t h i s  administered  l e a r n how  they  marketing  of business/commercial  1.4  develop  Review o f P r i o r  focus, a  t o commercial  and use t r a d e a r e a  realtors  analyses  Research  r e a l t o r p r a c t i c e s of marketing  l o c a t e d t h a t examined  real  estate.  One  on b r o k e r  and i n v e s t o r p r a c t i c e s o f i n v e s t m e n t  the other  t h r e e examined r e a l t o r p r a c t i c e s o f real  estate.  examine t h e r e a l t o r s in  the marketing  be drawn  While these  use o f t r a d e  of r e t a i l  from t h e i r  in their  property.  F o u r e m p i r i c a l s t u d i e s were  residential  to  space,  findings with  area  study  focused  analysis; marketing  f o u r s t u d i e s do n o t (location) information  some u s e f u l a n a l o g i e s c a n respect to the present  research. 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 of  calculating  investment  g r o u p s i n f r e q u e n t l y employ  returns.  common t o o t h e r b u s i n e s s  t h a t was  cited  difficulty concluded  fields.  by recommending  more a c c u r a t e practitioner  The m a i n  input data.  and r e l i a b l e  both investment reason  the The  that greater a t t e n t i o n should  o p e r a t i o n a l techniques  literature  of  l a c k o f s o p h i s t i c a t i o n was  of o b t a i n i n g the necessary  given to developing  that  s o p h i s t i c a t e d methods  analysis  for this  I t found  input data.  study be  f o r generating  Similarly,  real  estate  s h o u l d be d e v o t i n g 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  noted  Lyle and  and B u r n s  sellers  with  the  legal  earlier. in  another  of"residential  routine  details  aspects  study  real  of  estate  the  and e x p l a n a t i o n  found were  broker's  of  the  that  both  usually  satisfied  s e r v i c e s ((  transaction  buyers  eg.,  in  non-  13 technical was  terms).  substantial than  prices  and market  a study  that  sellers,  by  sellers  knowledge marketing. also  brokers and  the  for  how  to  et  the  overall  survey nature  Weaknesses supplied  recreational groups  and  the  respect  data  trends to  were  community  made  a' h o m e - b u y e r .  and  real  of  to  obtained  research  with  the  he  found  agent's  was  trends  is  business/commercial determine where  that  estate  to  value, collect  brokers  The r e s u l t s agents  it,  obtained informed  markets  they  worked.  quantity  neighbourhood  of  trade  area  the  (i.e.  children's  The q u a l i t y affect  on  information  institutions  churches,  institutions  Similarly,  sources  well  the  schools,  as  were  organizations).  neighbourhood  there  it.  concerned to  part  and market of  that  related  property)  collect,  geographical  facilities,  of  »  the  Their  and s e l l e r s  market  indicated of  on  results 14  prices  information.  ibility by  about  assessed  identified  with  Similar  interpret  al.  neighbourhood  from  so  information  (residental  buyers  know w h a t  Houston of  product  To d i s c e r n  finally  more  found  particularly dissatisfied  Information  must  research  Connett.and Sawatzky.  important  property.  regarding  trends.  were  of  the  dissatisfaction,  buyers  in  However,  the  and  access-  investment  information,  9  including  details  population by  businesses,  and income must a f f e c t  a user/buyer  1.5  of neighboring  of r e t a i l  surrounding  the investment  made  space.  S i g n i f i c a n c e o f t h e Study  By  researching realtor  analysis, their  this  clients  study  p r a c t i c e s of trade area  has p o t e n t i a l v a l u e  and. c u s t o m e r s .  or underutilized  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 made f o r i m p r o v i n g upgrade t h e i r  a n a l y s i s and i n c r e a s e t h e i r  their  sales  should  they  are working  i n current  R e a l t o r s who  l e v e l o f knowledge  (and h e n c e  be a b l e t o h e i g h t e n  (location)  and s u g g e s t i o n s  operational techniques.  about t h e p r o p e r t y expertise)  f o r r e a l t o r s and  Important t r a d e area  c r i t e r i a which,^re-overlooked  (location)  their  the e f f i c i e n c y of  effort.  In support  a study  by B u s c h a n a l y s e d  a salesman's  expert  and r e f e r e n t s o c i a l power b a s e s i n r e g a r d  to their  impact  on t h e c u s t o m e r ' s t r u s t  attitude  and  behavioral intentions.  i n t h e salesman's  Expert  power was d e f i n e d a s ,  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 k n o w l e d g e , i n f o r m a t i o n and s k i l l s i n a relevant area, and  r e f e r e n t power a s , the p e r c e i v e d a t t r a c t i o n to  Results  one a n o t h e r from t h i s  arising  study  more e f f e c t i v e t h a n customer changes.  o f members i n t h e d y a d  from f r i e n d s h i p e t c .  indicate  . . 1,6'  that expertise i s generally  r e f e r e n t power i n p r o d u c i n g  desired  10  In may  be  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 able  research their  to  has  their  relevance  ability  information analysis,  improve  to  listings  to s p e c i f i c  be  able  wish to  and  search  Reducing search  buyers.  to t r a n s f e r  This  and  Moreover, t a r g e t marketing w i l l  As use  more s e l l e r s of  b u y e r s who their  are  top  research  decisions  of  area  business (assets  can  bidders,  will  will  to  sale/lease  trans-  r e s u l t i n premium more l i k e l y  be  the  broker  (through  match t h e i r p r o p e r t i e s they  c o u l d be  his  with  expected to  increase  services.  also  could  users/investors  (location)  failure.  market  t h e i r most b e n e f i c i a l u s e s .  become aware t h a t  demand f o r h i s The  trade  since properties  t a r g e t marketing)  general  r e a l t o r s w i t h more t i m e  actions.  at p r i c e s r e f l e c t i n g  their  prospects.  p r o d u c t i v i t y t h r o u g h more f r e q u e n t  traded  area  target marketing  increase  transaction prices  Using  developed trade  time f o r l i s t i n g s  time p r o v i d e s  the improve  prospects.  o f m a r k e t i n g e f f o r t s from the  sellers  reduce t h e i r  and  from a p r o p e r l y  realtors, should  concentration  of e x p e r t i s e ,  f o r r e a l t o r s who  locate  obtained  level  as  an  have v a l u e since  f o r the  location  evidence points  important underlying  A representative  sample o f  u n d e r $1,000,000.00) n e w l y e s t a b l i s h e d  81  to  cause  poor of  small  retail  and  \ --  service  enterprises  i n the  Providence^-  Rhode I s l a n d ,  metro-  17 politan  a r e a were m o n i t o r e d o v e r  Objectives  of  the  research  a two  year  period.  were t o d e t e r m i n e t h e  c i r c u m s t a n c e s w h i c h accompany a b u s i n e s s e ' s  specific  inception,  11  d e v e l o p m e n t and failure linked  f o r 32  demise. of the  to l i t t l e  business  and  weakness.  A  Results  40  show t h a t t h e  f i r m s t h a t c l o s e d were  o r no m a r k e t r e s e a r c h p r i o r  inadequate  sales resulting  trade  a n a l y s i s may  area  causes mainly-  to  from  of  commencing  competitive  have a v e r t e d  these  failures.  1.6  Organization  To  g a i n an  analysis was  insight  Study  into  a questionnaire  developed.  construct concept  of the  To  g i v e an  area  and  reviews  Chapter three provides questionnaire. the chapter techniques  o u t l i n e s trade of a n a l y s i s . gap  two  introduces  identifying  As  trade  t h a t c o u l d be  area  purpose to the  f o u r major c o n t r i b u t i o n s  area a n a l y s i s . the b a s i s f o r c o n s t r u c t i n g  area  area  characteristics  such,  in real  f o r business/commercial techniques  for this  D r a w i n g f r o m t h e body o f t r a d e  existing  precisely  used  overview of m a t e r i a l used  the q u e s t i o n n a i r e , chapter  of trade  the  p r a c t i c e s of trade  t h a t c o u l d be  to the development of t r a d e  fill  realtor  the  chapter  property  charactersitics and  by  used to develop  literature,  and  attempts  estate literature  area  the  by  a trade  more  of  suggesting  to  importance operational  area  analysis. Chapter four presents the  research.  are d i s c u s s e d .  The  t h e methods and  c o n s t r u c t i o n and  content  N e x t , a d m i n i s t r a t i o n and  cedures are d e s c r i b e d .  The  chapter  procedures of the  data  concludes  questionnaire  analysis with  of  a  pro-  12  description The five.  of the  results  respondents.  of the survey  These r e s u l t s  are presented  show t h e t y p e , p u r p o s e ,  the trade area analyses being  developed  i n chapter and s c o p e o f  by t h e r e s p o n d e n t s .  In a d d i t i o n ,  relationships  among s u r v e y  Chapter  s i x concludes  and summarizes t h e m a j o r  of the survey. three,  Drawing from  two r e l a t e d  areas  the r e s u l t s  are discussed:  of preparing trade area analyses area information i n marketing In c o n c l u s i o n , suggestions  items  are presented. findings  s e c t i o n and c h a p t e r (1) r e a l t o r  practices  and (2) t h e u s e o f t r a d e  business/commercial  for further  property.  research are given.  13  1.7  Footnotes  Weldon 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 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 , 1 9 7 7 ) , p. 68. 2 H. H o a g l a n d , R e a l E s t a t e P r i n c i p l e s 3rd E d i t i o n Y o r k : M c G r a w - H i l l Book Company, 1 9 5 5 ) , p. 286. 3 Sherman J . M a i s e l and S t e p h e n E . R o u l a c , R e a l E s t a t e I n v e s t m e n t and F i n a n c e (New Y o r k : M c G r a w - H i l l Book Company, 1976) , p . 484. (New  4  J o h n B. A l l a n , C o m m e r c i a l and I n d u s t r i a l R e a l E s t a t e (Los A n g e l e s , CA: CAR, 197 3) ,~p. 53. 5 P a u l B. Downing, " F a c t o r s A f f e c t i n g C o m m e r i c a l L a n d V a l u e s : An E m p i r i c a l S t u d y o f M i l w a u k e e , W i s c o n s i n , " L a n d E c o n o m i c s 49 ( F e b r u a r y 1 9 7 3 ) : 44-56. ^Weldon 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 and I n d u s t r i a l P r o p e r t y , p. 161. 7 H e r b e r t H e r t z f e l d , "Quo V a d i s , B r o k e r ? What's Y o u r Role?" R e a l E s t a t e Review 2 (Summer 197 2) : 2 4-30. g J o h n B. A l l e n , C o m m e r i c a l and I n d u s t r i a l R e a l E s t a t e , p. 14. 9 "John B. A l l a n , S e l l i n g Income P r o p e r t y S u c c e s s f u l l y (Los A n g e l e s , CA: CAR, 1 9 7 6 ) , p. 75. S h e l d o n A. G r o s s , "A M o d e l f o r E f f e c t i v e R e a l E s t a t e Today, May-June 1975, p. 56. 1  0  Site  Selection,"  ^ May M. K a p l a n , " T r a n s a c t i o n T i p s : P u t t i n g T o g e t h e r a S u c c e s s f u l R e a l E s t a t e P a c k a g e , " R e a l E s t a t e T o d a y , 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 P a p e r No. 1, Urban L a n d E c o n o m i c s P u b l i c a t i o n s , U n i v e r s i t y o f B r i t i s h C o l u m b i a , 1 9 7 7 ) , pp. 1-16. 13 J a c k L y l e and L e l a n d B u r n s , C o m m u n i c a t i o n P r o b l e m s o f the Real E s t a t e I n d u s t r y — The Image o f t h e R e a l E s t a t e A g e n t (Los A n g e l e s : G r a d u a t e S c h o o l o f B u s i n e s s A d m i n i s t r a t i o n , U n i v e r s i t y o f C a l i f o r n i a , 1 9 6 7 ) , pp. 1-5.  14  14  R u s s e l l Connett and J a s p e r Sawatzky, The P u b l i c Image of the Real E s t a t e Agent (Sacramento, CA: D i v i s i o n o f Real E s t a t e , S t a t e o f C a l i f o r n i a , 1963), pp. 1-3 0. 15 M.J. Houston e t a l . , "Real E s t a t e Agents as a Source o f Information f o r Home Buyers," The J o u r n a l o f Consumer A f f a i r s 11 (Summer 1977): 111-122. P. Busch and D. W i l s o n , "An Experimental A n a l y s i s of a Salesman's E x p e r t and Referent Bases of S o c i a l Power i n the B u y e r - S e l l e r Dyad, " J o u r n a l of Marketing Research 13 (February 1976): 3-11. 17 Kurt Mayer and Sidney G o l d s t e i n , The F i r s t Two Years: Problems of Small Business Growth and S u r v i v a l (Washington, D.C: Small Business A d m i n i s t r a t i o n , 1961), pp. 1-133.  CHAPTER CONTRIBUTION DEVELOPMENT  TWO  TOWARDS OF  TRADE  ANALYSIS  THE AREA  16  2.1  Introduction  This  chapter  describes  the  concept of trade  reviews major c o n t r i b u t i o n s to the area  of R e t a i l  G r a v i t a t i o n , (3)  (4) M a r k e t i n g G e o g r a p h y . perspectives  i s important  An  Following  the  presented.  (1) C e n t r a l P l a c e  Consumer B e h a v i o r ,  since together area  they  analyses  review of each p e r s p e c t i v e ,  useful implications for a real Accordingly,  background t o chapter  the  and  trade  i n t r o d u c t i o n to these  framework upon w h i c h most t r a d e  and  development of  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 :  (2) Law  area  and  four  form are  the based.  i t s limitations  estate practitioner  chapter  Theory,  provides  three, which d e s c r i b e s  a  are  conceptual  trade  area  analysis application.  2.2  Trade Area  The area  Concept  American Marketing A s s o c i a t i o n d e s c r i b e s  a  trade  as, a d i s t r i c t whose s i z e i s u s u a l l y d e t e r m i n e d by t h e b o u n d a r i e s w i t h i n which i t i s e c o n o m i c a l i n terms o f volume and c o s t f o r a m a r k e t i n g u n i t t o s e l l and o r d e l i v e r a good o r 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 t r a d e from which the most o f stood  i s that  s t o r e d e r i v e s most o f i t s b u s i n e s s ,  i t s c u s t o m e r s come f r o m .  by  area  viewing  The  concept can  o r where be  under-  p o t e n t i a l c u s t o m e r s ' a s f o r c e s o f demand  retail  establishments  supply  and  as  forces of supply.  demand., i n t e r a c t w i t h i n  trade  T h e s e two  areas  to  area  and  forces,  determine  17  what p a r t i c u l a r goods o r s e r v i c e s a r e r e q u i r e d location.  Therefore,  factors within analyst quired  a trade  a knowledge o f s u p p l y area  at a  given  and demand  makes i t p o s s i b l e  f o r the  t o d e t e r m i n e what goods o r s e r v i c e s a r e most r e by t h e s u r r o u n d i n g p o p u l a t i o n  for estimating  potential sales  and p r o v i d e s  the basis  f o r stores marketing  these  goods o r s e r v i c e s . The  following brief  review o f major  to the development o f t r a d e insight  area  analyses  i n t o the concept of trade  these c o n t r i b u t i o n s  three  oriented.  contributions  a trade  2.3  the  Considered.-together,  trade  area  Marketing-, G e o g r a p h y , t h e f o u r t h  presents  further  analyses.  The  reviewed are t h e o r e t i c a l l y  draws• much o f i t s c o n t e n t and  area.  provides  c o m p r i s e t h e m a i n body o f knowledge w h i c h  p r a c t i t i o n e r s use t o develop t h e i r first  contributions  perspective,  from the p r e c e d i n g  t h e most p r a c t i c a l g u i d e l i n e s  contributions  f o r analysing  area.  Central  Place  General  review  Central  Place  size,  Theory  T h e o r y was  originally  formulated  number and d i s t r i b u t i o n o f c i t i e s  to  and towns  describe providing  2 goods and s e r v i c e s t o t h e i r variations tribution  of the theory pattern  hinterlands.  Subsequent  have a t t e m p t e d t o e x p l a i n  of r e t a i l i n g  functions within  the d i s -  urban  areas.^  18  While  the theory  i s not p r a c t i c a l  a r e a , i t does have some u s e f u l the  conceptual  trade  implications  for  practitioner. The  of  for analysing a  theory  a business  i s based  and  on  two  (2) s h o p p i n g  'the t h r e s h o l d o f a b u s i n e s s  elements: range.  refers  (1) t h e t h r e s h o l d  Berry  states that  to;  the s m a l l e s t market a r e a t h a t w i l l s u p p o r t the smallest economically f e a s i b l e establishement of the c l a s s , and  range  as,  t h e maximum d i s t a n c e c o n s u m e r s a r e w i l l i n g to i t . 4 The  range of a b u s i n e s s  an u p p e r and  lower  selling  limit.  The  specific  consumers; the  lower  limit  thus  identifies  the trade area  kind  of business.  The  to  the  t h r e s h o l d pur-  the b u s i n e s s .  Range specific  t h r e s h o l d r e p r e s e n t s t h e minimum  t h r e s h o l d i t w o u l d be  the b u s i n e s s .  Below a  uneconomical f o r a  business  t o s u p p l y goods o r s e r v i c e s s i n c e a d e q u a t e p r o f i t s be  both  attract  f o r a commodity o r  market a r e a r e q u i r e d to support certain  represents  i s unable  i n c o r p o r a t e s the  c h a s i n g power r e q u i r e d t o s u s t a i n  travel  goods can have  upper l i m i t  d i s t a n c e beyond which the b u s i n e s s  to  could  not  earned. The  theory maintains  l o c a t e d where t h e i r efficiently distribution both  that r e t a i l  establishments  t h r e s h o l d requirements  satisfied.  will  T h i s i m p l i e s t h a t the  be  level  o f demand w i t h i n : ; an u r b a n a r e a w i l l  t h e number and  location  of stores.  are  most and determine  Therefore, i f  19  demand i s s e v e r a l t i m e s g r e a t e r one f i r m , o t h e r attracted In  firms marketing  t o t h e same  location  distances.  to t r a v e l varying Central  Place  goods.  High order  distances  t h e consumer's w i l l i n g n e s s  f o r d i f f e r e n t commodities,  T h e o r y d i s t i n g u i s h e s between h i g h  would  into this  purchased  the  same  and d r y - c l e a n i n g  states  value,  frequent  order  them.  goods  standardized  i n t e r v a l s by  goods r e q u i r e  the other  i s willing  order  a higher  associated  threshold  with the items.  hand, have a l o w e r t h r e s h o l d  marketing these products  regular  goods a r e  to travel a  Similarly, stores  purchase the items a t short  greater  marketing because o f the Low o r d e r  since  intervals.  goods,  consumers Stores  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 the  and r e g u l a r  and c a r s  low o r d e r  services are  that because high  a consumer  t o acquire  shopping habits on  Conversely,  sets  consumer.  of greater  high  i n t e r v a l s by t h e same  s u c h as t e l e v i s i o n  category.  at short,  The t h e o r y  distance  and low o r d e r  goods r e f e r t o t h o s e i t e m s t h a t a r e p u r -  Most d u r a b l e s  such as g r o c e r i e s  upon  s o u g h t , may be p r e p a r e d t o t r a v e l  Explaining  consumer.  and  recognizes  A consumer, d e p e n d i n g  chased a t i r r e g u l a r and i n f r e q u e n t  fall  also  influence determining the  activities.  type o f product being  varying  be  area.  as an i m p o r t a n t  of r e t a i l  level of  s i m i l a r products w i l l  a d d i t i o n t o demand, t h e t h e o r y  accessibility  the  than the t h r e s h o l d  than comparison shopping  consumer's s h o p p i n g h a b i t s  f o r these  items.  influences  20  Stemming proposes less  that  from the the  dispersed  dispersion  will  above  higher  will  be  occur  the  its  distribution  points  means  that  small  goods w o u l d be areas be:  -  and  fewer  central  figure  to  larger  of  the  distribution  with  greater  shopping  positioned larger  order  central  centres  with  good  of  provided, Within  high  low  areas  goods as  lower  This order  surrounding  order  the this  successively  offering  small  surrounding trade  theory-  dispersion.  areas to  the  points.  a nesting patterns  order  several  relationships,  trade  would  shown  in  2.1.  Figure  2.1  H i e r a r c h y o f Trade C e n t r e s and t h e i r Respective Trade Areas  Source:  B . J . B e r r y , Geography of Market D i s t r i b u t i o n (Englewood C l i f f s : I n c . , 1967), p. 65.  C e n t r e s and R e t a i l N . J . . Prentice Hall  21  L i m i t a t i o n s and u s e f u l  For  a p p l i c a t i o n purposes, c e n t r a l p l a c e theory possesses  a number o f l i m i t a t i o n s . patterns)  implications  of i t s d e f i n e d  The r i g i d s i z e and shape trade  (hexagonal  areas do not conform t o  reality:' since, e m p i r i c a l s t u d i e s t h a t c o n s i d e r the s p a t i a l shape of market areas suggest t h a t the b a s i c shape i s a f f e c t e d by competition (including intervening o p p o r t u n i t i e s ) , by v a r y i n g p o p u l a t i o n d e n s i t y and income, and by b a r r i e r s t o movement. 5 The  theory i s f u r t h e r l i m i t e d by i t s treatment o f consumer  behavior.  I t implies  e f f o r t to obtain the r e q u i r e d  t h a t consumers w i l l make the l e a s t  a good by v i s i t i n g the nearest  item(s).  Given high p o p u l a t i o n  consumers may have s e v e r a l s t o r e s or centres attraction available within they are prepared t o t r a v e l .  centre o f f e r i n g  densities, of d i f f e r i n g  the maximum d i s t a n c e  range t h a t  In such a s i t u a t i o n , i t i s  l i k e l y t h a t each centre has a p r o b a b i l i t y o f being  patronized  at l e a s t once. While C e n t r a l Place Theory has a number o f drawbacks, i t a l s o possesses some u s e f u l ideas I t introduces  f o r the p r a c t i t i o n e r .  the r e l a t i o n s h i p between market s i z e , type o f  s t o r e , and the l o c a t i o n the s t o r e must have t o s a t i s f y i t s minimal t h r e s h o l d  requirements.  Thus, w h i l e a given  area  may be able t o s u s t a i n one convenience grocery s t o r e , two or more convenience g r o c e r y s t o r e s competing f o r the same business may r e s u l t i n below average earnings f o r each s t o r e .  2.4  Law o f 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 o f trade area  a n a l y s i s comes  Gravitation. the  f r o m r e s e a r c h b a s e d on t h e Law o f R e t a i l  The r e s e a r c h was  difference i n attraction  some d i s t a n c e a p a r t  first  t o w a r d s two c i t i e s  for potential  a town between t h e c i t i e s .  undertaken t o e x p l a i n  customers r e s i d i n g i n  Later, v a r i a t i o n s of this  were u s e d t o e x p l a i n t h e d i f f e r e n c e s i n d r a w i n g between i n t r a u r b a n s h o p p i n g c e n t r e s . T h e o r y , t h e Law o f R e t a i l insight  into  the concept  Research i n t h i s formulated  'Reilly"s  Ba Bh  (Pa\ \Pb } N  x  power  further  area.  a r e a was p i o n e e r e d using  law  As d i d C e n t r a l P l a c e -  Gravitation provides of trade  Law'  t h a t were  by R e i l l y  the f o l l o w i n g  who  equation:  (Db_ \Da  where, Ba = t r a d e drawn by c i t y A f r o m any g i v e n i n t e r m e d i a t e city. Bb = t r a d e drawn by c i t y B f r o m t h e same i n t e r m e d i a t e city. Pa = r e s i d e n t p o p u l a t i o n o f c i t y A. Pb = r e s i d e n t p o p u l a t i o n o f c i t y B. Da = d i s t a n c e o f c i t y A f r o m t h e 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 o f c i t y B f r o m t h e i n t e r m e d i a t e c i t y . N = 1.  With the DB  a d d i t i o n a l terms d e f i n e d = distance  from B t o the  as  follows:  breaking  point,  Bo. i.e., Dab The  the  p o i n t where  =1.  = d i s t a n c e between A and  B = Da  +  Db.  equation states, T h a t two c i t i e s a t t r a c t t r a d e f r o m an i n t e r m e d i a t e town i n t h e v i c i n i t y o f t h e b r e a k i n g p o i n t £ p o i n t where t h e t r a d i n g i n f l u e n c e i s equalJ approximately in direct p r o p o r t i o n t o t h e p o p u l a t i o n s o f t h e 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 f r o m t h e s e two c i t i e s t o t h e i n t e r m e d i a t e town. 7  8 R e i l l y ' s m o d e l was  modified  by  Converse.  c a t i o n made i t p o s s i b l e t o c a l c u l a t e t h e between two  o r more c o m p e t i n g c i t i e s  i n f l u e n c e o f e a c h was  where  D, b  the  distance  a t which the  using  separating  = the p o p u l a t i o n = the p o p u l a t i o n  b P a V  2.2  show t h e  by  approximate  the  illustrates  breaking  point  e q u a l ) between c i t y  P  1  how  city  of c i t y  B;  and  of c i t y  A.  9  this equation  ( p o i n t where t h e and  A  cities  P->  A and  point  equation:  city  from c i t y  c o u l d be  modifi-  trading  following  = t h e b r e a k i n g p o i n t between c i t y i n m i l e s f r o m B;  ^ ab  Figure  equal  This  B  B;  used  to  trading influence i s  through  P . c  24 Figure Breaking  2.2  Point o f Trade Area f o r C i t y P  n  P = 200.000 3  P  2  IOO'OOO  500.000  P, = 200,000  Pi = 400,000  Source: David L. Huff, " D e f i n i n g and E s t i m a t i n g a Trading Area," J o u r n a l o f Marketing 28 (July 1964) : 37. A n a l y s t s have used Converse's equation breaking doing,  to estimate  p o i n t between i n t r a u r b a n shopping c e n t r e s .  they have s u b s t i t u t e d shopping centres  square f e e t f o r s a l e s area f o r p o p u l a t i o n for distance.  In so  for cities,  and d r i v i n g time  I t has been noted, however, t h a t  technique i s f r e q u e n t l y i n a c c u r a t e . " ^  the  The  this  inaccuracy  r e s u l t s from not t a k i n g i n t o account business  from  walk-in  customers and those customers who r e l y upon p u b l i c t r a n s portation.  In a d d i t i o n , the model o v e r s i m p l i f i e s drawing  power by not c o n s i d e r i n g d i f f e r e n c e s i n income, e t h n i c composition  and other f a c t o r s .  Attempting to overcome these l i m i t a t i o n s , one has  constructed  an a l t e r n a t e model."'""'"  This  researcher  reformulation  25  incorporates  the  probability  centres.  Consideration is  depending  on  a  consumer  formal  the  class  may e x p e n d  expression  of  that  also  consumers  given  or  type  of  more  or  less  Huff's  to  the  commodity  model  time  may v i s i t fact being  acquiring  other  that, purchased, it.  A  is:  S .  D  T.  .  A  P. .  13  n  S.  T  where  P. . -' 1  S . ^  T.. 1  1  1 Figure trade this  2.3 area  model,  xj  1  = 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 of o r i g i n i t r a v e l i n g to a p a r t i c u l a r shopping center j ; = the s i z e o f a s h o p p i n g c e n t r e j (measured i n terms o f the square footage o f s e l l i n g area devoted to the s a l e of a p a r t i c u l a r c l a s s of goods); = the t r a v e l time i n v o l v e d i n g e t t i n g from a consumer's t r a v e l base i to a given shopping c e n t e r j ; and a parameter w h i c h i s t o be estimated e m p i r i c a l l y to r e f l e c t the e f f e c t of 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 :  presents for  a visual  a shopping  exemplification  centre  (J^)  would  of  how  appear  the using  26  Figure  2.3  Trade Area of Shopping Center J  Source: David L. Huff, " D e f i n i n g and'Estimating a T r a d i n g J o u r n a l o f Marketing 28 (July 1964): 37.  From Figure  2.3, the trade  area f o r a shopping centre  Area,"  located  at J-^ i s composed o f a s e r i e s o f p r o b a b i l i t y i s o p l e t h s t h a t d i s t r i b u t e consumer expenditures among two o r more centres  depending on the type or c l a s s o f commodity under  consideration.  L i m i t a t i o n s and u s e f u l  implications  A c r i t i c o f the g r a v i t y model notes t h a t d e s p i t e r e f i n e 13 ments, i t s a p p l i c a t i o n continues t o pose problems. problems a r i s e from data a v a i l a b i l i t y , for  the choice  These o f measure  consumer a t t r a c t i o n and f r i c t i o n , the need f o r a n a l y s i s  27  of  retail  implicit  c e n t r e s by m e r c h a n d i s e assumptions  behavior.  In s p i t e o f these  bounded by t h e r i g i d  While emphasizing b a s e d on s i z e ,  2.5  of being  Studies  General  of  since other  o f Consumer  store and this  competitive  centres  areas are Theory. advantage  that trade  a l s o have a p r o b a b -  Behavior  from t h i s  field  of research  consist of  f o c u s i n g on some p a r t i c u l a r  Examples o f t h i s  research  t o q u a n t i f y consumer a t t i t u d e s w i t h  the centres o v e r a l l of research  only o f f e r behavior  intuitions  within trade  attractiveness.  is still  respect to  areas.  centres,  However, s i n c e  i n i t s infancy stage,  regarding  aspect  are studies  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 s h o p p i n g  type  areas  review  s t u d i e s , each  attempt  patterns o f C e n t r a l Place  a shopping centre's  human b e h a v i o r .  that  I t e x p l a i n s why t r a d e  does  visited.  Contributions empirical  d r a w b a c k s , t h e model  t h e model a l s o i l l u s t r a t e s  a r e n o t immutable ility  and t h e m o d e l ' s  a b o u t consumer and e n t e r p r e n e u r i a l  have u s e f u l i m p l i c a t i o n s . not  lines  the nature  i t can  o f consumer  The f o l l o w i n g p r e s e n t s  e x a m p l e s o f t h e r e s e a r c h t h a t h a s b e e n done i n t h i s  some field.  14 Mason and Moore (1)  that there  explored  t h e two f o l l o w i n g a s s u m p t i o n s :  i s homogeneity w i t h i n t r a d e  consumer p a t r o n a g e , and (2) t h a t s i m i l a r  areas  regarding  socio-economic  28  groups e x h i b i t s i m i l a r r e t a i l findings age  indicated that:  decisions  similar  (1)  patronage d e c i s i o n s . homogeneity r e g a r d i n g  i s lacking within  trade  s o c i o e c o n o m i c g r o u p s do  patterns.  not  a r e a s and  patron-  (2)  have s i m i l a r  influence  on  perceptions shopping  the  c u s t o m e r s have an  the  important  patterns.  O t h e r examples o f affecting  of  that  shopping  From t h e i r f i n d i n g s , t h e y s u g g e s t t h a t  a t t i t u d e s and  Their  studies  in this field  customer's p e r c e p t i o n  of  f o c u s on  travelling  factors  time  to  15 a shopping centre. indicated retail  that  affect his  Mason  explored  s h o p p i n g b e h a v i o r as  findings  the  indicated that  shaping  s t u d y by  ability  g e o g r a p h i c p o s i t i o n and 16  B r u n n e r and t i m e on  of  customer's s u b j e c t i v e  establishment  centre's  in  the  Results  Thompson  f e e l i n g s about to evaluate  the  s i g n i f i c a n c e of  opposed to o t h e r  since  75%  of  the  customers  of  further  that by  A  s t u d y by  d r i v i n g time beyond the  size, attractiveness  and  15 the  Cox  and  15 17  Cooke  minute range i s absence of  Their  influential  i n t h i s sample r e s i d e d w i t h i n  centre.  travel  factors.  each major c e n t r e the  the  h i s t r a v e l time to i t .  d r i v i n g time i s v e r y  shopping patterns  a  of  minutes found  influenced  perceived  b a r r i e r s ( i . e . congestion, bridges 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  W h i l e consumer b e h a v i o r r e s e a r c h developed theories  o r models t h a t  has  not,  as  yet,  a p r a c t i t i o n e r could  apply,  29  its  value  lies  attitudes.  i n t h e e m p h a s i s i t p l a c e s on consumer  Taking  analysts w i l l Their  a l e s s o n from t h i s  see t h e m e r i t  research, trade  i n conducting  consumer  area  surveys.  r a t i o n a l e w i l l be, b a s e d upon t h e s i m p l e n o t i o n t h a t i f we want t o know what p e o p l e b e l i e v e , why t h e y a c t t h e way t h e y do, and how t h e y p l a n t o a c t we s h o u l d a s k them. 18  This  type  o f approach can a s s i s t  what m e r c h a n d i s e to  lines  an u r b a n a r e a .  the analyst i n determining  o r s t o r e t y p e s w o u l d be most  suited  Examples showing t h e u s e f u l n e s s o f  consumer r e s e a r c h f o r t h e s e  p u r p o s e s a r e g i v e n by W a t k i n s  19 et  2.6  a l . , and W e a l .  Marketing  General  Geography  review  Applebaum  states that,  M a r k e t i n g Geography i s c o n c e r n e d w i t h t h e d e l i m i t a t i o n and measurement o f m a r k e t s and w i t h t h e c h a n n e l s o f d i s t r i b u t i o n t h r o u g h w h i c h goods move f r o m p r o d u c e r t o consumer. 20 With t h i s to the  focus, the d i s c i p l i n e  adopts a c l i n i c a l  the problem o f trade area a n a l y s i s . three preceding  approach  Drawing i n s i g h t s  contributions ( i . e . Central Place  from  Theory,  Law o f R e t a i l  G r a v i t a t i o n and S t u d i e s o f Consumer R e s e a r c h )  practitioners  i n this  r a t h e r than  field  theoretical  measure a t r a d e  area.  r e l y mainly  or experimental  upon t h e i r o b s e r v a t i o n s study  t o d e l i m i t and  30  Using  this  practitioners their  uses  such  factors  To d e l i m i t  fora specific  site,  these  stage o f a n a l y s i s translating  retailing  sites  a r e matched w i t h  Using  certain  1  such  lines,  In'-their  data, sales  uses a r e e s t i m a t e d .  In t h i s  t h e i r most b e n e f i c i a l  and u s e f u l  final  into  fore-  manner,  uses.  implications  Perhaps t h e o n l y l i m i t a t i o n  o f Marketing  Geography i s  a t some p o i n t an a n a l y s t must u s e h i s own judgment o r  common s e n s e  its  analysts consider  potential  t h e f a c t o r s o f demand i n a t r a d e a r e a  for specific  of  shopping  t h e y u s e v a r i o u s methods a n d t e c h n i q u e s  opportunities.  Limitations  they  When s e l e c t i n g  a n d p u r c h a s i n g power.  casts  that  trade areas  as n e i g h b o r i n g b u s i n e s s e s , m e r c h a n d i s e  consumer a c c e p t a n c e ,  approach,  developing,-  as r o a d n e t w o r k s , c o m p e t i n g  and p o p u l a t i o n d i s t r i b u t i o n .  factors  for  or observational  consider several factors while  trade area analyses.  analyse areas  type o f c l i n i c a l  this,  while  Marketing  developing  a trade area analysis.'  G e o g r a p h y i s n o t an e x a c t  guidelines offer  t h e most p r a c t i c a l  problem o f trade area a n a l y s i s . other  science.  Because However,  approach t o t h e  One:researcher,  c o n t r i b u t i o n s to trade area analysis  after  reviewing  states,  P e r h a p s r e t a i l a r e a a n a l y s i s i s one f i e l d o f e n q u i r y w h i c h must a d o p t t h e c l i n i c a l a p p r o a c h as a means f o r r e s o l v i n g Because o f Marketing  i t s specific  Geography's c l i n i c a l  problems.  21  ( i . e . observational)  approach t o t h e problem o f trade area a n a l y s i s  and r e l a t i v e  31  ease o f a p p l i c a t i o n ,  i t s methods and t e c h n i q u e s  the b a s i s f o r t h e q u e s t i o n n a i r e used t o survey t h e i r p r a c t i c e s of trade jective, these  Chapter  area  analysis.  could follow.  as  realtors  Towards t h i s  three o u t l i n e s the major f a c t o r s  a n a l y s t s c o n s i d e r and p r e s e n t s  realtors  serve  a procedure  that that  on  ob-  32  2.7  Footnotes  ^ David -L. Huff, " D e f i n i n g and E s t i m a t i n g a Trade Area," J o u r n a l o f Marketing '28 (July 1964): 37. 2 The i n t e r e s t e d reader i s d i r e c t e d t o : W. C h r i s t a l l e r , C e n t r a l Places i n Southern Germany (Englewood C l i f f s , N.J. : P r e n t i c e H a l l Inc., 1966) and A. Losch, The Economics of L o c a t i o n (New Haven: Conn.; Yale U n i v e r s i t y P r e s s , 1954). 3 For example see: B.J. B e r r y , Geography o f 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.: P r e n t i c e H a l l Inc., 1967). 4 I b i d . , p. 15. 5 P.L. Simons, "The Shape o f Suburban R e t a i l Market Areas: I m p l i c a t i o n s from a L i t e r a t u r e Review," J o u r n a l of R e t a i l i n g 49 (Winter 1973«1974): 66-67. D. Thompson, "Future D i r e c t i o n s i n R e t a i l Trade Area Research," Economic Geography 42 (January 1966): 4. 7 P.D. Converse, "New Laws o f R e t a i l J o u r n a l o f Marketing 14 (1949): 379.  Gravitation,"  p  I b i d . , pp. 379-384. 9  I b i d . , p. 384.  Curt Kornblou ed., Guide t o Store L o c a t i o n Research w i t h an Emphasis on Super Markets (Reading, " Massachusetts: Addison-Wesley P u b l i s h i n g Company, 1968) pp. 26-27 David L. Huff, " D e f i n i n g on E s t i m a t i n g a Trade Area," pp. 34-38. 12 I b i d . , p. 36. 13 P. S c o t t , Geography and R e t a i l i n g , 3rd ed. [London: Hutchinson and Co. L t d . , 1973) , p. 178. 14 J . Mason and C. Moore, "An.Empirical R e a p p r a i s a l of B e h a v i o r i s t i c Assumptions i n T r a d i n g Area S t u d i e s , " J o u r n a l of R e t a i l i n g 46 (Winter 1960-19 ): 31-38.  33  15  D. Thompson, "New Concept: S u b j e c t i v e Journal of R e t a i l i n g 39 (Spring 1963): 1-6.  Distance,"  16 J . Brunner and J . Mason, "The I n f l u e n c e of D r i v i n g Time upon Shopping Centre P r e f e r e n c e , " J o u r n a l of Marketing 32 ( A p r i l 1968): 57-61. 17 W. Cox and E. Cooke, "Other Dimensions Involved i n Shopping Centre P r e f e r e n c e , " J o u r n a l of Marketing 34 (October 1970): 12-17. 18 Gary E l d r e d and Robert Z e r b s t , "Consumer Research and the Real E s t a t e A p p r a i s e r , " The A p p r a i s a l J o u r n a l 44 (October 1976): 511. 19 E. Watkins and V. Vandemark, "Consumer Information Strengthens Market Information Systems," J o u r n a l of Retailing 47 (Spring 1971): 49-54, and W. Weale, "Measuring the Customer's Image of a Department Store,!" J o u r n a l of R e t a i l i n g 37 (Summer 1961): 40-48. 20  D. Thompson, "Future Research," p.11. 21 I b i d . , p.  12.  D i r e c t i o n s i n R e t a i l Trade Area  CHAPTER THREE TRADE AREA ANALYSIS: APPLICATION  35  3.1  I n t r o d u c t i on  T h i s chapter has two  o b j e c t i v e s : (1) i t - , o u t l i n e s  p r a c t i c a l methods o f d e v e l o p i n g a trade area a n a l y s i s 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 and techniques  sources  t h a t form the b a s i s of 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 analysis.  To accomplish  these o b j e c t i v e s , the chapter draws  most of i t s content from Marketing  Geography, f o r reasons  of a p p l i c a b i l i t y which are d i s c u s s e d i n chapter two.  The  chapter begins by o u t l i n i n g a g e n e r a l procedure  f o r analysing  a trade area.  i s described  Next, each step o f the procedure  - i n c l u d i n g r e l a t e d trade area c h a r a c t e r i s t i c s , of a p p l i c a t i o n and data sources. e x p l a i n s how through  r e t a i l i n g o p p o r t u n i t i e s can be  chapter  identified  techniques.  General Procedure  f o r A n a l y s i n g a Trade Area  A trade area a n a l y s i s may The  In c o n c l u s i o n , the  a s y n t h e s i s of trade area i n f o r m a t i o n and s a l e s  forecasting  3.2  techniques  a n a l y s t may  or he may  be developed  f o r two  purposes.  have a s i t e f o r which a r e t a i l use i s needed  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 o b j e c t i v e of the a n a y l s t i s to l o c a t e a s i t e f o r 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 t i o n ) needs of the use i n q u e s t i o n . or more s i t e s to determine how  (loca-  He than can analyse  w e l l the trade area  one  Xlocation)  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 s u b j e c t use.  I f the o b j e c t i v e of the a n a l y s t i s t o f i n d a user  f o r a p a r t i c u l a r s i t e , the emphasis of h i s a n a l y s i s w i l l vary.  Instead of c o n s i d e r i n g one or more s i t e s i n r e l a t i o n  t o the trade area  ( l o c a t i o n ) needs of a s p e c i f i c use,  he  c o n s i d e r s one or more uses i n r e l a t i o n t o the t r a d e 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 the s i t e i n q u e s t i o n . For both o b j e c t i v e s , four b a s i c steps can be f o l l o w e d to develop  a trade area a n a l y s i s .  These steps a r e :  (1)  trade area d e l i n e a t i o n ,  (2) d e s c r i p t i o n of p o p u l a t i o n  income c h a r a c t e r i s t i c s ,  (3) e v a l u a t i o n of the  value of the s i t e , and  merchandising  (4) use of s a l e s f o r e c a s t i n g 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 . these four steps have r e l e v a n c e f o r most of the spaces  and  to be found i n an urban a r e a .  cases where an a n a l y s t may  Together, retail  However, there are  concentrate h i s a n a l y s i s on some  o f the steps w h i l e e l i m i n a t i n g o t h e r s .  For example,  one  case would be a r e t a i l space l o c a t e d i n a h o t e l lobby where the t r a d e area would be comprised traffic.  of p a s s i n g p e d e s t r i a n  Here, i t would not u s u a l l y be necessary  a n a l y s t to examine s t r e e t networks or competing areas to d e f i n e the trade area.  f o r the shopping  Therefore, f l e x i b i l i t y  on  the part of the a n a l y s t i s r e q u i r e d to adapt h i s method of trade area a n a l y s i s to the problem a t hand.  3.3  Step One  The  - Trade Area D e l i n e a t i o n  f i r s t q u e s t i o n t h a t an a n a l y s t can ask about a  37  r e t a i l space i s , "Where w i l l  the p o t e n t i a l customers come  from?". An answer to t h i s q u e s t i o n w i l l i d e n t i f y the and shape of the space's  t r a d i n g area.  size  As an i n i t i a l  to answer t h i s q u e s t i o n the p r a c t i t i o n e r c o u l d begin o u t l i n i n g an area, beyond which the space would not ably be expected  to draw customers.  effort by  reason-  T h i s area w i l l be a  g e n e r a l i z a t i o n s i n c e the a c t u a l trade area t h a t i s e v e n t u a l l y i d e n t i f i e d i s dependent upon what r e t a i l i s proposed f o r the space.  facility  T h i s choice i s made at a l a t e r  stage i n the a n a l y s i s or i s a l r e a d y known, depending on whether the a n a l y s t i s s e a r c h i n g f o r a s i t e or f o r a u s e r . S e v e r a l f a c t o r s which can be c o n s i d e r e d to d e l i n e a t e a trade area f o r 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 d e s c r i b e d .  R e t a i l l o c a t i o n type of the s u b j e c t s i t e  A r e t a i l space may of  be l o c a t e d i n any one of a number  d i f f e r e n t r e t a i l l o c a t i o n types.  Table 3.1  a u s e f u l summary of the v a r i o u s r e t a i l l o c a t i o n which an a n a l y s t may  encounter.  presents types  38  Table  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 A.  Unplanned Business Districts 1. Central Business district. 2. CBD String stores. 3. Secondary Business District. Serves p o r t i o n s of a c e n t r a l c i t y or a suburb. 4. Secondary String stores. A d j o i n secondary, business districts. 5. Neighborhood stores. Occur i n s m a l l c l u s t e r s or i n i s o l a t i o n . 6. Outlying Highway stores. Occur i n s t r i n g s or i n isolation.  B. Planned Shopping Centers 1. CBD Planned Shopping Center. A r i s e through urban renewal. 2. Regional Planned Shopping Center. In s t r o n g 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 s m a l l e r 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 p a r t , upon the p a s s i n g parade of highway t r a f f i c . Source:  W. Applebaum and S. Cohen, "S.tore T r a d i n g Areas i n a Changing Market," J o u r n a l of R e t a i l i n g . 3 7 :.\ ( F a l l 1961) : 20. .'. .  From t a b l e 3.1, or unplanned.  shopping areas can be c l a s s i f i e d as planned Within  each c l a s s i f i c a t i o n , there e x i s t s a  h i e r a r c h y of shopping areas a c c o r d i n g drawing power. type,  Generally,  to s i z e and  associated  the larger'.the r e t a i l l o c a t i o n  the l a r g e r will-be'the.".area" from-'which i t d e r i v e s most  of i t s s a l e s .  T h i s r e l a t i o n s h i p i s r e f e r r e d to as drawing  power. In a d d i t i o n to s i z e , the k i n d of r e t a i l  associations  t h a t comprise the r e t a i l l o c a t i o n type a l s o i n f l u e n c e drawing  39 power and the r e s u l t i n g s i z e and shape of a trade area f o r a subject s i t e .  Explaining this  relationship,  Nelson d i s t i n g u i s h e s among three main business (1) g e n e r a t i v e , (2) shared and  sources:  (3) suscipient."''  business i s represented by customers who  are p r i m a r i l y  a t t r a c t e d t o an area f o r the purpose of shopping particular store.  T h i s business i s produced  i t s e l f and i s r e p r e s e n t a t i v e of i t s own  Generative  at a  by the s t o r e  drawing power.  the other hand, shared b u s i n e s s i s business r e s u l t i n g customers who  have, as t h e i r primary o b j e c t i v e ,  at a n e i g h b o r i n g s t o r e ( s ) .  On from  shopping  In c o n t r a s t , s u s c i p i e n t b u s i n e s s  i s r e p r e s e n t e d by customers whose i n t e n t i o n f o r b e i n g i n the area i s other than shopping  and who  are c o i n c i d e n t a l l y  a t t r a c t e d t o the s t o r e . Applebaum s t a t e s t h a t , In theory, the j T t r a d e a r e a j boundary of the most powerful s t o r e [ s t o r e g e n e r a t i n g the most b u s i n e s s j w i l l a l s o serve as the boundary of a l l o t h e r s t o r e s .  2  In p r a c t i c e , however, the analyst-must  e x e r c i s e judgement  i n d e l i n e a t i n g trade area boundaries.  I f a s i t e i s occupied  by.only one  s t o r e , then t h a t s t o r e must e x e r t a l l the p u l l i n g  power t o generate business sources.  customers s i n c e i t cannot r e l y upon shared I f the s i t e i s a s s o c i a t e d w i t h other  s t o r e s , then i t s trade area may  be i n f l u e n c e d by the drawing  power of these s t o r e s i n combination w i t h i t s own power.  drawing  In each case, however, competition from o t h e r  retail  l o c a t i o n types and f a c t o r s of a c c e s s i b i l i t y g e n e r a l l y serve to d e l i n e a t e the s i t e ' s outermost  trade area  boundaries.  40  Data sources and  techniques  At t h i s i n i t i a l stage i n h i s data g a t h e r i n g  program,  the a n a l y s t can r e c o r d the r e t a i l l o c a t i o n type o f the subject s i t e .  I f the r e t a i l l o c a t i o n type i s c h a r a c t e r i z e d  by more than one s t o r e , a marketing map can be s t a r t e d . This map would show the types o f b u s i n e s s e s ,  the merchandise  l i n e s they c a r r y and t h e i r p o s i t i o n i n r e l a t i o n t o the subject s i t e . municipal  Maps f o r t h i s purpose can be o b t a i n e d  o r r e g i o n a l government o f f i c e s .  from  Commercial s t r e e t  d i r e c t o r i e s t h a t cross r e f e r e n c e businesses 3  by t h e i r s t r e e t  addresses can a l s o be o f a s s i s t a n c e .  Influence of a c c e s s i b i l i t y Cohen and Applebaum d e f i n e a c c e s s i b i l i t y as, a concept t h a t i s u s u a l l y 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 t h a t has good a c c e s s i b i l i t y i s one t h a t i s e a s i l y reached by customers. . . 4 T h i s d e f i n i t i o n i m p l i e s t h a t a c c e s s i b i l i t y can be e v a l u a t e d by examining two factors:. (.1) d i s t a n c e and (2) ease o f customer movement.  For the purpose o f d e l i n e a t i n g a trade  area, these two f a c t o r s can be examined i n a comparative sense. Thus, the a n a l y s t can compare the a c c e s s i b i l i t y o f two o r more shopping areas f o r p o t e n t i a l customers. when considered and  T h i s comparison  along with other f a c t o r s such as the s i z e  a t t r a c t i v e n e s s o f the competing c e n t r e s and customer  shopping h a b i t s w i l l p r o v i d e  the necessary i n f o r m a t i o n t o  41 determine the s i z e and shape o f the s u b j e c t s i t e ' s trade area i n r e l a t i o n to the proposed'use. Distance and ease o f customer movement between two or more r e t a i l  location  types can be evaluated by c o n s i d e r i n g  an area's road network and b a r r i e r s w i t h i n t h i s network. traffic  t o movement  existing  The road network serves t o d i r e c t  and hence p o t e n t i a l  customers.  Barriers,  on the  other hand, impede t h i s movement by i n f l u e n c i n g the potential  customer's p e r c e p t i o n o f d i s t a n c e and ease o f  movement. 5 Mertes  has developed a u s e f u l  framework t h a t an a n a l y s t  c o u l d use t o examine an area's road network i n r e l a t i o n t o the  a c c e s s i b i l i t y o f a s i t e or shopping area.  c l a s s i f i e d according to t h e i r function. are  viewed as t r a f f i c accumulators.  traffic  Residential  streets  They serve t o move  from i t s p l a c e o f o r i g i n t o major thoroughfares.  Major thoroughfares assemble t r a f f i c streets  Roads": are  and move t h i s t r a f f i c  from the r e s i d e n t i a l  t o other roads c a l l e d  traffic  d i s t r i b u t o r s which, i n t u r n , move t r a f f i c t o and from major business The be  districts. a c c e s s i b i l i t y o f s i t e s or shopping areas can then  e v a l u a t e d by c o n s i d e r i n g t h e i r l o c a t i o n  these roads.  i n r e l a t i o n to  For example, a s i t e l o c a t e d at the i n t e r s e c t i o n  of two major thoroughfares w i l l have g r e a t e r a c c e s s i b i l i t y to move p o t e n t i a l intersection Similarly,  customers than a s i t e l o c a t e d at the  of a r e s i d e n t i a l street  and a major thoroughfare.  a s i t e l o c a t e d i n a major b u s i n e s s d i s t r i c t  will  42  have the g r e a t e s t 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 o f 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 f e d  by both r e s i d e n t i a l s t r e e t s and major t h o r o u g h f a r e s .  It  i s t h i s convergence o f t r a f f i c t h a t i n f l u e n c e s the s i z e o f a s i t e ' s trading area. The road network a l s o serves t o i n f l u e n c e the shape of  a trade area.  Applebaum and Cohen stater.- t h a t ,  In g e n e r a l , s t o r e t r a d i n g areas are elongated i n the d i r e c t i o n o f customer movement. 6 Since t r a f f i c o r p o t e n t i a l customer movement i s c e n t r i p e t a l towards the major business d i s t r i c t s due t o s t r e e t p a t t e r n s , the trade areas t h a t emerge w i l l be i n f l u e n c e d by these patterns.  T h e i r boundaries  will  tend t o p a r a l l e l r a t h e r  than c u t across p a t t e r n s o f movement. An e v a l u a t i o n o f a c c e s s i b i l i t y can a l s o c o n s i d e r b a r r i e r s to movement.  B a r r i e r s t o movement can be r e f e r r e d t o as  natural or a r t i f i c i a l .  They are important  to consider  s i n c e they may i n f l u e n c e a p o t e n t i a l customer's p e r c e p t i o n of  d r i v i n g time o r ease o f movement.  Examples o f n a t u r a l  b a r r i e r s are r i v e r s , g r e e n b e l t s and other characteristics. areas, t r a f f i c  topographic  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  congestion o r a c u l t u r a l break between a  f a s h i o n a b l e suburb and a slum a r e a .  Because, the impact o f  such b a r r i e r s cannot be measured p r e c i s e l y , an a n a l y s t must e x e r c i s e judgement when a s s e s s i n g t h e i r i n f l u e n c e on the 7 s i z e and shape of a trade a r e a .  43  Data sources and techniques  A s t r e e t map o f the area can a s s i s t the a n a l y s t i n e v a l u a t i n g the a c c e s s i b i l i t y o f the s u b j e c t s i t e .  On t h i s  map, n a t u r a l and a r t i f i c i a l b a r r i e r s t o movement c o u l d be i d e n t i f i e d and s t r e e t s c o u l d be c l a s s i f i e d a c c o r d i n g t o their function.  When t h i s map i s examined i n r e l a t i o n t o  competing shopping  areas, the a n a l y s t w i l l be i n a p o s i t i o n  to d e l i n e a t e the trade area o f the s u b j e c t s i t e .  Maps f o r  t h i s purpose can be o b t a i n e d from v a r i o u s government or commercial  agencies.  I n f l u e n c e o f competing shopping  areas and e s t i m a t i o n  o f t r a d e area  A f t e r the a n a l y s t has analysed the r e t a i l l o c a t i o n  type  and a c c e s s i b i l i t y o f the s u b j e c t s i t e , he i d e n t i f i e s competing shopping  areas.  These areas can be d e f i n e d as  r e t a i l l o c a t i o n types which are reasonable  alternatives for  p o t e n t i a l customers i n terms o f l o c a t i o n , s i z e and merchandise lines.  Together  they form the extreme p o i n t s beyond which  p o t e n t i a l customers would g e n e r a l l y not be drawn t o the subject  site.  The p a t t e r n of trade areas t h a t c h a r a c t e r i z e s an urban area i l l u s t r a t e s the nature and i n f l u e n c e o f competing shopping  areas.  W i t h i n t h i s p a t t e r n , the t r a d i n g area of  the C.B.D. i s completely  superimposed upon the e n t i r e urban  44  area.  S i m i l a r l y , the t r a d i n g area o f a r e g i o n a l  centre may  superimpose  neighborhood  i t s e l f upon t h a t of a community or  shopping c e n t r e .  i s o l a t e d neighborhood  shopping  W i t h i n t h i s framework,  s t o r e s w i l l have s m a l l e r t r a d i n g g  areas w i t h i n the boundaries of the l a r g e r  ones.  The o b j e c t i v e of the a n a l y s t i s to determine  the e x t e n t  ( s i z e and shape) t o which the t r a d i n g area of a s u b j e c t s i t e f i t s i n t o the o v e r a l l trade area p a t t e r n .  To accomplish  t h i s o b j e c t i v e , p r a c t i t i o n e r s have c o n v e n i e n t l y d i v i d e d 9  t r a d i n g areas i n t o three zones.  The zone o f g r e a t e s t  p o t e n t i a l or drawing power i s r e f e r r e d C t o as the primary trading area.  The primary t r a d i n g area or zone a c c o r d i n g  to p r a c t i c e , i s expected to c o n t r i b u t e approximately t h i r d s of the s i t e ' s p o t e n t i a l customers.  The  two  secondary  zone i s the area beyond the primary zone t h a t i s s t i l l expected t o y i e l d customers  but t o a l e s s e r degree due t o  the c o u n t e r - p u l l of competing  centres.  T h i s zone u s u a l l y  c o n t r i b u t e s most of the remaining customers f o r by the primary zone.  not  accounted  The t e r t i a r y or f r i n g e zone i s  regarded as a c a t c h a i l area f o r customers by e i t h e r the primary or secondary  not accounted f o r  zones.  Data sources and techniques  Applebaum suggests the use of customer techniques to determine these zones.  spotting  Using t h i s technique,  an a n a l y s t would i n t e r v i e w shoppers p a s s i n g the s u b j e c t s i t e  45  to determine t h e i r addresses.  The  sample of  addresses  o b t a i n e d would then be p l o t t e d on a customer d i s t r i b u t i o n map  t h a t has been d i v i d e d i n t o segments r e p r e s e n t i n g b l o c k s  or zones of i n c r e m e n t a l d i s t a n c e from the s i t e .  The  number of customers i n each segment i s then computed as a percentage percentages  of the t o t a l number of customers surveyed.  would r e p r e s e n t the s i t e ' s p o t e n t i a l t r a d i n g  area expressed centages  These  i n terms of drawing power.  the s i t e ' s primary,  area' . c o u l d be  secondary  From these  per-  and t e r t i a r y t r a d i n g  estimated."*"^  Another technique makes use of a competition map. map  i d e n t i f i e s surrounding  shopping  i n r e l a t i o n to the s u b j e c t area.  areas and t h e i r  These shopping  This  location  areas  are  then c l a s s i f i e d a c c o r d i n g to t h e i r r e t a i l l o c a t i o n type both the number and type of s t o r e s . i n each shopping are l i s t e d i n the same f a s h i o n as was  and  area  done f o r the s u b j e c t  area. In d e c i d i n g how  many shopping  on the competition map,  areas should be  the a n a l y s t uses h i s judgement.  example, an i s o l a t e d neighborhood s t o r e may hood shopping  c e n t r e on one  centre on the other s i d e . t h a t these two  shopping  store's trading area.  identified  have a  s i d e and a community  For  neighbor-  shopping  In t h i s case, i t c o u l d be assumed  areas form the outer l i m i t s of the On the other hand, the trade area  boundary of a r e g i o n a l shopping  centre would not be bounded  by a c l u s t e r of neighborhood s t o r e s .  Instead, the trade  area of the neighborhood s t o r e s would resemble an  island  46  w i t h i n the l a r g e r trade area o f the c e n t r e . Once the a n a l y s t has i d e n t i f i e d competing  shopping  areas i n t h i s f a s h i o n , he compares t h e i r a c c e s s i b i l i t y t o potential site.  customers w i t h the a c c e s s i b i l i t y o f the s u b j e c t  Using the i n f o r m a t i o n gathered on h i s marketing maps,  the a n a l y s t can then estimate the approximate s i z e and shape o f the subject, s i t e Is trade area."'""'" Another technique t h a t the a n a l y s t c o u l d use i n conj u n c t i o n w i t h h i s c o m p e t i t i o n map i s c a l l e d the "microcosm 12 technique."  Using t h i s technique, the e n t i r e  t r a d i n g area  i s f i r s t d e l i n e a t e d w i t h the a s s i s t a n c e o f road and comp e t i t i o n maps t o encompass an area beyond the p o s s i b l e draw of t h e s u b j e c t s i t e . s m a l l segments.  Next, t h i s area i s d i v i d e d i n t o s e v e r a l  Interviews are h e l d w i t h a sample o f shoppers  from each segment t o determine as what percentage goods and where.  t h e i r shopping h a b i t s such  o f f a m i l y income i s spent on v a r i o u s Using t h i s i n f o r m a t i o n , the drawing power  of the s u b j e c t s i t e i s estimated i n r e l a t i o n t o competing c e n t r e s t a k i n g i n t o account  such f a c t o r s as a c c e s s i b i l i t y ,  the s i z e o f competing c e n t r e s and t h e i r a t t r a c t i v e n e s s .  A  judgement i s then made as t o how many businesses the s u b j e c t s i t e :might a t t r a c t dise l i n e s .  from each segment f o r d i f f e r e n t merchan-  In t h i s manner trade areas f o r d i f f e r e n t  merchandise l i n e s can be determined  by the a n a l y s t .  47  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 Characteristics  A 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 a s s o c i a t e d w i t h a trade area i s important First/  f o r three  reasons.  such a d e s c r i p t i o n w i l l p r o v i d e the a n a l y s t w i t h  data t h a t he can use t o i d e n t i f y growth trends w i t h i n the trade a r e a .  Second i t p r o v i d e s the b a s i s upon which the  a n a l y s t can i n i t i a l l y  determine the type and q u a l i t y o f  goods o r s e r v i c e s most l i k e l y t o be in.demand by p o t e n t i a l customers l i v i n g  i n the trade a r e a .  T h i r d , data  gathered  at t h i s stage can be used l a t e r t o compute s a l e s f o r e c a s t s f o r proposed  uses.  P o p u l a t i o n trends  The p o p u l a t i o n of a trade area may be s t a b l e , or growing.  declining  W i t h i n t h i s o v e r a l l growth p a t t e r n , other demo-  g r a p h i c trends may be o c c u r r i n g .  F o r example, a trade  area's  o v e r a l l p o p u l a t i o n s i z e may be s t a b l e , but an i n - m i g r a t i o n of young f a m i l i e s may be b a l a n c i n g an o u t ^ m i g r a t i o n o f e l d e r l y couples.  I t i s the task o f the a n a l y s t t o n o t i c e  these trends s i n c e they can a s s i s t i n i d e n t i f y i n g market opportunities for potential r e t a i l  businesses.  To determine an area's o v e r a l l p o p u l a t i o n t r e n d the a n a l y s t can make use o f s e v e r a l sources o f i n f o r m a t i o n and 13 techniques.  Birnkrant  suggests,  t h a t as a f i r s t  step,  48  both h i s t o r i c and present p o p u l a t i o n  statistics  can be  gathered about the trade area and i t s surrounding politan configuration.  Future  metro-  growth r a t e s can then be  p r e d i c t e d by u s i n g methods based on numerical  increase,  percentage i n c r e a s e or percentage share of a l a r g e r a r e a . The  numerical  i n c r e a s e method examines p o p u l a t i o n  t h a t has occurred.over  growth  a s p e c i f i e d time p e r i o d and p r o j e c t s  t h i s same growth over a s i m i l a r f u t u r e p e r i o d .  The per-  centage i n c r e a s e method assumes t h a t c u r r e n t and f u t u r e growth p a t t e r n s w i l l be p r o p o r t i o n a t e l y s i m i l a r t o p a s t percentage i n c r e a s e s , using the preceding year f o r the c a l c u l a t i o n s .  year as a base  In the percentage share o f a  l a r g e r area, the a n a l y s t assumes t h a t the trade  area's  growth w i l l r e f l e c t o v e r a l l growth p a t t e r n s o f the metrop o l i t a n area.  Estimates  of future population  growth  trends  d e r i v e d from these three methods are then a d j u s t e d , a f t e r c o n s i d e r i n g the p o t e n t i a l growth c h a r a c t e r i s t i c s o f each trade  area. T h i s c o n s i d e r a t i o n w i l l i n v o l v e examining such f a c t o r s  as: 1 — Known f a c t o r s r e l a t i n g t o the probable f u t u r e p o p u l a t i o n growth o f the community, such as plans f o r i n d u s t r i a l development. 2 - Amount o f d e s i r a b l e r e s i d e n t i a l l a n d w i t h i n the t r a d i n g area a v a i l a b l e f o r f u t u r e development. 3 - S p e c i f i c f a c t s r e l a t i n g t o near-term r e s i d e n t i a l development, such as b u i l d i n g permits i s s u e d and announced plans f o r housing p r o j e c t s . 14 Consideration  o f these f a c t o r s w i l l a s s i s t the a n a l y s t i n  49  i n determining  p o t e n t i a l growth p a t t e r n s t h a t can be used  to modify h i s p o p u l a t i o n f o r e c a s t f o r the trade The  area.  a n a l y s t can use h i s i n f o r m a t i o n on growth  as an i n i t i a l i n d i c a t i o n o f market o p p o r t u n i t y . area's p o p u l a t i o n i s growing, by determining  trends  I f a trade  the composition  of t h i s growth, he w i l l be able t o t r a n s l a t e t h i s  information  i n t o f a c t o r s o f demand f o r v a r i o u s goods and s e r v i c e s . I f growth i s c h a r a c t e r i z e d by young f a m i l i e s moving i n t o s i n g l e detached d w e l l i n g s , a market o p p o r t u n i t y may e x i s t f o r l i n e s o f merchandise such as major a p p l i a n c e s , f u r n i t u r e and other products ownership.  r e l a t e d . t o new f a m i l y formation and home  On the other hand, i f p o p u l a t i o n i s d e c l i n i n g  the a n a l y s t can i n v e s t i g a t e the causes o f the d e c l i n e . F o r example, the cause may be due t o maturing neighborhoods where sons and daughters are l e a v i n g home. i n a trade area comprised mainly  This could r e s u l t  o f r e t i r e d households.  In  t h i s case, the a n a l y s t c o u l d ^ c o n s i d e r goods and s e r v i c e s f o r h i s s u b j e c t s i t e t h a t are r e q u i r e d by t h i s segment o f the p o p u l a t i o n .  Data sources and techniques  To s a t i s f y h i s data requirements  the a n a l y s t can o b t a i n  p o p u l a t i o n data from S t a t i s t i c s Canada f o r years ending i n one  and s i x .  T h i s source  d e s c r i b e s p o p u l a t i o n by census  t r a c t s which are s m a l l g e o g r a p h i c a l areas w i t h i n a d e f i n e d m e t r o p o l i t a n area.  Diagram 3.1 presents an example o f how  a p o r t i o n o f Vancouver i s s u b d i v i d e d i n t o census t r a c t s .  50  Diagram  3.1  Vancouver Census T r a c t s  Source: S t a t i s t i c s Canada, Vancouver Census T r a c t Map Vancouver O f f i c e , S t a t i s t i c s Canada, 1979. I f a trade area corresponded  to census t r a c t 28, the  a n a l y s t c o u l d r e f e r to S t a t i s t i c s Canada Catalogue  95-82 8  which would show the p o p u l a t i o n s i z e of t h i s census t r a c t f o r v a r i o u s census y e a r s . correspond  However, a trade area may not  t o a census t r a c t .  To overcome  t h i s problem,  S t a t i s t i c s Canada, s i n c e 1971, f i l e s census data i n a computer bank l a b e l e d "Cansim."  For a small f e e , a  51  non-government s e r v i c e named T e t r a d Computer A p p l i c a t i o n s L t d . w i l l r e t r i e v e census data from t h i s computer bank f o r any  s i z e or shape of trade  area.^  Another source of i n f o r m a t i o n that, the a n a l y s t can use to i d e n t i f y p o p u l a t i o n trends i s the " F i n a n c i a l  Post  17  Survey of Markets."  T h i s p u b l i c a t i o n shows the  overall  m e t r o p o l i t a n growth r a t e and estimates p o p u l a t i o n s i z e f o r intereensus years. r e g i o n a l and  In a d d i t i o n to t h i s source,  l o c a l l e v e l s of government can be  These agencies may  of the m e t o r p o l i t a n area.  data can a l s o be gathered  The  consulted.  even be .able to supply the a n a l y s t w i t h  a c u r r e n t p o p u l a t i o n map  s p o t t i n g " and  provincial,  Population  i n c o n j u n c t i o n w i t h the "consumer  "microcosm" techniques  discussed  earlier.  a n a l y s t 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 p o p u l a t i o n  trends.  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  A f t e r the a n a l y s t has  i d e n t i f i e d growth t r e n d s , he  d e s c r i b e 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 of the area.  can  trade  P o p u l a t i o n s i z e can be s u b d i v i d e d i n t o such c a t e g o r i e s  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 v a r i a b l e s t h a t can examined.  Due  be  to the l a r g e number of " v a r i a b l e s , the a n a l y s t  begins by examining broad  demographic c l a s s i f i c a t i o n s .  L a t e r i n the a n a l y s i s , as r e t a i l uses are proposed, other s i g n i f i c a n t v a r i a b l e s r e l a t e d to these uses can be examined.  52  For example, the e d u c a t i o n a l l e v e l of the p o p u l a t i o n w i l l have more s i g n i f i c a n c e f o r a book s t o r e than a grocery store.  S i m i l a r l y , the number of s i n g l e - d e t a c h e d owner  o c c u p i e d d w e l l i n g s as opposed to m u l t i - r e s i d e n t i a l u n i t s w i l l be important  f o r a s t o r e marketing  lawn and  garden  supplies. Income c h a r a c t e r i s t i c s are e q u a l l y important.  When  these c h a r a c t e r i s t i c s are broken down i n t o f a m i l y or househ o l d d i s p o s a b l e income, the s t r e n g t h of an area's power can be estimated.  Areas having h i g h  purchasing  household  d i s p o s a b l e incomes can be matched w i t h l u x u r y merchandise l i n e s or demand goods of a h i g h q u a l i t y . household  Areas w i t h  low  d i s p o s a b l e incomes, on the o t h e r hand, w i l l  have l e s s demand f o r t h i s type of merchandise  Data sources and  line.  techniques  The a n a l y s t can s a t i s f y h i s data requirements  with  r e s p e c t t o 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 from s e v e r a l sources.  As an i n i t i a l s t e p , the annual S t a t i s t i c s Canada 18  Catalogue  can be c o n s u l t e d .  T h i s catalogue c o n t a i n s a  list  and b r i e f d e s c r i p t i o n of p u b l i c a t i o n s c o n t a i n i n g census information. p r o v i d e data.  Compusearch, as an a l t e r n a t i v e source, can a l s o However, d u r i n g i n t e r c e n s a l y e a r s , data from  these sources w i l l have to be updated. To update census data, the a n a l y s t can c o n s u l t the " F i n a n c i a l Post Survey of Markets."  T h i s annual  publication  53  p r o v i d e s estimates o f c u r r e n t p o p u l a t i o n and per c a p i t a d i s p o s a b l e income by m e t r o p o l i t a n r e g i o n s .  Statistics  19 Canada catalogue annual  13-20 7  can a l s o be used.  Based on an  survey, the p u b l i c a t i o n p r o v i d e s estimates o f f a m i l y  and household  incomes f o r major urban areas.  As an a l t e r n a t i v e t o S t a t i s t i c s Canada i n f o r m a t i o n or f o r updating purposes, techniques.  the a n a l y s t can r e l y upon survey  In c o n j u n c t i o n w i t h e i t h e r the "customer  s p o t t i n g " o r "microcosm" techniques d i s c u s s e d e a r l i e r , the a n a l y s t can r e p l i c a t e census data about income and p o p u l a t i o n characteristics.  T h i s method has the advantage o f p r o v i d i n g  c u r r e n t i n f o r m a t i o n t h a t can be t a i l o r e d t o the s p e c i f i c data needs o f the a n a l y s t . 3.5  Step Three - Merchandising  Value o f the S i t e  Up t o t h i s p o i n t , the a n a l y s t has been g a t h e r i n g data on s e v e r a l trade area c h a r a c t e r i s t i c s .  T h i s data has  a s s i s t e d him t o t e n t a t i v e l y i d e n t i f y merchandise l i n e s o r r e t a i l a c t i v i t i e s which c o u l d be matched w i t h the s u b j e c t space.  A " f u r t h e r i n d i c a t i o n o f market o p p o r t u n i t y i s o b t a i n e d  when the p r a c t i t i o n e r e v a l u a t e s these p o t e n t i a l uses i n r e l a t i o n t o the merchandising  value o f the s i t e .  c h a n d i s i n g value of a" . r e t a i l space i s determined  The merby a n a l y s i n g  the t r a f f i c flow past the s i t e ; and business environment ;  c h a r a c t e r i s t i c s such as r e t a i l a s s o c i a t i o n s , s t r e e t visibility  and p a r k i n g  availability.  location,  54  Traffic  flow  Traffic  flow past a s i t e  can be separated i n t o  h i c u l a r and p e d e s t r i a n t r a f f i c .  These two  can then be analysed as to q u a n t i t y and Regarding  ve-  types of  traffic  composition.  q u a n t i t y , the speed and volume o f p a s s i n g  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 s i d e of the s t r e e t on which the i s located. manner. to  Pedestrian t r a f f i c  Passing t r a f f i c  i t s purpose.  going shopping  I t may  can be counted  site  in a similar  can a l s o be e v a l u a t e d a c c o r d i n g be going to work, r e c r e a t i o n a l ,  or r e t u r n i n g home.  Proposals to widen s t r e e t s  and i n c r e a s e p a r k i n g f a c i l i t i e s or changing  l a n d uses can  then be c o n s i d e r e d as these c o u l d p o t e n t i a l l y a f f e c t  the  20  traffic The  flow p a s t the  site.  a n a l y s t can r e l a t e the f i n d i n g s from a  traffic  flow a n a l y s i s to the types of customers r e q u i r e d by kinds o f r e t a i l a c t i v i t i e s .  Generally, stores that rely  upon s u s c i p i e n t business sources for  different  ( i . e . people whose purpose  being i n the area i s o t h e r than shopping)' r e l y more upon  the q u a n t i t y of p a s s i n g t r a f f i c than on i t s composition. S t o r e s r e l y i n g upon shared business sources whose primary o b j e c t i v e i s shopping  a t a nearby s t o r e )  be l e s s r e l i a n t upon o v e r a l l q u a n t i t y . be more concerned  ( i . e . customers  w i t h the composition  will  These s t o r e s w i l l of the t r a f f i c  flow  as t h i s flow r e l a t e s t o t h e i r customer needs.. S t o r e s t h a t generate  business  ( i . e . s t o r e s t h a t a t t r a c t customers whose  55  primary purpose i s shopping not concerned of  at the s t o r e i n question)  as much about t r a f f i c  congestion.  are  flow as w i t h the absence  For these types of s t o r e s , the c a p a c i t y of  the s t r e e t t o c o n v e n i e n t l y accomodate t h e i r customers 21 d u r i n g shopping hours i s of prime Besides e v a l u a t i n g t r a f f i c  importance.  flow i n r e l a t i o n t o business  sources, the a n a l y s t can c o n s i d e r merchandise l i n e s or s p e c i f i c uses.  For example, d r y - c l e a n i n g e s t a b l i s h m e n t s  p r e f e r t o l o c a t e on the s i d e of the s t r e e t t h a t customers pass going t o work.  Customers drop t h e i r c l e a n i n g on the way  work and p i c k i t up on the way  back.  to  Convenience food s t o r e s ,  on the other hand, p r e f e r the r e t u r n i n g home s i d e of the 22 street. Data sources and  techniques  The type and e x t e n t of t r a f f i c data t h a t an a n a l y s t gathers will  depend on the s u b j e c t s i t e and the b u s i n e s s  r e q u i r e d by the proposed  uses.  sources  V e h i c u l a r t r a f f i c counts  u s u a l l y a v a i l a b l e from the c i t y e n g i n e e r i n g department. volume of p e d e s t r i a n t r a f f i c  are The  can be counted by o b s e r v a t i o n . 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 s p o t t e r s can be employed t o c l a s s i f y t r a f f i c ing or  to s p e c i f i c c r i t e r i a .  For example, people c a r r y i n g bags  e n t e r i n g s t o r e s can be i d e n t i f i e d as shoppers.  on the time of day, people a t bus of  a s t r e e t may  accord-  Depending  stops on d i f f e r e n t s i d e s  be going t o or r e t u r n i n g from work.  Similar  56  c r i t e r i a may be used t o determine the composition o f vehicular t r a f f i c . record data.  Traffic  time t a b l e s can be used t o  These t a b l e s would show the volume o f d i f f e r e n t  types o f t r a f f i c and other c h a r a c t e r i s t i c s t h a t the a n a l y s t deems u s e f u l .  Business  environment  Business environment r e f e r s to a l l non-movement c h a r a c t eristics  associated with a s i t e l s  retail  location  type.  Major c h a r a c t e r i s t i c s t h a t can be e v a l u a t e d a r e p a r k i n g ,  access  and v i s i b i l i t y , and the l o c a t i o n and c h a r a c t e r o f neighboring  uses.  I f the r e t a i l  l o c a t i o n type i s an i s o l a t e d one  or a s m a l l c l u s t e r o f neighborhood s t o r e s , l e s s depth o f a n a l y s i s i s r e q u i r e d than f o r a l a r g e r shopping  area b e f o r e  p o t e n t i a l uses can be i d e n t i f i e d . The  a n a l y s t can f i r s t c o n s i d e r what p a r k i n g  facilities  are a v a i l a b l e and whether these are o f f or on the s i t e . T h i s i s p a r t i c u l a r l y important  i f the proposed use i s h i g h l y  dependent upon v e h i c u l a r t r a f f i c . 103  suburban r e t a i l shopping  F o r example, a survey o f  c e n t r e s found t h a t a r a t i o o f  5.5 p a r k i n g spaces per thousand square  f e e t o f gross l e a s a b l e  24 area i s the g e n e r a l requirement. l i t t l e walk-in t r a f f i c e x i s t s .  T h i s r a t i o a p p l i e s when Where shopping  d i s t r i c t s are  c e n t r a l l y l o c a t e d and served by mass t r a n s p o r t a t i o n or where a l a r g e amount o f w a l k - i n t r a f f i c rounding  i s o b t a i n e d from the s u r -  area, p a r k i n g requirements  are reduced.  Merchandise  x  57  l i n e s t h a t are c a r r i e d by the r e t a i l s t o r e a l s o i n f l u e n c e the amount of r e q u i r e d customer p a r k i n g .  As.an example,  a f u r n i t u r e s t o r e r e q u i r e s fewer p a r k i n g f a c i l i t i e s a drugstore because of i t s comparatively over and customer patronage.  The  than  lower stock t u r n -  drugstore, on the other  hand, has a h i g h stock turnover and i s very dependent upon vehicular t r a f f i c  f o r 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 f o r p o t e n t i a l customers the a n a l y s t notes the s i t e ' s r e l a t i v e to the t r a f f i c flow.  position  Using i n f o r m a t i o n t h a t  was  gathered e a r l i e r w i t h r e s p e c t to the s t r e e t network, he c o n s i d e r s the type of s t r e e t f r o n t i n g the s i t e .  Next, the  s i t e ' s l o c a t i o n i n r e l a t i o n to the s t r e e t i s noted. can be c l a s s i f i e d as c o r n e r , near corner or middle  Sites street.  G e n e r a l l y , s i t e s on or near a corner have the most v i s i bility  and access to p a s s i n g v e h i c u l a r t r a f f i c .  If  warranted, t r a f f i c o r i e n t e d businesses such as d r u g s t o r e s , s e r v i c e s t a t i o n s or dry c l e a n i n g establishments may  be 25  i d e n t i f i e d as p o t e n t i a l uses f o r these types df  sites.  A n a l y s i n g the c h a r a c t e r of n e i g h b o r i n g s t o r e s a l s o a s s i s t s the p r a c t i t i o n e r i n h i s i d e n t i f i c a t i o n process of p o t e n t i a l uses.  By a p p l y i n g fundamental r e t a i l i n g concepts,  p o t e n t i a l of the s u b j e c t space w i t h r e s p e c t to uses can be e v a l u a t e d .  surrounding  Nelson mentions s i x concepts  h e l p f u l f o r t h i s purpose.  The concepts  t h a t are  of g e n e r a t i v e , shared  and s u s c i p i e n t business were d e f i n e d e a r l i e r . other concepts  the  are business i n t e r c e p t i o n ,  The  three  cumulative  58  a t t r a c t i o n and c o m p a t i b i l i t y .  26  Business i n t e r c e p t i o n occurs when a r e t a i l e s t a b l i s h m e n t p o s i t i o n s i t s e l f between p o t e n t i a l customers and a store.  T h i s concept encompasses a " l e a s t e f f o r t "  r e g a r d i n g the consumer's shopping h a b i t s . to o u t l e t s merchandising of act  convenience  competing principle  I t can be a p p l i e d  goods.  The concept  cumulative a t t r a c t i o n means t h a t some s t o r e s w i l l  trans-  more b u s i n e s s together than i f they were w i d e l y s c a t t e r e d .  This concept can be used w i t h s t o r e s marketing goods where c l u s t e r i n g has a tendency  comparison  t o i n c r e a s e both the  s i z e and p e n e t r a t i o n o f the t r a d i n g a r e a .  Compatability  means t h a t some s t o r e s are more complementary than o t h e r s . Examples o f complementary s t o r e s would be those  marketing  women's c l o t h i n g , a c c e s s o r i e s , shoes, m i l l i n e r y and c o s m e t i c s .  Data source and techniques  O p e r a t i o n a l l y , the a n a l y s t can begin h i s e v a l u a t i o n of n e i g h b o r i n g uses by n o t i n g the b u s i n e s s  neighborhood's  g e n e r a l appearance and c o n s t r u c t i n g a marketing map.  This  map would i n i t i a l l y show the l o c a t i o n o f n e i g h b o r i n g uses and t h e i r g e n e r a l merchandise l i n e s .  The a n a l y s t c o u l d then  i d e n t i f y these uses a c c o r d i n g t o t h e i r b u s i n e s s source, b e g i n n i n g w i t h the g e n e r a t i v e and proceeding t o the s u s c i p i e n t and  shared. The a n a l y s t can use these recorded o b s e r v a t i o n s t o  f u r t h e r s e l e c t o r screen p o t e n t i a l uses f o r the s u b j e c t s i t e  59 depending on the o b j e c t i v e o f h i s a n a l y s i s  (i.e. a site  i n need o f a user o r a user i n need o f a s i t e ) .  I f the  s i t e i s adjacent t o a s t o r e t h a t generates b u s i n e s s , a s t o r e r e l y i n g upon a shared business source c o u l d be c o n s i d e r e d . Nelson's  concept o f cumulative  c o u l d a l s o be a p p l i e d .  a t t r a c t i o n and c o m p a t a b i l i t y  Thus, a p a i n t s t o r e c o u l d ben'efit-  from l o c a t i n g near f u r n i t u r e or hardware s t o r e s . chandise  I f mer-  l i n e s c a r r i e d by n e i g h b o r i n g businesses are  convenience  o r i e n t e d , the a n a l y s t may be able t o apply the  concept o f business i n t e r c e p t i o n i n s e l e c t i n g a use.  Further,  i f some n e i g h b o r i n g s t o r e s are u n a t t r a c t i v e , competing uses i n more a t t r a c t i v e f a c i l i t i e s c o u l d be  proposed.  In a d d i t i o n t o u s i n g a marketing map as a data  source,  the a n a l y s t c o u l d c o n s u l t the trade a s s o c i a t i o n p u b l i c a t i o n s t h a t are a v a i l a b l e .  These p u b l i c a t i o n s , sponsored by  v a r i o u s r e t a i l i n g groups  ( i . e . r e s t a u r a n t , g r o c e r y , hard-  ware e t c . ) , o f t e n c o n t a i n i n f o r m a t i o n oh the trade area ( l o c a t i o n ) requirements  o f d i f f e r e n t r e t a i l uses.  As such,  they are o f v a l u a b l e a s s i s t a n c e to the a n a l y s t who i s s e l e c t i n g a s i t e f o r a user o r a user f o r a s i t e .  3.6  Use o f Sales 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  During the p r e c e d i n g stages o f h i s trade area a n a l y s i s , the a n a l y s t has been g a t h e r i n g data which have a s s i s t e d him i n e i t h e r proposing uses f o r a p a r t i c u l a r s i t e or s c r e e n i n g  60  s i t e s f o r a s p e c i f i c user.  His remaining task i s t o  e v a l u a t e each use or s i t e , as the case may  be, i n terms o f  i t s p o t e n t i a l s a l e s g e n e r a t i n g a b i l i t y t o i d e n t i f y the or s i t e w i t h the h i g h e s t s a l e s volume . p o t e n t i a l . accomplished  by u s i n g v a r i o u s s a l e s f o r e c a s t i n g  use  This i s techniques  which can r e v e a l whether o p p o r t u n i t i e s f o r a proposed vent u r e are very f a v o r a b l e , a c c e p t a b l e , poor or n e a r l y 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 o b t a i n i n g a r e a l i s t i c a p p r a i s a l o f the s a l e s t h a t could be a t t a i n e d the a n a l y s t a l s o a s s i s t s i n determining the r e n t a l or investment  value of a s i t e .  Depending upon the use being c o n s i d e r e d , some techniques w i l l be more a p p l i c a b l e than o t h e r s .  Here, the a n a l y s t w i l l  have to e x e r c i s e judgement i n , choosing the t h a t can produce the most r e l i a b l e d a t a .  technique(s)  For example, f o r e -  c a s t i n g the s a l e s p o t e n t i a l of a s t o r e r e l y i n g upon s u s c i p i e n t business c o u l d b e s t be accomplished t h a t c o n s i d e r the merchandising  by  v a l u e of the s i t e  techniques and  p a r t i c u l a r l y the volume of p a s s i n g t r a f f i c •. r a t h e r than surrounding trade area.  the  On the other hand,. the s a l e s volume  p o t e n t i a l of s t o r e s r e l y i n g upon g e n e r a t i v e or shared business sources are b e s t estimated by techniques t h a t conc e n t r a t e on the surrounding' trade a r e a .  Since the focus o f  t h i s study i s trade area a n a l y s i s , the remaining p a r t of the chapter reviews s a l e s f o r e c a s t i n g techniques based on a s i t e ' s surrounding trade a r e a .  61 Determining  the volume of a v a i l a b l e  business  As an i n i t i a l s t e p , the a n a l y s t determines  the amount  t h a t i s spent by trade area r e s i d e n t s f o r the l i n e s of merchandise a s s o c i a t e d w i t h the proposed use. c u l a t i o n w i l l i n f o r m the a n a l y s t how  This c a l -  much t r a d e area r e s i d e n t s  spend on a commodity, r e g a r d l e s s o f whether t h e i r  purchases  are made i n s i d e or o u t s i d e of the trade area.  amount  i s c a l c u l a t e d by determining spent by v a r i o u s household  The  the average amount t h a t i s  types f o r a commodity and  by  m u l t i p l y i n g t h i s amount by the number of households r e s i d i n g 27 i n the trade a r e a . To i l l u s t r a t e the technique, suppose t h a t a s p o r t i n g goods s t o r e was  b e i n g c o n s i d e r e d f o r the s u b j e c t s i t e .  task of the a n a l y s t would be to determine how trade area r e s i d e n t s spend on s p o r t s equipment  The  much money purchases  made i n s i d e and o u t s i d e of the designated trade a r e a . determine t h i s amount, the a n a l y s t c o u l d use the s p o t t i n g " or "microcosm" techniques  To  "customer  discussed e a r l i e r .  Using  these techniques, the a n a l y s t c o u l d survey r e s i d e n t s on t h e i r expenditure p a t t e r n s f o r s p o r t i n g goods.  As an a l t e r n a t e  source of data, S t a t i s t i c s Canada p u b l i c a t i o n s c o u l d be used. S t a t i s t i c s Canada catalogue 62-547, Urban Family 28 Expenditure,  c o n t a i n s data on urban f a m i l y expenditure  p a t t e r n s based on a survey conducted  every two y e a r s .  i n f o r m a t i o n from t h i s p u b l i c a t i o n , the a n a l y s t can  .Using  estimate  the average amount t h a t trade area r e s i d e n t s spend on s p o r t i n g  62 goods.  For example, t a b l e 21!". of the p u b l i c a t i o n shows  t h a t the average  annual household expenditure i n Vancouver 29  f o r s p o r t i n g goods was  $51.70 i n 1976.  Other t a b l e s i n  the p u b l i c a t i o n c r o s s r e f e r e n c e expenditure p a t t e r n s w i t h s e l e c t e d demographic and income c h a r a c t e r i s t i c s based a survey of e i g h t major Canadian t a b l e 22 average  cities.  For example,  shows t h a t s i n g l e a d u l t households  spent an  of $13.10 on s p o r t i n g goods i n 1976 w h i l e  comprising of two  on  households  a d u l t s and three c h i l d r e n spent an  average of $58.00.^^  Other t a b l e s d e t a i l  by c l a s s of tenure and by income.  expenditures  From t a b l e 23, the an-  a l y s t would l e a r n t h a t homeowners w i t h mortgages spent an average 31  of $64.40 on s p o r t i n g goods w h i l e tenants  spent  $26.90.  Table 24 would show t h a t the g r e a t e s t v a r i a t i o n  of expenditures f o r s p o r t i n g goods i s e x p l a i n e d by income. For example, households  r e p o r t i n g incomes of between  $10,000.00 and $12,000.00 spent an average of $11.20 on . s p o r t i n g goods whereas those r e p o r t i n g incomes o f over $35,000.00 spent an average  of $133.60.  32  Using h i s p o p u l a t i o n and income data c o l l e c t e d  earlier,  the a n a l y s t c o u l d match these c h a r a c t e r i s t i c s w i t h the d a t a on urban  family expenditures.  He c o u l d then s e l e c t  those  demographic or income v a r i a b l e s t h a t he c o n s i d e r s t o be the most r e l e v a n t i n d i c a t o r s o f household expenditure p a t t e r n s f o r the proposed  l i n e of merchandise.  In t h i s manner, an  estimate of the amount spent f o r a commodity by each  household  i n the trade area can be c a l c u l a t e d t o a r r i v e a t the  total  63  volume of a v a i l a b l e b u s i n e s s . used w i t h e i t h e r the  This amount can then  be  " r e s i d u a l " or "share of the market"  techniques to f o r e c a s t the s a l e s p o t e n t i a l o f a proposed use.  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 using  The  the  " r e s i d u a l "^technique  " r e s i d u a l " technique i s u s e f u l f o r determining  r e l a t i v e ease of e n t r y of a proposed use and  i n t o a trade  the  area  can a l s o be used to estimate the s a l e s volume p o t e n t i a l  of the proposed use.  The  approach, i s to c o n s i d e r trade  area and  procedure, using  the  residual  a l l competing s t o r e s w i t h i n  to measure the degree to which they  s e r v i n g the trade  the  are  area i n terms of a c t u a l s a l e s volume.  The  estimated t o t a l amount of s a l e s by these s t o r e s i s then subtracted the trade  from the t o t a l volume of a v a i l a b l e business i n area t h a t was  calculated e a r l i e r .  The  residual  or r e s u l t i n g f i g u r e i n d i c a t e s the remaining margin of p o t e n t i a l a v a i l a b l e to the new  entrant.  To estimate the a c t u a l s a l e s volume of competing i n a trade  sales  area, the a n a l y s t f i r s t conducts a f i e l d  T h i s survey determines the c o n d i t i o n and  stores  survey.  s i z e (expressed i n  gross l e a s e a b l e  area) of a l l competing s t o r e s .  information  data from S t a t i s t i c s Canada, an estimate o f  and  Using t h i s  the volume of s a l e s o r i g i n a t i n g from s t o r e s w i t h i n trade area can be made.  the  64  For example, S t a t i s t i c s contains  Canada catalogue 63-210" ' 3  3  n a t i o n a l averages o f s a l e s per square f o o t f o r  chain s t o r e s s e l l i n g v a r i o u s merchandise l i n e s based on a survey conducted every two y e a r s .  Table D of catalogue  63-210 shows t h a t i n 1977, s p o r t i n g good s t o r e s s o l d an average of $142.00 o f merchandise per square f o o t of gross 34 l e a s a b l e area.  Therefore,  t o estimate the a c t u a l s a l e s  volume of competing s p o r t i n g good s t o r e s w i t h i n a trade  area,  the t o t a l area o f the competing s t o r e s c o u l d 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 s u b t r a c t e d  the t o t a l volume of a v a i l a b l e b u s i n e s s ,  from  the r e s i d u a l volume  of business a v a i l a b l e t o the proposed use i s o b t a i n e d . f i g u r e could then be m o d i f i e d  This  to r e f l e c t the s a l e s volume  of s t o r e s t h a t the a n a l y s t judges t o be below o r above average.  A f t e r the a n a l y s t has estimated the r e s i d u a l  volume of business a v a i l a b l e f o r a proposed use, he can d e r i v e estimates . f o r f u t u r e years';based on p o p u l a t i o n o r income trends  i n the trade area.  I f population  or income  i s expected t o i n c r e a s e , the r e s i d u a l volume o f a v a i l a b l e 35 business w i l l a l s o  increase.  The r e s i d u a l volume.of business a v a i l a b l e to a proposed use when compared with the t o t a l volume o f business a v a i l a b l e i n the trade area w i l l i n d i c a t e whether the proposed venture i s f a v o r a b l e or u n f a v o r a b l e . small or n o n - e x i s t e n t ,  I f the r e s i d u a l amount i s  a state of s a t u r a t i o n o r o v e r s t o r i n g  may e x i s t and the proposed venture may be poor or next to impossible.  Applebaum and Cohen d e f i n e s t o r e s a t u r a t i o n as,  65  a c o n d i t i o n under which e x i s t i n g s t o r e 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 e q u i l i b r i u m c o n d i t i o n does n o t p r e v a i l , a t r a d e area can be e i t h e r understored o r o v e r s t o r e d  with  respect  to a p a r t i c u l a r use. Examples o f c o n d i t i o n s o f unders t o r i n g are unusually travelling  h i g h s a l e s per square f o o t , customers  f u r t h e r than they wish i n order  crowded and slow shopping c o n d i t i o n s . when the reverse  conditions occur.  t o shop and  Overstoring  exists  The o b j e c t i v e o f the  a n a l y s t :is', , t h e r e f o r e , t o i d e n t i f y uses f o r which s t a t e s of u n d e r s t o r i n g  exist.  To estimate what percentage share o f the r e s i d u a l volume of a v a i l a b l e business t h a t a proposed use can capture, the a n a l y s t weighs s e v e r a l f a c t o r s .  These"factors  i n c l u d e the  s i z e o f the proposed f a c i l i t y , the merchandising value o f the s i t e , and the strengths  and weaknesses o f competing  s t o r e s i n r e l a t i o n t o the proposed one.  I f the r e s i d u a l  volume o f a v a i l a b l e b u s i n e s s is l a r g e i n r e l a t i o n t o the t o t a l volume o f a v a i l a b l e b u s i n e s s i n the trade area, the a n a l y s t might f o r e c a s t higher  than average s a l e s per square  f o o t depending on the s i z e o f the proposed s t o r e .  F o r example,  i f the area o f a proposed s p o r t i n g good s t o r e when m u l t i p l i e d by the n a t i o n a l average s a l e s per .square f o o t f i g u r e (i.e.  $142.00) r e s u l t e d i n a f i g u r e s u b s t a n t i a l l y l e s s than  the r e s i d u a l amount o f a v a i l a b l e b u s i n e s s , forecast higher  the a n a l y s t might  than average s a l e s per square f o o t .  c o n s i d e r a t i o n could be given  Similar  t o the merchandising value  o f the  66  site or  and to s t o r e image as these f a c t o r s c o u l d p o s i t i v e l y  a d v e r s e l y a f f e c t the s a l e s volume p o t e n t i a l o f the 38  proposed use.  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" technique  The  "market share" technique i s g e n e r a l l y used f o r 39  a s s e s s i n g department  s t o r e o r shopping c e n t r e o p p o r t u n i t i e s .  The technique assumes t h a t a s t r o n g r e t a i l e r ,  regardless of  c o m p e t i t i o n , w i l l achieve a c e r t a i n share o f r e t a i l i n i t s own r e t a i l category.  sales  A p p l i c a t i o n o f the technique  r e q u i r e s t h a t an a n a l y s t has a thorough knowledge o f t h e s t r e n g t h s and weaknesses o f the proposed use(s) which a s s i s t s him t o determine t h e r e a l i s t i c  share o f t h e market  t h a t can be o b t a i n e d . The total  "market share" technique begins by c a l c u l a t i n g the  volume o f a v a i l a b l e b u s i n e s s w i t h r e s p e c t t o d i f f e r e n t  trade area zones  ( i . e . primary, secondary and  tertiary).  For-.each" zone, an estimate o f the a v a i l a b l e b u s i n e s s t h a t the proposed use(s) can capture i s made.  T h i s estimate  share i s based on judgement and o r the performance  o f the  proposed use(s) i n other a r e a s . Based on judgement, the a n a l y s t c o n s i d e r s the number, s i z e and merchandising appeal o f competing market share.  Market  and upper range.  o u t l e t s when e s t i m a t i n g  share i s then expressed as a lower  F o r example the a n a l y s t c o u l d c a l c u l a t e  67  the amount of s a l e s r e p r e s e n t e d by a 5%, o f the market.  10% or 15%  share  S i m i l a r c a l c u l a t i o n s c o u l d be made f o r  f u t u r e years r e f l e c t i n g p o p u l a t i o n or income t r e n d s i n the area.  I f o p e r a t i n g r e s u l t s of the proposed use'(s)  are a v a i l a b l e f o r other s i m i l a r areas, these r e s u l t s as expressed i n s a l e s per square estimate market  share.^  f o o t can a l s o be used t o  68  3. 7  (New  Footnotes  Richard Nelson, The S e l e c t i o n of R e t a i l L o c a t i o n s York: F.W. Dodge C o r p o r a t i o n , 1958), p. 45. 2  W. Applebaum and S. Cohen, "Store T r a d i n g Areas i n a Changing Market," J o u r n a l of R e t a i l i n g 37 ( F a l l 1961) : 21. 3 A d e t a i l e d d e s c r i p t i o n and e x p l a n a t i o n o f the use of marketing maps i s given i n Curt Kornblau ed. , Guide to Store L o c a t i o n Research w i t h an Emphasis on Supermarkets (Reading, Massachusetts: Addison-Wesley P u b l i s h i n g Company, 1968), pp. 143-206. 4 W. Applebaum and S. Cohen, "Trading Area Networks Problems o f Store S a t u r a t i o n , " J o u r n a l of R e t a i l i n g 37 ( F a l l 1961): 35.  and  5 J . Mertes, "A R e t a i l S t r u c t u r a l Theory f o r S i t e A n a l y s i s , " J o u r n a l of R e t a i l i n g 40 (Summer 1964): 19-30. ^ W. Applebaum and S. Cohen, "Store T r a d i n g Areas i n a Changing Market," p. 23. 7 For an example of how two a n a l y s t s c o n s i d e r n a t u r a l and a r t i f i c i a l b a r r i e r s to movement see, Applebaum and Cohen, "Store T r a d i n g Areas i n a Changing Market," p. 23. g  T h i s p a t t e r n i n g i s e x p l a i n e d i n g r e a t e r d e t a i l by Applebaum and Cohen, "Trading Area Networks and Problems of Store S a t u r a t i o n , " pp. 32-35. 9  . W i l l i a m Applebaum, "Methods f o r Determining Store Trade Areas, Market P e n e t r a t i o n and P o t e n t i a l S a l e s , " J o u r n a l of Marketing Research 3 (May 1966): 128. T h i s technique i s d e s c r i b e d i n d e t a i l by Applebaum i n h i s a r t i c l e e n t i t l e d "Methods f o r Determining Store Trade Areas, Market P e n e t r a t i o n , and P o t e n t i a l S a l e s , " pp. 127-141. An a p p l i c a t i o n of t h i s technique can be found i n W i l l i a m Beaton, Real E s t a t e Investment (Englewood C l i f f s , J e r s e y : P r e n t i c e - H a l l , Inc., 1971), pp. 175-176.  New  12 W a l s t e i n Smith J r . , " R e t a i l L o c a t i o n s and Consumer S p a t i a l Behavior," The Real E s t a t e A p p r a i s e r 32 (November 1966) 26  69 13  Michael B i r n k r a n t , "Shopping Centre F e a s i b i l i t y Study: I t s Methods and Techniques," J o u r n a l o f P r o p e r t y Management 35 (November-December 1960): 274-275. 14  . . W i l l i a m R. Davidson and A l t o n F. Doody, R e t a i l 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 T r a c t s : P o p u l a t i o n and Housing C h a r a c t e r i s t i c s Vancouver - Catalogue 95-82 8 (Ottawa: S t a t i s t i c s Canada, 1978). 16 T h i s f i r m i s a branch of Compusearch. In Vancouver these s e r v i c e s can be found at 740 N i c o l a S t r e e t , telephone 685-2295. 17 T h i s p u b l i c a t i o n i s p u b l i s h e d a n n u a l l y by MacleanHunter L i m i t e d , Toronto, O n t a r i o . 18 T h i s catalogue i s a v a i l a b l e f r e e of charge from any S t a t i s t i c s Canada i n f o r m a t i o n c e n t r e . In Vancouver, the catalogues may be o b t a i n e d a t 1145 Robson S t r e e t . In a d d i t i o n , s t a f f members are a v a i l a b l e f o r c o n s u l t a t i o n at these reference centres. 19 S t a t i s t i c s Canada, "Income D i s t r i b u t i o n by S i z e i n Canada - Catalogue 13-20 7 (Ottawa: S t a t i s t i c s Canada, 1978) . 20 For more i n f o r m a t i o n , the reader could see Davidson and Doddy, R e t a i l i n g Management, pp. 138-139. 21 For a thorough d i s c u s s i o n on the importance o f t r a f f i c flow f o r v a r i o u s k i n d s of r e t a i l a c t i v i t i e s , the reader i s d i r e c t e d t o Richard Nelson, The S e l e c t i o n o f R e t a i l L o c a t i o n s , pp. 44-143. 22 J . Meirtes, " S i t e O p p o r t u n i t i e s f o r the Small R e t a i l e r , " i n R e t a i l i n g Concepts, I n s t i t u t i o n s and Management, ed. J . Markin (New York: MacM.il l a n Co., 1971), pp. 193-97. 23 The i n t e r e s t e d reader i s r e f e r r e d t o S. Sands, "Improving the Accuracy o f P e d e s t r i a n T r a f f i c Courts," J o u r n a l of Retailing 37 (Summer 1961): 33. 24 Urban Land I n s t i t u t e , P a r k i n g Requirements f o r Shopping Centres (Washington, D . C : Urban Land I n s t i t u t e T e c h n i c a l B u l l e t i n No. 53,"l965), p. 9.  70 25  A F u r t h e r d e s c r i p t i o n of how a s i t e ' s l o c a t i o n can be e v a l u a t e d i n r e l a t i o n to v a r i o u s uses i s given by J . E p s t e i n , "Geography and the Business of R e t a i l S i t e E v a l u a t i o n arid S e l e c t i o n , " Economic Geography 47 (November 1971) : 195. 26 R i c h a r d Nelson, The S e l e c t i o n o f R e t a i l i n g L o c a t i o n s , pp. 53-55 27 Davidson  and Doddy, R e t a i l i n g Management, pp. 127-128.  28 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 I b i d . , p. 6 7. 3 0  I b i d . , pp.  3 1  I b i d . , p.  3 2  I b i d . , pp.  84-85. 102. 120-121.  33 (Ottawa: 34  S t a t i s t i c s Canada, R e t a i l Chain Stores Catalogue S t a t i s t i c s Canada, 1979). I b i d . , p.  63-210  17.  35 For an i l l u s t r a t i o n of how i s a p p l i e d , the reader i s d i r e c t e d "Shopping Centre F e a s i b i l i t y : I t s ' pp. and Bernard J . Kane, A Supermarket L o c a t i o n A n a l y s i s , (New Inc., 1977), pp. 75-86.  the " r e s i d u a l " technique to Michael Birnkrant, Methods and Techniques," Systematic Guide t o York: F a i r c h i l d P u b l i c a t i o n  36  Applebaum and Cohen, "Trading Area Networks and problems of Store S a t u r a t i o n , " p. 36. 37 I b i d . , p.  36.  38 M i c h a e l B i r n k r a n t , "Shopping Methods and Techniques", pp. 277.  Centre F e a s i b i l i t y : I t s  39 I b i d . , p.  276.  40 The i n t e r e s t e d reader can r e f e r t o two sources t h a t e x p l a i n and i l l u s t r a t e how the "share o f the market" technique i s used to estimate the s a l e s volume p o t e n t i a l of a r e t a i l  71 activity. W i l l l i a m Applebaum, "Methods o f Determining Store Trade Areas, Market P e n e t r a t i o n , and P o t e n t i a l S a l e s , " pp. 127-141, g i v e s a step by step procedure f o r implementing the technique. Harold Imus, " P r o j e c t i n g Sales P o t e n t i a l s f o r 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 o f the technique f o r department s t o r e s .  CHAPTER FOUR METHODOLOGY  73  4.1  Introduction  The  survey instrument  used i n t h i s study i s a q u e s t i o n n a i r e  designed t o survey commercial r e a l e s t a t e agents on t h e i r p r a c t i c e s o f t r a d e area a n a l y s i s .  T h i s chapter e x p l a i n s  how the q u e s t i o n n a i r e was developed. procedures  I t then o u t l i n e s the  used t o administer the survey and i n t e r p r e t the  results.  A d e s c r i p t i o n o f the respondents'  concludes  the chapter.  4.2  characteristics  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  From chapter t h r e e , trade area c h a r a c t e r i s t i c s and techniques  t h a t r e a l t o r s c o u l d use t o develop  a n a l y s i s were i d e n t i f i e d .  a trade area  Based upon t h i s i n f o r m a t i o n ,  an i n i t i a l s e t o f q u e s t i o n s was formulated.  These q u e s t i o n s  were p r e t e s t e d on 15 commercial r e a l e s t a t e agents who were a l s o i n v i t e d t o elaborate when q u e s t i o n s were u n c l e a r . The f i n a l d r a f t o f the q u e s t i o n n a i r e was then (see appendix 1 ) .  Survey q u e s t i o n s were designed  the type, scope and purpose o f the trade area developed  developed  by the respondents.  t o examine  analyses  Where a p p r o p r i a t e , o t h e r  questions not d i r e c t l y r e l a t e d t o p r a c t i c e s o f trade area a n a l y s i s were i n c l u d e d i n the survey t o o b t a i n i n f o r m a t i o n about the respondent's personal  o v e r a l l marketing  characteristics.  p r a c t i c e s and  74  Type of trade area a n a l y s i s  The was  type o f t r a d e analyses developed  determined  asked  by three q u e s t i o n s .  by the  R e a l t o r s were f i r s t  i f they considered the surrounding area  i n t h e i r marketing R e a l t o r s who  respondents  of business/commercial  (trade area)  properties.  i n d i c a t e d t h a t they c o n s i d e r e d a p r o p e r t y ' s  trade area were then asked  i f they normally l i m i t e d  their  analyses to items of g e n e r a l importance t o business/commerc i a l p r o p e r t i e s or i f they developed  analyses f o r s p e c i f i c  uses such as f a s t food, hardware, drug s t o r e e t c . .  A  f u r t h e r i n d i c a t i o n of the type of trade area analyses developed  was  o b t a i n e d by a s k i n g r e a l t o r s i f they  being  prepared  w r i t t e n analyses as opposed to r e l y i n g e x c l u s i v e l y  on  mental notes.  Purpose of trade area a n a l y s i s  Two  s e t s of q u e s t i o n s i n the survey were formulated  to  examine the purpose of the r e a l t o r ' s trade area a n a l y s i s . Aimed a t o b t a i n i n g an i n s i g h t i n t o the r e a l t o r ' s  understanding  of the r e l a t i o n s h i p between trade area and v a l u e , one asked  r e a l t o r s to i d e n t i f y f a c t o r s t h a t they b e l i e v e d t o be  major i n f l u e n c e s on value f o r business/commercial Two  question  properties.  r e l a t e d q u e s t i o n s were i n c l u d e d t o d i s c o v e r who  determined  the asking p r i c e s of p r o p e r t i e s l i s t e d by  and i f they f o r e c a s t e d i n c r e a s e s or decreases  usually realtors  i n value f o r  75  c l i e n t s and customers o f t h e i r business/commercial A second s e t of q u e s t i o n s was  listings.  d e v i s e d to examine the  r e a l t o r ' s use of trade area a n a l y s i s as a marketing for  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 .  An i n i t i a l  tool  question  asking r e a l t o r s to d e s c r i b e t h e i r three most e f f i c i e n t ways to  l o c a t e (1) l i s t i n g s and  (2) prospects was  used to determine  the sample's e v a l u a t i o n of trade area a n a l y s i s as a or p r o s p e c t i n g t o o l .  listing  A second q u e s t i o n asked r e a l t o r s i f  they used i n f o r m a t i o n from t h e i r trade area analyses i d e n t i f y prospects.  The  t h i r d q u e s t i o n enquired i n t o the  r e a l t o r ' s b a s i s f o r d e c i d i n g when to prepare area  to  a w r i t t e n trade  analysis.  Scope o f trade area a n a l y s i s  The  scope of the respondents'  probed by f o u r survey q u e s t i o n s . upon mental notes were asked considered.  trade area analyses Realtors r e l y i n g  to l i s t  Other r e a l t o r s , who  items they  was  exclusively  normally  a t times prepare w r i t t e n  analyses were surveyed on t h e i r use of t w e n t y - f i v e  items  r e l a t e d to the f o u r major components of a trade area a n a l y s i s o u t l i n e d i n chapter t h r e e .  Due  to the many 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 t h a t might be used by r e a l t o r s , the l i s t of t w e n t y - f i v e items i s not haustive.  For the sake of d e s i g n i n g a manageable  judgement was  survey,  e x e r c i s e d i n s e l e c t i n g key items thought  most r e l e v a n t f o r the commercial r e a l t o r .  The  ex-  to be  t h i r d question  76  asked r e a l t o r s t o o u t l i n e the steps t h a t they f o l l o w e d l e a d i n g to the i d e n t i f i c a t i o n o f s p e c i f i c p r o s p e c t s and the l a s t q u e s t i o n e x p l o r e d the respondents^ use o f r e l a t e d s t a t i s t i c a l data and sources o f i n f o r m a t i o n .  Use o f r e a l  estate7.literature  Two q u e s t i o n s probed literature.  the respondents' use o f r e a l e s t a t e  Respondents were asked t o l i s t  the r e a l e s t a t e  magazines o r j o u r n a l s t h a t they o r t h e i r of f r e e s u b s c r i b e d t o . In  a d d i t i o n , they were asked t o recommend books on  real  estate.  4 .3  Survey A d m i n i s t r a t i o n  commercial  On August 18, 1978, surveys were m a i l e d t o 461 brokers r e p r e s e n t i n g 181 r e a l t y o f f i c e s . were chosen  R e c i p i e n t s o f the survey  from a comprehensive l i s t o f 461 a c t i v e I.C.I,  r e a l t o r s s u p p l i e d by the Vancouver Real E s t a t e Board. an accompanying cover l e t t e r were asked to complete  (see Appendix "A")  In  realtors  and r e t u r n the survey b e f o r e September  8,, 197 8, i f they had e x p e r i e n c e working w i t h business/commerc i a l property.  I f n o t , they were asked t o i n d i c a t e  non-involvement  on the cover l e t t e r and t o r e t u r n the l e t t e r  in  the postage-paid s e l f - a d d r e s s e d envelope  each survey.  their  supplied with  To encourage p a r t i c i p a t i o n , the c o v e r i n g l e t t e r ,  s i g n e d by a f a c u l t y member, b r i e f l y s t a t e d the purpose  of the  77  study, appealed to the respondent's p r o f e s s i o n a l i s m  and  guaranteed t h a t h i s p r i v a c y and c o n f i d e n t i a l i t y would be safeguarded.  In a d d i t i o n to the c o v e r i n g l e t t e r and as  a f u r t h e r inducement to complete  the survey,  were asked t o i n d i c a t e whether they wished  respondents  to r e c e i v e a  copy of the r e s u l t s a t a l a t e r date. All  of the i n i t i a l m a i l surveys were b l i n d coded t o  f a c i l i t a t e follow-ups of non-respondents. m a i l i n g , 64 r e a l t o r s completed of  non-involvement  38.6%.  the survey and 104  initial  replies  were r e c e i v e d g i v i n g a response r a t e of  Non-respondents were then c o n t a c t e d and m a i l e d a  second copy of the survey. response r a t e to 45.1  4.4  From the  T h i s e f f o r t i n c r e a s e d the  percent.  Data A n a l y s i s  Data from the survey was  coded and keypunched f o r com-  p u t e r a n a l y s i s by the S t a t i s t i c a l Package f o r the S o c i a l Sciences  (SPSS;)> .S"!")•,  Two  computer subprograms of SPSS':  - - c o n d e s c r i p t i v e and f r e q u e n c i e s - - were used t o analyse the data. table  F o l l o w i n g t h i s i n i t i a l examination, contingency  t c r o s s t a b u l a t i o n ) analyses were performed  to i n v e s t i g a t e  s e t s of r e l a t i o n s h i p s between s e l e c t e d v a r i a b l e s .  78  4.5  D e s c r i p t i o n o f Respondents  The group o f respondents c o n s i s t e d o f 74 member-realtors o f the Vancouver  Real E s t a t e Board'who a t the time o f the  survey were a c t i v e l y i n v o l v e d w i t h marketing business/commercial property.  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 ,  Table 4.1 p r e s e n t s the ages o f the r e a l t o r s who  responded  f o r s e l e c t e d age c a t e g o r i e s .  Table 4.1 AGE DIS>TRIBUTION OF RESPONDENTS Age I n t e r v a l s In Years  Absolute Frequency  Relative Frequency  Cumulative Frequency  24-34  16  22.5  22.5  35 - 44  24  33.8  56.3  45-54  13  18.3  74.6  55-67  18  25.4  100.0  71  (Missing Total  data)  3 74  From t a b l e 4.1, 33.8% o f the r e a l t o r s were between the ages of 35 and 44, 22.5% were under  35 and 43.7% were over 44.  mean age o f the respondents was 43.8 years w i t h the minimum  The  79 age being 24 and the maximum 67. respondents  were more than 34 years of  Table 4.2  age.  shows t h a t -.41.9% of the respondents  been working between one trial,  Over t h r e e - q u a r t e r of the  had  and f i v e years w i t h I.C.I,  commercial and investment)  (indus-  p r o p e r t y w i t h 8.2  being  the mean number of years worked by a l l respondents.  Table  4.2  YEARS WORKED WITH I d  PROPERTY  Absolute Frequency  Relative Frequency (Pet.)  Adjusted Frequency (Pet.)  Cumulative Frequency (Pet.)  31  41.9  43.7  43.7  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  74  100.0  Years ."1— 5  l. v  6-10  missing 100.0  The number of years each respondent p r o p e r t y was  100.0  worked w i t h I.'C.I.  s u b t r a c t e d from h i s age t o determine  at which he began working w i t h I.C.I, p r o p e r t y . percent of the respondents  between the mean number of years  r e p o r t e d working w i t h T.C.I, p r o p e r t y average  age  C43.8 y e a r s ) .  age  Forty-three  t o t h i s s e c t i o n began working  w i t h t h i s type of p r o p e r t y a f t e r the age of 35. the d i s p a r i t y  the  (.8.2  This explains respondents  years) and  I t can be i n f e r r e d  f i n d i n g s t h a t working w i t h I.C.I, p r o p e r t y was  from  their  these  a later  80 c a r e e r choice f o r a l a r g e percentage  o f the respondents.  Education" l e v e l arid p r o f e s s i o n a l r e a l e s t a t e d e s i g n a t i o n s  Table 4.3 summarizes the education l e v e l s  achieved  by the respondents.  Table 4.3 LEVEL OF EDUCATION Relative Absolute Frequency Frequency XPct.) Grade  Adjusted Frequency (Pet.)  Cumulative Frequency (Pet.)  20.5  21.7  21.7  14.9  15.9  37.7  20  27.0  29.0  66.7  Post Secondary Graduate  23  31.1  33.3  100.0  M i s s i n g Data  5  Total  74  6 t o 12  15.  Graduate to 12 Attended Post Secondary  11  .  6.8  100.0  Missing  100.0  100.0  As shown iri'. t a b l e 4.3, more than h a l f df the respondents (62.3%) had e i t h e r attended or were graduates  o f post  ary i n s t i t u t i o n s and a f u r t h e r 15.9% were secondary graduates.  Although,  some post secondary  second-  school  a m a j o r i t y o f the respondents had  e d u c a t i o n , t h i s t r a i n i n g was not  n e c e s s a r i l y r e l a t e d t o r e a l e s t a t e s i n c e o n l y a q u a r t e r of these r e a l t o r s r e p o r t e d h o l d i n g r e a l e s t a t e d e s i g n a t i o n s .  81  In the area of p r o f e s s i o n a l r e a l e s t a t e d e s i g n a t i o n s , 26.9% of the respondents designations.  r e p o r t e d h o l d i n g one o r more  The two most popular d e s i g n a t i o n s were  being a member of the Real E s t a t e Institutes, A o f B.C. and a f e l l o w o f the Real E s t a t e I n s t i t u t e o n o f Canada. q u a l i f i c a t i o n s h e l d by the respondents  Other  included appraisal  and p r o p e r t y management d e s i g n a t i o n s .  Gross annual income and percent o f income a t t r i b u t e d t o business/commercial  property  Table 4.4 presents the frequency p f gross  annual  incomes f o r sample members i n s e l e c t e d income c a t e g o r i e s .  Table  4.4  GROSS: ANNUAL INCOME IN THOUSANDS  Income Range  Absolute Frequency  Relative Frequency (Pet.)  Cumulative Frequency (Pet.)  17  23  23  16 - 25  16 '  21.6  44.6  26 - 45  19  25.7  70.3  46 - 60  13  17.6  87.8  100  6  8.1  95.9  Over 100  3  0-15  61 -  74  .  4.1  100.0  100  From t a b l e 4.4 the modal income category was 26 to 45 thousand w i t h 25.7% of a l l incomes f a l l i n g i n t o t h i s The mean gross annual income of the respondents thousand.  range.  was 39.8  82  The average p e r c e n t o f annual income accounted f o r byv a r i o u s p r o p e r t y c l a s s i f i c a t i o n s i s presented i n t a b l e 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  Mean Percent of Annual Income Represented by P r o p e r t y Type  Residential  21%  Office  11%  Business/Commercial  41%  Industrial  21%  Other  . . 6% 100%  As was a n t i c i p a t e d due t o the focus o f the study, respondents earned an average o f 41% of t h e i r gross annual income working w i t h business/commercial p r o p e r t y .  Business/commercial p r o p e r t i e s ' s o l d d u r i n g the p a s t two years and type of l i s t i n g agreement  I t c o u l d be assumed t h a t r e a l t o r s who work w i t h low p r i c e d and/or n o n - e x c l u s i v e l i s t i n g s may devote l e s s time t o developing a trade a n a l y s i s .  To account f o r t h i s p o t e n t i a l  i n f l u e n c e on the q u a l i t y of t h e i r a n a l y s e s , respondents were asked t o i n d i c a t e the number and p r i c e s o f business/commercial properties  t h a t were s o l d d u r i n g the past two years.. In  a d d i t i o n , they were asked what p e r c e n t 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 o f business/commercial p r o p e r t i e s , developed o r undeveloped,  t h a t were s o l d i n  d i f f e r e n t p r i c e ranges and the percent of r e a l t o r s who reported  s e l l i n g the p r o p e r t i e s over a two year p e r i o d .  Table 4.6 BUSINESS/COMMERCIAL PROPERTIES SOLD BY RESPONDENTS OVER A TWO YEAR PERIOD Developed  Number Sold  P r i c e Range  Percent o f Respondents R e p o r t i n g Having S o l d Properties 37 .9  Less than $75,000  65  75,000 t o 149,999  89  50 .0  117  67 .2  500,000 t o 1,000,000  69  53 .4  Greater than 1,000,000  58  39 .7  150,000 t o 499,999  t  Undeveloped Less than $75,000  53  27 .6  75,000 t o 149,999  47  29 .3  150,00"to 499,999  78  36 .2  500,000 t o 1,000 000  41  10 .7  Greater than 1,000,000  14  13 .8  Number r e p o r t i n g s a l e s  58  Missing  16  7  cases  74  From t a b l e 4.6, over h a l f o f the respondents r e p o r t e d  selling  developed p r o p e r t i e s a t p r i c e s i n excess o f o n e - h a l f m i l l i o n  84  d o l l a r s and over 13 percent s o l d undeveloped p r o p e r t i e s a t p r i c e s i n excess of one m i l l i o n  dollars.  Table 4.7 p r e s e n t s the percentage of e x c l u s i v e  listings  worked by the respondents.  Table  4.7  PERCENTAGE OF EXCLUSIVE LISTINGS WORKED BY RESPONDENTS  Interval 0-25 26 - 50 51 - 75 76 - 100  (Pet) t\  .  Total  Table 4.7  Absolute Freq.  Relative Freq. (Pet)  Cumulative Freq. (Pet)  13 18 11 32  17.6 24.3 14.9 43.2  17.6 41.9 56 .8 100.0  74  100.0  shows t h a t 43 p e r c e n t of the respondents  indicated  t h a t over 75 percent of t h e i r l i s t i n g s were e x c l u s i v e or e x c l u s i v e r i g h t to s e l l . R e a l t o r s who  work w i t h both e x c l u s i v e l i s t i n g s  and  high p r i c e d p r o p e r t y would be more l i k e l y t o perform a t r a d e area a n a l y s i s than r e a l t o r s working w i t h lower p r i c e d non-exclusive l i s t i n g s .  Both t a b l e s 4.6  and 4.1  show t h a t  a l a r g e percentage of the respondents t o the survey are i n the  former category.  These respondents, t h e r e f o r e , r e p r e s e n t  f a v o r a b l e s u b j e c t s f o r the purpose of t h i s study.  85  4.7  Footnotes  Norman H. Nie e t 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) . 1  9  CHAPTER FIVE RESULTS  87  5.1  I n t r o d u c t i o n and Summary o f the Main F i n d i n g s  Survey r e s u l t s are c o n v e n i e n t l y arranged with the format presented  to coincide  i n the p r e c e d i n g chapter as  follows: - S e c t i o n 1: Type d f Trade Area A n a l y s i s - S e c t i o n 2: Purpose o f Trade Area A n a l y s i s - S e c t i o n 3: Scope o f Trade Area A n a l y s i s , and - S e c t i o n 4: Use o f Real E s t a t e L i t e r a t u r e The is  chapter begins with a summary o f the main f i n d i n g s .  This  f o l l o w e d by a d e t a i l e d d e s c r i p t i o n o f the r e s u l t s . Summary o f the Main F i n d i n g s  A. C o n s i d e r a t i o n o f trade area area a n a l y s i s 1. Most o f the respondents  (87.8 percent)  they c o n s i d e r trade area of business/commercial  ( l o c a t i o n ) and type o f trade indicated that  ( l o c a t i o n ) i n t h e i r marketing  properties.  2. Two t h i r d s o f t h e respondents who c o n s i d e r trade  area  ( l o c a t i o n ) l i m i t t h e i r analyses t o items o f g e n e r a l importance r a t h e r than d e v e l o p i n g them f o r s p e c i f i c 3. Close t o h a l f o f the r e a l t o r s who responded seldom or never prepare  uses.  (49 percent)  a w r i t t e n t r a d e area ( l o c a t i o n )  .analysis. B. Purpose o f trade area a n a l y s i s 1. S e v e n t y - f i v e percent of the brokers who responded determined the asking p r i c e s o f p r o p e r t i e s they  listed  e i t h e r by themselves o r i n c o n j u n c t i o n with the owner.  88  However, 40 percent of the respondents  d i d not acknow-  ledge trade area  factor  ( l o c a t i o n ) as a major  i n f l u e n c i n g the value of business/commercial  property;  and 76 percent i n d i c a t e d t h a t they do not f o r e c a s t i n c r e a s e s or decreases  i n the value of t h e i r  listings  f o r c l i e n t s or customers. 2. Twenty percent of the r e a l t o r s who  responded o u t l i n e d  steps t h a t they f o l l o w e d i n t h e i r trade area ( l o c a t i o n ) a n a l y s i s l e a d i n g t o the i d e n t i f i c a t i o n of prospects w h i l e 80 percent d i d not. 3. Over 30 percent of the respondents t h e i r most e f f e c t i v e way (2) p r o s p e c t s , and area  d i d not l i s t  to l o c a t e :  their  (1) l i s t i n g s or  4 percent mentioned t h a t a trade  ( l o c a t i o n ) a n a l y s i s was  among t h e i r t h r e e most  e f f e c t i v e ways f o r l o c a t i n g p r o s p e c t s . 4. Over one  t h i r d of the respondents  trade area  who  prepare w r i t t e n  ( l o c a t i o n ) analyses d i d not s t a t e t h e i r  reason f o r doing so. by the remaining  The most popular reasons  r e a l t o r s were s a l e s t o o l ,  given  client  request and s u i t a b i l i t y of a p r o p e r t y f o r a s p e c i f i c use. C. Scope of trade area a n a l y s i s 1. S i x percent of the respondents  whos cons i deri- trade- are a  ( l o c a t i o n ) r e l y e x c l u s i v e l y upon mental notes. r e a l t o r s mainly  These  c o n s i d e r items r e l a t e d to the merchan-  d i s i n g value of a s i t e . 2. Respondents who  develop w r i t t e n analyses most f r e q u e n t l y  89  c o n s i d e r items r e l a t e d to the merchandising  value of  a s i t e f o l l o w e d by trade area d e l i n e a t i o n , 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, c a s t i n g techniques uses.  l a s t l y , sales fore-  f o r determining the most b e n e f i c i a l  Related to s a l e s f o r e c a s t i n g techniques,  the  three l e a s t f r e q u e n t l y c o n s i d e r e d items out of the 25 items surveyed were - s a l e s f o r e c a s t s f o r present or p o t e n t i a l u s e r s , conducting consumer surveys determining household  and  expenditure p a t t e r n s i n a t r a d e  area. 3. H a l f of the r e a l t o r s 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) a n a l y s e s . 4. T h i r t e e n percent of the respondents  listed  Statistics  Canada as a data source and one r e a l t o r mentioned t e t r a d . 5. Most of the respondents  (80 percent) who  use  their  a n a l y s i s to i d e n t i f y p r o s p e c t s d i d not o u t l i n e  the  steps t h a t they f o l l o w e d f o r t h i s purpose.  the  steps t h a t were o u t l i n e d , e v a l u a t i n g the value of a s i t e was  Of  merchandising  the most popular one.  No  realtor  mentioned steps t h a t could be used to f o r e c a s t s a l e s f o r e x i s t i n g or p o t e n t i a l users of a r e t a i l  space.  Use o f r e a l e s t a t e 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 e s t a t e magazines or j o u r n a l s t h a t they or t h e i r o f f i c e s u b s c r i b e d t o and no respondent or author on commercial r e a l e s t a t e .  l i s t e d a book  90  The in  5.2  above f i n d i n g s  the f o l l o w i n g  are presented i n greater d e t a i l  sections.  S e c t i o n 1 - Type o f T r a d e A r e a  C o n s i d e r a t i o n o f trade, a r e a of  retail  Analys i s  (location)  i n the marketing  space  R e a l t o r s were a s k e d w h e t h e r t h e y c o n s i d e r e d t r a d e a r e a (location) presents  i n t h e i r marketing of r e t a i l  space.  Table  5.1  the f i n d i n g s .  Table CONSIDERATION  Category Label  OF: TRADE. AREA  Absolute Frequency  Consider Location Never C o n s i d e r Location  5.1 (LOCATION)  Relative Frequency (Pet)  Cumulative Frequency (Pet)  65  87.8  87.8  9  12.2  100.0  74  100.0  From t a b l e  5.1, 12.2% o f t h e r e s p o n d e n t s d i d n o t c o n s i d e r  trade area  (location)in  t h e i r marketing  of r e t a i l  s p a c e and  87.7% d i d .  Type o f t r a d e a r e a or  for specific  (location)  analysis  developed: general  uses  T a b l e 5.2 shows t h e number o f r e s p o n d e n t s who  developed  91  analyses f o r s p e c i f i c uses such as f a s t food, hartware e t c . as opposed t o those who o n l y analysed items of g e n e r a l or who never c o n s i d e r e d trade area  Table  importance  (location).  5.2  TYPE OF TRADE AREA (LOCATION) ANALYSES DEVELOPED Absolute Frequency  Category L a b e l  Relative Frequency (Pet)  Adjusted Frequency (Pet)  Cumulative Frequency (Pet)  A n a l y s i s .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  Of the r e a l t o r s who c o n s i d e r e d trade area normally developed  100.0  (location),  33.8%  analyses f o r s p e c i f i c uses and 66.2%  l i m i t e d t h e i r analyses t o items o f g e n e r a l importance  to  business/commercial p r o p e r t i e s . Other survey f i n d i n g s i n d i c a t e t h a t 7 3% o f the r e a l t o r s who developed  analyses f o r s p e c i f i c uses were able t o d e s c r i b e  how they used t h e i r analyses t o i d e n t i f y p r o s p e c t s .  In  c o n t r a s t , r e a l t o r s who l i m i t e d t h e i r analyses t o items o f g e n e r a l importance  were not able t o do so.  Also,  realtors  who c o n s i d e r e d s p e c i f i c uses while developing t h e i r  analyses  were more frequent users o f the 25 trade area items i n c l u d e d i n the survey and g e n e r a l l y worked w i t h more e x c l u s i v e  listings  than other r e a l t o r s .  Form o f trade area  (location) analysis: written or  mental notes  R e a l t o r s were asked how o f t e n they prepared w r i t t e n analyses as opposed t o making mental notes.  Table 5.3  presents the f i n d i n g s .  Table 5.3 FREQUENCY OF WRITTEN TRADE AREA (LOCATION) ANALYSES  Category  Label  Always Often Seldom Never Consider Location Mental Notes Only  Absolute Frequency  Relative Frequency (Pet)  Cumulative Frequency (Pet)  16 22 23  21.6 29.7 31.1  21.6 51.4 82.4  9 4 74  .  12.2 5.4  94.6 100.0  100.0  Table 5.3 shows t h a t 21.6% o f the respondents  always prepare  a w r i t t e n a n a l y s i s , 29.7% o f t e n d i d so, 31.1% seldom wrote a n a l y s e s , 12.2% never c o n s i d e r e d trade area ( l o c a t i o n ) and 5.4%  r e l i e d e x c l u s i v e l y on mental notes.  93 5.3  S e c t i o n 2 - Purpose o f Trade Area A n a l y s i s  Trade area a n a l y s i s as a v a l u e determinant:  R e a l t o r s i n the sample were asked t o l i s t f a c t o r s  that  they b e l i e v e d t o be the major i n f l u e n c e on v a l u e f o r business/commercial p r o p e r t y . sample each l i s t e d  S i x t y - e i g h t r e a l t o r s from the  from one up t o s i x f a c t o r s .  Table 5.4  presents the f i n d i n g s .  Table 5.4 FACTORS LISTED AS MAJOR INFLUENCES ON VALUE FOR BUSINESS/COMMERCIAL PROPERTIES Absolute Frequency  Category L a b e l Location Location & Financial Financial Economic Missing  24 17 . 20 6  74  Relative Frequency (Pet)  Adjusted ' Frequency (Pet)  32.4 22 .9 2 7.0 9.5 8.2  -  35.3 25.0 29.4 10.3 Missing  100.0  100.0  Survey r e s u l t s show t h a t 39.7% o f the respondents d i d not acknowledge l o c a t i o n the  (trade area) as a major f a c t o r i n f l u e n c i n g  value o f business/commercial p r o p e r t y .  T h i s group  listed  such f a c t o r s as l e a s e terms, i n t e r e s t r a t e s , money supply, cash flow e t c . .  Other respondents who acknowledged  as a major f a c t o r l i s t e d  location  items such as surrounding t r a d e  area, a c c e s s i b i l i t y e t c . . A second q u e s t i o n asked r e a l t o r s who determined the  94  asking p r i c e o f p r o p e r t i e s they l i s t e d .  Table 5.5 shows'  who u s u a l l y determined the a s k i n g p r i c e o f p r o p e r t i e s by the r e a l t o r s who  listed  responded.  Table 5.5 WHO DETERMINES THE ASKING PRICE OF BUSINESS/COMMERCIAL- PROPERTIES  Absolute Frequency  Category L a b e l Owner Fee A p p r a i s e r Realtor R e a l t o r and Owner R e a l t o r and In-House Appraiser M i s s i n g Data Total  11 4 21 34  14.9 5.4 28.4 45 .9  3 1  4.1 1.4  74  From t a b l e 5.5, 2 8.8%  Relative Frequency (Pet)  100.0  Adjusted Relative Frequency (Pet) 15.1 "5:5 28:8 4616 4.1 Missing 100.0  o f the respondents determined a s k i n g  p r i c e s by themselves, 46.6% i n c o n j u n c t i o n w i t h the owner, and 4.1% w i t h an in-house a p p r a i s e r .  Over 15.1% o f the  respondents i n d i c a t e d t h a t the a s k i n g p r i c e was determined by the owner and 5.5% s t a t e i t was determined by a f e e appraiser.  These r e s u l t s show t h a t 79.5% o f the respondents  determined the a s k i n g p r i c e o f l i s t e d p r o p e r t i e s e i t h e r by themselves or i n c o n j u n c t i o n w i t h o t h e r p a r t i e s . The r e l a t i o n s h i p between who determines a s k i n g p r i c e and t h e respondents' c o n s i d e r a t i o n o f t r a d e area' ( l o c a t i o n ) was a l s o examined.  I t was found t h a t a l l o f the r e a l t o r s  who i n d i c a t e d t h a t they, never c o n s i d e r e d t r a d e area  (location)  95 determined without  the asking p r i c e s of p r o p e r t i e s they  listed  the a s s i s t a n c e of a p p r a i s e r s .  Members of the sample were asked casted i n c r e a s e s or decreases  i f they sometimes f o r e -  i n the value of t h e i r b u s i n e s s /  commercial l i s t i n g s f o r c l i e n t s o r customers. percent of the respondents i n d i c a t e d they d i d not do  Thirteen  i n d i c a t e d they d i d and  87%  so.  Trade area a n a l y s i s as a marketing  tool for locating  l i s t i n g s or prospects  Respondents were asked t o d e s c r i b e t h e i r t h r e e most e f f e c t i v e ways to l o c a t e : (1) l i s t i n g s , and All  (2) p r o s p e c t s .  of the ways given r e l a t e d to canvassing, s o c i a l c o n t a c t s ,  o f f i c e f l o o r days and a d v e r t i s i n g w i t h the e x c e p t i o n of three r e a l t o r s who  s t a t e d t h a t they assessed p o s s i b l e uses  to  locate prospects.  of  the respondents  and 31.1%  I t i s s i g n i f i c a n t to note t h a t  d i d not l i s t  d i d not l i s t  a t h i r d way  A r e l a t e d q u e s t i o n asked t h e i r trade area  a t h i r d way  to l o c a t e l i s t i n g s  to l o c a t e p r o s p e c t s .  respondents  i f they used  ( l o c a t i o n ) analyses to help  s p e c i f i c prospects f o r i n d i v i d u a l p r o p e r t i e s . shows the  findings.  35.1%  identify Table  5.6  96  Table 5.6 USE OF TRADE AREA (LOCATION) ANALYSIS TO IDENTIFY PROSPECTS  Category  Label  Absolute Frequency  Relative Frequency (Pet)  Adjusted Frequency (Pet)  Cumulative Frequency (Pet)  Use L o c a t i o n Analysis to I d e n t i f y Prospects  49  66.2  80.3  80.3  Don't Use L o c a t i o n Analysis to Identify Prospects  12  14.2  19.7  100.0  Never Consider Location  9  12.2  M i s s i n g Data  4  5.4  74  100.0  Total  100.0  From t a b l e 5.6, 80.3% o f the brokers who c o n s i d e r e d i n d i c a t e d t h a t they used t h e i r trade area to i d e n t i f y prospects and 19.7% do n o t . who considered trade area  location  (location) analysis Four o f the brokers  ( l o c a t i o n ) d i d not respond t o  the q u e s t i o n . When the group who used t h e i r analyses t o i d e n t i f y prospects were asked t o o u t l i n e the steps t h a t they f o l l o w e d f o r t h i s purpose, 67% d i d not respond.  The 33% who responded  a l s o belong t o the group who develop t h e i r analyses f o r s p e c i f i c uses as opposed to only c o n s i d e r i n g items o f g e n e r a l importance.  The steps t h a t were l i s t e d are more  c o n v e n i e n t l y d i s c u s s e d under S e c t i o n 3 - Scope o f trade area analyses. Another q u e s t i o n to determine the purpose o f the  97  respondents' trade area a n a l y s e s , asked r e a l t o r s t o g i v e t h e i r reason area  f o r d e c i d i n g when t o prepare  (location) analysis.  a w r i t t e n trade  Table 5.7 l i s t s the reasons  t h a t were g i v e n .  Table  5.7  BASIS FOR DECIDING WHEN TO PREPARE A WRITTEN ANALYSIS  Absolute Frequency  Basis Sales T o o l C l i e n t Request Property Well S u i t e d f o r a S p e c i f i c Use Major Property Depends on Own Judgement Out of Town Buyer S e r i o u s Buyer Corporate C l i e n t Always Do One Prospect Requires T r a f f i c Count  10 6  25.7 15.4  6 4 3 3 2 2 2  15.4 10.3 7.7 7.7 5.1 5.1 5.1 2.6  Total  39  The most popular reasons  Relative Frequency (Pet)  are s a l e s t o o l , c l i e n t  100.0  request,  s u i t a b i l i t y of a p r o p e r t y f o r a s p e c i f i c use and major property.  Two o f the r e a l t o r s who mentioned s a l e s t o o l  f u r t h e r e x p l a i n e d t h a t a w r i t t e n a n a l y s i s was prepared i f the property was d i f f i c u l t  to s e l l or lacked general  T h i r t y - s i x percent o f the respondents who do w r i t t e n analyses d i d not respond t o the q u e s t i o n .  interest.  98  5.4  S e c t i o n 3 - Scope o f Trade Area A n a l y s i s  Items c o n s i d e r e d by respondents on mental  relying  exclusively  notes  Table 5.8 l i s t s the items t h a t are normally c o n s i d e r e d by respondents, who r e l y e x c l u s i v e l y on mental  notes.  Table 5.8 TRADE AREA (LOCATION) ITEMS CONSIDERED BY RESPONDENTS WHO RELY EXCLUSIVELY ON MENTAL NOTES L o c a t i o n Item Population Accessibility T r a f f i c Counts Zoning Neighboring Businesses Neighborhood Appearance Business Trends Type o f S t r e e t Surrounding Area  Realtor 1  Realtor 2  Realtor 3  Realtor 4  X X X  X  X  X  X X  X  X  X  X X  X  Of the nine items l i s t e d , n o t i n g 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 f o l l o w e d by t r a f f i c counts, zoning and type o f s t r e e t . one  realtor.  Other items were each chosen by o n l y  99  Items c o n s i d e r e d by respondents who do writfeen^analyses  The t r a d e area (location)'.'.items t h a t respondents c o n s i d e r e d u s e f u l f o r t h e i r w r i t t e n analyses are p r e s e n t e d i n t a b l e 5.9 a c c o r d i n g t o major trade area a n a l y s i s components, frequency o f use and o v e r a l l rank order o f use. The rank order o f use f o r each o f the 25 items was d e t e r mined by the f o l l o w i n g procedure.  F o r each respondent, an  item t h a t was always used was g i v e n a one, sometimes used: 2, and i f i n f r e q u e n t l y or never used: 3.  A weighted score  f o r the item was o b t a i n e d by adding i t s weight on each survey.  For t h e s i x t y respondents t o t h i s s e c t i o n o f the  survey, p o s s i b l e scores t h a t . a n item c o u l d r e c e i v e ranged from 60 i f the item was always used by each member t o 180 i f i t was i n f r e q u e n t l y o r 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 Always (Pet)  Sometimes (Pet)  Infrequently or never (Pet)  Weighted score on 18 0  Trade Area D e l i n e a t i o n A c c e s s i b i l i t y of s i t e Type of s t r e e t L i s t i n g existing/proposed competing shopping area Changing land uses i n area D e f i n i t i o n / d e l i n e a t i o n of trade area Time/distance contours Conducting consumer surveys  6.7 10.0  40.0 35.0  18.3 2 8.3  108 115  30.0 16.7  35.0 43.3  35.0 36.7  123 134  1.7  21.7  76.7  165  41.7 36.7  .  Average Weighted Score P o p u l a t i o n and  80 84  25.0 18.3  68.3 71.7  116  Income C h a r a c t e r i s t i c s  Economic outlook of trade area P o p u l a t i o n of trade area Rate of trade area p o p u l a t i o n growth Income l e v e l s i n trade .-area Conducting consumer Surveys  41.7  31. 7  2 6 .7  111  36.7  41. 7  21 .7  111  26.7  51. 7  21 .7  117  16.7  53. 3  30 .0  128  1.7  21. 7  76 .7  165  1  Average Weighted Score Merchandising  126  Value of S i t e  A c c e s s i b i l i t y of s i t e On-site parking Type of s t r e e t Street location V i s i b i l i t y of s i t e Neighborhood appearance O f f - s i t e parking  68.3 68.3 71.7 66.7 6 8.3 5 8.3 43.3  25.0 25.0 18.3 25.0 18.3 26.7 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 (Pet)  Sometimes (Pet)  Infrequently or never (Pet)  Weighted score on 180  Merchandising Value of S i t e (Cont •d) L i s t of n e i g h b o r i n g uses P e d e s t r i a n t r a f f i c count V e h i c u l a r t r a f f i c count O r i g i n / d e s t i n a t i o n of local traffic  43. 3 30.0 15.0  36. 7 55. 0 35. 0  20 .0 15 .0 50 .0  106 111 113  16.7  46. 7  36 .7  132  Average Weighted Score  98  S a l e F o r e c a s t i n g Techniques f o r Determining the Most B e n e f i c i a l Uses L i s t i n g competing s t o r e s i n area 30.0 Vacancy r a t e s i n area 35.0 Absorption rate 15 .0 Household expenditure patterns i n trade area 6.7 Sales f o r e c a s t f o r p r e s e n t / p o t e n t i a l users of s i t e 8, Conducting eonsumer Surveys 1,  50.0 51.7 35 .0  20.0 13.3 50.0  98 107 141  38.3  55.0  149  33.3 21.7  58, 76,  150 165  Average Weighted Score Number o f Respondents: 60 Missing data : 14 Total  Examining  74  the average weighted  scores of each of the major  components o f a trade area a n a l y s i s shows t h a t items to  related  s a l e f o r e c a s t i n g techniques f o r determining the most  b e n e f i c i a l uses are g e n e r a l l y the l e a s t f r e q u e n t l y used f o l l o w e d by items concerned w i t h p o p u l a t i o n and income  135  102  characteristics.  E v a l u a t i n g the merchandising  value o f  the s i t e i s the most popular component f o l l o w e d by t r a d e area d e l i n e a t i o n .  Steps used t o i d e n t i f y  specific  prospects  R e a l t o r s who s t a t e d t h a t they used t h e i r a n a l y s i s t o i d e n t i f y p r o s p e c t s were asked  t o o u t l i n e the steps t h a t  they f o l l o w e d f o r t h i s purpose.  Twenty percent o f t h i s  group o u t l i n e d steps and 80% d i d n o t .  Table 5.ID  presents  the steps t h a t were o u t l i n e d and groups them under the four major components of a trade area a n a l y s i s as d i s c u s s e d i n chapter t h r e e .  103 Table 5.10 STEPS USED TO IDENTIFY SPECIFIC PROSPECTS GROUPED UNDER THE MAJOR COMPONENTS OF A TRADE AREA ANALYSIS Steps O u t l i n e d  R e a l t o r Number 1 2 3 4 5 6 7 8 9  10 111213 14 15,  Trade Area D e l i n e a t i o n - O v e r a l l Examination -Accessibility  o f Area  X  X "  XX X  X  P o p u l a t i o n and Income Characteristics -Population Analysis -Past trends i n area Merchandising  X X  XX X  Value of S i t e  - P e d e s t r i a n counts - V e h i c l e counts -Neighboring Businesses -Accessibility -Visibility  X X X X X X X X X X X X X X X  X X  X  X X  X X X X X X X X X X X X  Sale F o r e c a s t i n g Techniques f° I d e n t i f y i n g Users r  - L o c a t i o n needs o f p r o s p e c t s -Business trends -Survey o f competition w i t h i n trade area  X X  X  X XX  X X  XXX  From t a b l e 5.10, f i v e r e a l t o r s o u t l i n e d steps r e l a t e d t o trade area d e l i n e a t i o n but. d i d not mention steps f o r d e s c r i b i n g p o p u l a t i o n o r 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  o t h e r r e a l t o r s l i s t e d steps f o r d e s c r i b i n g p o p u l a t i o n c h a r a c t e r i s t i c s but omitted steps f o r d e l i n e a t i n g a trade area.  The most popular trade area component analysed was the  merchandising  value o f the s i t e w i t h t r a f f i c flow a n a l y s i s  being the most f r e q u e n t l y l i s t e d item.  Nine r e a l t o r s  104  o u t l i n e d steps t h a t r e l a t e d t o techniques f o r i d e n t i f y i n g users/prospects.  No r e a l t o r mentioned t h a t he d i d a s a l e s  forecast for this  purpose.  Use o f s t a t i s t i c a l data and r e l a t e d  sources  Respondents were asked t o i n d i c a t e the frequency with which they used s t a t i s t i c a l data and t o name t h e i r sources of  information.  Table 5.11 shows t h a t 17.9% o f the r e a l t o r s  always use s t a t i s t i c a l data, 31.3%: o f t e n and 50.7%: seldom or  never.  Table 5.11 USE  Category L a b e l  OF STATISTICAL DATA Absolute Frequency  Always Often Seldom or Never M i s s i n g Data  12 21 34 7  Relative Frequency (Pet) 16 .2 28.4 45.9 9.5  Adjusted Frequency (Pet)  Cumulative Frequency (Pet)  17.9 31.3 50.7 missing  17.9 . 49.3 100.0  T h i r t y - n i n e o f the respondents who use s t a t i s t i c a l l i s t e d t h e i r sources.  Of these r e a l t o r s , t h i r t e e n  data  listed  one source, f i f t e e n : two sources and e l e v e n : three sources. The names o f these sources and t h e i r frequency o f s e l e c t i o n by respondents  to t h i s s e c t i o n a r e presented i n Table 5.12.  105 Table 5.12  Name  NAMES OF STATISTICAL SOURCES AND FREQUENCY OF SELECTION BY RESPONDENTS Relative Absolute Frequency Frequency (Pet)  C i t y of Vancouver Reports Market Trends T e e l a Reports S t a t i s t i c s Canada Previous Sales L i s t i n g s Reports In-House Reports Greater Vancouver Regional D i s t r i c t Chamber o f Commerce D o l l a r s and Cents Shopping Centres Assessment Role Tetrad  22 18 9 9 15 4 2  56.4 46.2 2 3.0 23.0 12.8 10.3 5.1  2 2  5.1 5.1  1 1 1  2.3 2; 3., 2.3  From t a b l e 5.12, i t i s s i g n i f i c a n t t o note t h a t three sources of data d e s c r i b e d i n chapter three  (Statistics  Canada, T e t r a d and Consumer Surveys) were mentioned  by few  r e a l t o r s o r not a t a l l .  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  R e a l t o r s were asked t o l i s t r e a l e s t a t e magazines or j o u r n a l s t h a t were s u b s c r i b e d t o by themselves or t h e i r  office.  Real e s t a t e magazines and j o u r n a l s were l i s t e d by 21.6 p e r c e n t the respondents.  The remaining 7 8.4  p e r c e n t e i t h e r d i d not  respond or l i s t e d p u b l i c a t i o n s such as the P r o v i n c e , Business Week, and Real E s t a t e Trends which c o u l d not be c l a s s i f i e d as  106 j o u r n a l s or magazines.  A second q u e s t i o n asked  realtors  to l i s t the t i t l e s or authors of books on commercial e s t a t e t h a t they c o u l d recommend t o o t h e r s . author on commercial  r e a l e s t a t e was  real  No book o r  l i s t e d by the respondents.  CHAPTER SIX DISCUSSION AND CONCLUSION  108 6.1  Introduction  The primary  aim o f t h i s study was  i n s i g h t s i n t o how  r e a l t o r s develop  analyses i n the marketing  to g a i n some p r a c t i c a l  and use trade area  of r e t a i l p r o p e r t i e s .  Survey  r e s u l t s i n d i c a t e - t h a t t h e r e i s a d i s c r e p a n c y between the importance o f trade area i n f o r m a t i o n as emphasized by e s t a t e l i t e r a t u r e and the respondents trade area  (location).  real  c o n s i d e r a t i o n of  As d i s c u s s e d i n chapter one,  real  e s t a t e l i t e r a t u r e emphasizes t h a t 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 e area; a knowledge of  a r e t a i l p r o p e r t y ' 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) determine i t s v a l u e .  f o r the space  In c o n t r a s t , t a b l e 5.1  and  shows t h a t  over 12 percent of the r e a l t o r s i n the study never c o n s i d e r trade area  (location).  c o n s i d e r trade area  Looking  at the r e a l t o r s who  do  ( l o c a t i o n ) , survey r e s u l t s i n d i c a t e t h a t  f o r most of these r e a l t o r s , a s u b s t a n t i a l gap  exists  between t h e i r analyses and the " c u r r e n t s t a t e of the a r t " as r e v e a l e d by the trade area l i t e r a t u r e reviewed  i n chapter  three. Two  o b s e r v a t i o n s help to e x p l a i n t h i s d i s c r e p a n c y .  f i r s t o b s e r v a t i o n concerns  the l a c k of a t t e n t i o n g i v e n i n  r e a l e s t a t e l i t e r a t u r e to steps and techniques  that realtors  c o u l d use f o r developing t h e i r trade area a n a l y s e s . of  t h i s omission were presented i n chapter one.  adequate g u i d e l i n e s or procedures have d i f f i c u l t y  The  Examples  Without  to f o l l o w , r e a l t o r s  developing comprehensive a n a l y s e s .  will  109  The  second o b s e r v a t i o n i s t h a t r e a l t o r s are g e n e r a l l y  unaware o f the b e n e f i t s t h a t c o u l d be o b t a i n e d from u s i n g a trade area a n a l y s i s as a marketing  t o o l f o r determining  value o r l o c a t i n g l i s t i n g s and p r o s p e c t s . may  As a r e s u l t ,  they  be devoting l e s s time than they otherwise would to  preparing t h e i r analyses. by r e a l t o r s  1  responses  T h i s o b s e r v a t i o n i s supported  to survey questions t h a t probed  b a s i s f o r developing a trade area a n a l y s i s . t a b l e 5.4  their  For example,  shows t h a t 40 percent of the r e a l t o r s i n the  d i d not acknowledge trade area  study  ( l o c a t i o n ) as a major f a c t o r  i n f l u e n c i n g the value o f business/commercial  property.  Another example i s t h a t only 4 percent mentioned t h a t a trade area a n a l y s i s was  an e f f e c t i v e way  to l o c a t e p r o s p e c t s .  Stemming from these o b s e r v a t i o n s , shortcoming's found the survey are d i s c u s s e d under two  areas.  The  first  by  area  concentrates on weaknesses found i n the sample's p r e p a r a t i o n of trade area a n a l y s e s .  The  second d e s c r i b e s how  information  from a trade area a n a l y s i s c o u l d be used as a marketing  aid  to determine value and to l o c a t e l i s t i n g s or p r o s p e c t s .  6.2  P r e p a r a t i o n of Trade Area  Analyses  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 t h e i r analyses  are  examined under f i v e interdependent  areas:  a n a l y s i s : w r i t t e n or mental notes,  (2) Type of a n a l y s e s :  g e n e r a l or developed develop  analyses,  f o r s p e c i f i c uses,  (1) Form of  (3) Steps used to  (4) Trade area c h a r a c t e r i s t i c s , and  S t a t i s t i c a l data and date sources.  For each of these  (5) areas,  110  shortcomings  are i d e n t i f i e d and suggestions f o r improvement  are o f f e r e d .  I t i s hoped t h a t these recommendations should  a s s i s t r e a l t o r s 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 p r o f e s s i o n a l s e r v i c e s to c l i e n t s and customers of t h e i r business/commercial  Form of a n a l y s e s : w r i t t e n or mental  Table 5.3  listings.  notes  shows t h a t h a l f of the r e a l t o r s i n the study  seldom or never prepared a w r i t t e n t r a d e area  (location)  a n a l y s i s , but u s u a l l y r e l i e d upon mental notes.  A compre-  hensive a n a l y s i s 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 t h r e e , each o f the  four major trade area a n a l y s i s steps or components  ( i e . trade  area d e l i n e a t i o n , 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 , merchandising value of a s i t e , and s a l e s f o r e c a s t i n g r e q u i r e s the g a t h e r i n g of s p e c i f i c d a t a .  techniques)  T h i s data i s then  s y n t h e s i z e d t o s e l e c t and screen uses so t h a t 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  identified.  Because of the v a r i e t y and breadth of data t h a t i s gathered andh.synthesized, r e a l t o r s r e l y i n g upon mental notes c o u l d , \': at b e s t , o n l y i n t u i t i v e l y i d e n t i f y prospects and value.  Furthermore,  i t i v e disadvantage to r e a l t o r s who  determine  these r e a l t o r s would be at a compet-  i n t h e i r s a l e s / l e a s e p r e s e n t a t i o n compared  can j u s t i f y t h e i r assumptions  w i t h substan-  t i a t i n g data from a c a r e f u l l y prepared w r i t t e n a n a l y s i s .  As  d i s c u s s e d i n chapter one, i n v e s t o r s r e q u i r e p e r t i n e n t market  Ill  data upon which to base t h e i r investment who  decisions.  Realtors  p r o v i d e i n v e s t o r s / u s e r s w i t h t h i s type of data i n w r i t t e n  form w i l l have demonstrated t h e i r e x p e r t i s e about the s u b j e c t p r o p e r t y , thereby i n c r e a s i n g t h e i r chances of a s u c c e s s f u l presentation.  Type o f 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  A trade area a n a l y s i s i s developed space and i t s surrounding use.  by a n a l y s i n g a r e t a i l  trade area i n r e l a t i o n to a s p e c i f i c  During each major step of the a n a l y s i s ( i e . trade  area d e l i n e a t i o n , etc.) trade area c h a r a c t e r i s t i c s  are  e v a l u a t e d i n r e l a t i o n to the s p e c i f i c trade area ( l o c a t i o n ) needs of p o t e n t i a l uses. and t h e i r trade area  By not c o n s i d e r i n g s p e c i f i c uses  ( l o c a t i o n ) requirements  while  developing  an a n a l y s i s , the whole purpose of the e x e r c i s e i s l o s t ; namely the i d e n t i f i c a t i o n o f a s i t e ' s most b e n e f i c i a l u s e ( s ) . Yet, 'table 5.2  shows t h a t two  c o n s i d e r trade area  t h i r d s of the r e a l t o r s  ( l o c a t i o n ) normally  analyses to items of g e n e r a l importance. suggest  t h a t a refinement  b e i n g developed  r  their  These f i n d i n g s  i n the type of analyses g e n e r a l l y  i s required.  R e a l t o r s who importance  limited  who  l i m i t t h e i r analyses to items o f g e n e r a l  are assuming t h a t a trade area can be  qualified  as e i t h e r good or poor without r e f e r r i n g to a s p e c i f i c T h i s assumption i s f a u l t y s i n c e each d i f f e r e n t r e t a i l  use. use  112  possesses  unique trade area  c h a r a c t e r i s t i c s may  ( l o c a t i o n ) needs.  Trade area  be very s u i t a b l e f o r one use and  s u i t a b l e f o r another.  For example, a trade area  not  comprised  mostly of s i n g l e a d u l t households would be poor f o r a c h i l d r e n ' s c l o t h i n g ^ s t o r e . S i m i l a r l y , the e d u c a t i o n a l l e v e l achieved by trade area r e s i d e n t s would be an c o n s i d e r a t i o n f o r a proposed use such as a  important  bookstore.  Furthermore, an i n t e g r a l p a r t of a trade area a n a l y s i s i s a s a l e s f o r e c a s t which n e c e s s i t a t e s the c o n s i d e r a t i o n of s p e c i f i c uses.  Unless the r e a l t o r f o r e c a s t s s a l e s f o r  proposed uses, h i s trade area a n a l y s i s w i l l be  incomplete.  I t w i l l not provide him w i t h s u f f i c i e n t i n f o r m a t i o n 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 t a r g e t market h i s product  ( r e t a i l space) a t a p r i c e r e f l e c t i n g the s a l e s  volume p o t e n t i a l of these  uses.  In a d d i t i o n , r e a l t o r s who  l i m i t t h e i r analyses to  of g e n e r a l importance are not a t t a i n i n g the depth of necessary  items  analyses  f o r i d e n t i f y i n g a p r o p e r t y ' s most b e n e f i c i a l u s e ( s ) .  T h i s c o n c l u s i o n i s supported by survey f i n d i n g s showing t h a t t h i s group o f r e a l t o r s c o u l d not o u t l i n e steps t h a t they f o l l o w e d l e a d i n g to the i d e n t i f i c a t i o n of p r o s p e c t s . i n the f u t u r e , r e a l t o r s should develop  Clearly,  t h e i r trade area  analyses f o r s p e c i f i c uses as opposed t o g a t h e r i n g data only on items of g e n e r a l  importance.  113  Steps used to develop  analyses  A trade area a n a l y s i s can be d i v i d e d i n t o four major components or s t e p s . delineation,  Together, for  value of a s i t e ,  and  (4) s a l e s f o r e c a s t i n g  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 u s e ( s ) . these four major steps comprise the b a s i c  developing a comprehensive When r e a l t o r s who  asked  (1) trade area  (2) 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 ,  (3) merchandising techniques  These steps a r e :  to l i s t  analysis.  c o n s i d e r trade area  ( l o c a t i o n ) were  the steps t h a t they f o l l o w e d i n t h e i r  over 69 percent f a i l e d  to respond.  steps l i s t e d by responding  procedure  analysis,  As shown i n t a b l e  5.10,  r e a l t o r s were mainly r e l a t e d t o  e v a l u a t i n g the merchandising  value of the s i t e .  For  this  step, the most popular trade area c h a r a c t e r i s t i c e v a l u a t e d was  t r a f f i c flow  ( i e . p e d e s t r i a n and v e h i c l e t r a f f i c c o u n t s ) .  However, steps t h a t c o u l d be used to analyse the three other trade area components were mentioned by few r e a l t o r s or not at a l l .  For example, the few r e a l t o r s who  listed  steps  r e l a t e d to trade area d e l i n e a t i o n d i d not i n d i c a t e t h a t they a l s o examined p o p u l a t i o n or income c h a r a c t e r i s t i c s w i t h i n the d e f i n e d trade a r e a .  Other r e a l t o r s who  s t a t e d t h a t they  c o n s i d e r e d 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 d i d not mention steps to d e l i n e a t e the trade area. f o u r t h trade area a n a l y s i s component techniques), a l l r e a l t o r s f a i l e d  Regarding  the  (sales f o r e c a s t i n g  to l i s t  steps r e l a t e d to  114 e i t h e r the " r e s i d u a l " or "share of the market" d i s c u s s e d i n chapter  techniques  three.  These f i n d i n g s suggest  t h a t r e a l t o r s are c o n c e n t r a t i n g  t h e i r analyses on e v a l u a t i n g the merchandising  value of a  s i t e w h i l e n e g l e c t i n g the three other trade area a n a l y s i s components.  To remedy t h i s d e f i c i e n c y , r e a l t o r s  expand the scope of t h e i r a n a l y s e s .  should  This w i l l involve  l e a r n i n g about the major steps of a trade area a n a l y s i s , the data t h a t can be gathered d u r i n g each step and how  finally  t h i s data can be i n t e r p r e t e d f o r 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  Trade area  uses.  characteristics  S e v e r a l trade area c h a r a c t e r i s t i c s and  techniques  are a s s o c i a t e d w i t h the four major steps of a trade area analysis.  Under trade area d e l i n e a t i o n , r e a l t o r s c o u l d r e c o r d  data about the s t r e e t network and competing shopping a marketing  map.  To d e s c r i b e p o p u l a t i o n and  areas  on  income c h a r a c t e r -  i s t i c s , r e a l t o r s c o u l d i d e n t i f y growth trends and  segment the  p o p u l a t i o n a c c o r d i n g to v a r i o u s demographic v a r i a b l e s by  conducting  consumer surveys or u s i n g i n f o r m a t i o n from S t a t i s t i c s Canada. To g a i n f u r t h e r i n s i g h t i n t o 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 , r e a l t o r s were asked how  o f t e n they used  items  r e l a t e d to each of the f o u r major steps of a trade area analysis.  Table-; 5.9  the merchandising  shows t h a t items used f o r e v a l u a t i n g  value of a s i t e were the most popular  f o l l o w e d by items f o r d e l i n e a t i n g a trade area and d e s c r i b i n g  115  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 . .  Items r e l a t e d to  s a l e s f o r e c a s t i n g techniques were the l e a s t f r e q u e n t l y used of  a l l the items.  These f i n d i n g s are c o n s i s t e n t w i t h  e a r l i e r o b s e r v a t i o n s concerning the respondents steps to develop  t h e i r analyses.  I t was  omission of  then noted t h a t  steps l i s t e d by r e a l t o r s concentrated on e v a l u a t i n g the merchandising  value o f a s i t e w i t h l i t t l e  or no a t t e n t i o n  g i v e n to o t h e r trade:; area components. R e a l t o r s may  upgrade 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 by l e a r n i n g t h a t items r e l a t e d t o trade area d e l i n e a t i o n , 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 s a l e s f o r e c a s t i n g techniques analysis.  are i n t e g r a l p a r t s of a trade area  I f these items are not c o n s i d e r e d , the  a n a l y s i s w i l l be s u p e r f i c i a l and o f l i t t l e marketing  aid.  resulting  use as a  By reviewing chapter three of t h i s  study,  r e a l t o r s w i l l r e c e i v e an i n t r o d u c t i o n to the v a r i o u s and techniques  items  a s s o c i a t e d w i t h each of the f o u r major s t e p s .  S t a t i s t i c a l Data and Data Sources  S e v e r a l items t h a t are e s s e n t i a l f o r d e v e l o p i n g a trade area a n a l y s i s r e q u i r e the g a t h e r i n g o f s t a t i s t i c a l  data.  For example, items such as p o p u l a t i o n , income, and  household  expenditure p a t t e r n s cannot be adequately  without  using r e l a t e d s t a t i s t i c a l data. c a s t i n g techniques t a b l e 5.11  analysed  Similarly, sales fore-  are a l s o based on s t a t i s t i c a l data.  shows t h a t h a l f of the r e a l t o r s i n the  study  Yet,  116 seldom o r never used s t a t i s t i c a l  data.  Looking a t the data sources i n t a b l e 5.12 t h a t were l i s t e d by respondents  f i n d s t h a t 2 3 percent named S t a t i s t i c s  Canada, 10.3 percent named C e n t r a l Mortgage and Housing, 5.1 percent named the Greater Vancouver Regional and 2.3 percent mentioned T e t r a d .  No r e a l t o r  District  indicated  t h a t he used consumer surveys o r marketing maps as data sources.  Most o f the o t h e r data sources named by r e a l t o r s  c o n t a i n data t h a t i s too g e n e r a l f o r the purpose o f dev e l o p i n g a trade area a n a l y s i s .  For example, the most popular  data source, Real E s t a t e Trends,  ( p u b l i s h e d by the Vancouver  Real E s t a t e Board) c o n t a i n s o n l y aggregated Vancouver.  data about  I t s purpose i s t o p r e s e n t a capsule summary  of market, demographic and o t h e r trends t h a t have o c c u r r e d i n Vancouver over the p a s t year; i t i s not an adequate data source t h a t can be used f o r the purpose o f a n a l y s i n g a s p e c i f i c trade a r e a .  S i m i l a r l y , p u b l i c a t i o n s and data  sources such as T e e l a , the Chamber o f Commerce, the a s s e s s ment r o l e and p r e v i o u s s a l e s l i s t i n g s , or  a l l contain  little  no data o f use f o r a trade area a n a l y s i s . These f i n d i n g s p o i n t t o a s e r i o u s d e f i c i e n c y i n the  respondents'use  of s t a t i s t i c a l  data and r e l a t e d data s o u r c e s .  T h i s d e f i c i e n c y i s p a r t l y e x p l a i n e d by the respondents' omission o f major trade area steps r e q u i r i n g the use o f statistical  data.  By devoting l i t t l e  or no a t t e n t i o n t o  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 o r s a l e s f o r e c a s t i n g techniques, these r e a l t o r s d i d not have a reason f o r u s i n g  117  s t a t i s t i c a l data.  T h e r e f o r e , an improvement i n the r e a l t o 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  6.3  analyses  Use of Trade Area A n a l y s i s as a Marketing A i d  A number o f survey q u e s t i o n s examined the purpose o f the r e a l t o r ' s trade area a n a l y s i s .  F o r example,  who prepared w r i t t e n analyses were asked b a s i s f o r d e c i d i n g when t o prepare  them.  respondents  to state t h e i r Thirty-six  percent  of these r e a l t o r s f a i l e d t o g i v e a b a s i s f o r t h e i r d e c i s i o n . As shown i n t a b l e 5.7, most of the other r e a l t o r s such reasons  as out of town buyer, s e r i o u s buyer, corporate  c l i e n t and c l i e n t r e q u e s t . respondents  listed  Only  25 percent of these  s t a t e d t h a t they prepared w r i t t e n analyses f o r  use as a s a l e s t o o l .  The g e n e r a l l a c k o f an adequate b a s i s  f o r p r e p a r i n g w r i t t e n analyses suggests  t h a t most r e a l t o r s  are unaware o f the p o t e n t i a l b e n e f i t s t h a t can be o b t a i n e d by u s i n g t h e i r a n a l y s i s as a marketing  tool.  As a l l u d e d  to e a r l i e r , t h i s c o n d i t i o n helps t o e x p l a i n why most r e a l t o r s are devoting l i t t l e o r no a t t e n t i o n t o p r e p a r i n g analyses.  The p o t e n t i a l marketing  their  b e n e f i t s t h a t can be  obtained from a trade area a n a l y s i s are b e s t d i s c u s s e d i n connection w i t h the r e a l t o r ' s primary  f u n c t i o n s 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 .  118  Determining  One  value  of the primary  determining  f u n c t i o n s performed by r e a l t o r s i s  the asking p r i c e of p r o p e r t i e s they l i s t  and  a s s i s t i n g i n n e g o t i a t i o n s t h a t l e a d to a t r a n s a c t i o n p r i c e . Table 5.5  i n d i c a t e s t h a t 75 percent of the r e a l t o r s i n  the study determined  the a s k i n g p r i c e s of p r o p e r t i e s they  l i s t e d by themselves or i n c o n j u n c t i o n w i t h the owner. Other r e s u l t s , however, suggest performing  t h i s marketing  of a n a l y s i s .  f u n c t i o n w i t h s u f f i c i e n t depth  For example, a l l of the r e a l t o r s  of the sample) who  (10.9  percent  never c o n s i d e r trade area ( l o c a t i o n )  s t a t e d t h a t they determined they l i s t e d .  t h a t r e a l t o r s are not  the asking p r i c e of p r o p e r t i e s  A l s o r e l a t e d to v a l u a t i o n , t a b l e 5.4  shows  t h a t over 39 percent of the r e a l t o r s f a i l e d to acknowledge t h a t trade area  ( l o c a t i o n ) i s a major f a c t o r  the value of business/commercial  property.  influencing In a d d i t i o n ,  over 76 percent of the sample i n d i c a t e d t h a t they never had f o r e c a s t e d i n c r e a s e s or decreases  i n the value of t h e i r  l i s t i n g s f o r c l i e n t s or customers. a major shortcoming  i n the procedure  These f i n d i n g s i n d i c a t e most r e a l t o r s use  to  determine value and t h e r e f o r e asking p r i c e s i n c e l i t e r a t u r e concerned trade area  w i t h v a l u a t i o n has e s t a b l i s h e d the key r o l e of (location) i n s e t t i n g a property's value.  For example, r e a l t o r s who  overlook trade area ( l o c a t i o n )  and concentrate only on f i n a n c i a l f a c t o r s to determine value and asking p r i c e are making f a u l t y assumptions.  Their  119  assumptions are f a u l t y s i n c e they are u s i n g a s t a t i c r a t h e r than dynamic approach f o r e s t i m a t i n g v a l u e .  A  static  approach presents value as i t i s a t a g i v e n p o i n t i n time; i t does not c o n s i d e r r i s k s attached to a p r o p e r t y ' s or expected  income stream  change i n the f u t u r e .  t h a t may  present  cause t h i s stream  to  To reduce t h i s u n c e r t a i n t y thereby  o b t a i n i n g a more accurate assessment of v a l u e , t r a d e area ( l o c a t i o n ) i n f o r m a t i o n i s gathered.  From t h i s i n f o r m a t i o n ,  r e a l t o r s c o u l d i d e n t i f y trends such as p o p u l a t i o n 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 f u t u r e p r o d u c t i v i t y of a p r o p e r t y i n terms of i t s s a l e s volume p o t e n t i a l .  By  e v a l u a t i n g the f u t u r e p r o d u c t i v i t y of a p r o p e r t y i n t h i s manner, the r e a l t o r w i l l be able to f o r e c a s t i n c r e a s e s or decreases  i n value thereby o b t a i n i n g a more accurate  assessment of p r e s e n t v a l u e .  A d d i t i o n a l l y , he w i l l b e n e f i t  by having the data a t hand, so s e l l e r s or buyers can  see  the b a s i s f o r h i s assumptions. Information from a trade area a n a l y s i s can a l s o be used to negotiate r e n t a l r a t e s .  Using s a l e s f o r e c a s t i n g techniques,  r e a l t o r s can i d e n t i f y the most b e n e f i c i a l use(s) w i t h r e s p e c t to t h e i r s a l e s volume p o t e n t i a l .  for a site  I f a state  of u n d e r s t o r i n g e x i s t s f o r a p a r t i c u l a r use, then s a l e s per square  f o o t 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 f o r the p a r t i c u l a r use.  Based on  this  trade area data, a space s u p p l i e r c o u l d n e g o t i a t e to r e c e i v e a percentage  share, of t h i s  profit.  120  L o c a t i n g l i s t i n g s and  A second primary buyers and s e l l e r s .  prospects  f u n c t i o n of r e a l t o r s i s to l o c a t e The  survey asked r e a l t o r s to  list  t h e i r three most e f f e c t i v e ways to l o c a t e : (1) listings,- and (2) p r o s p e c t s .  R e a l t o r s named methods such as phoning, -  mass m a i l - o u t s , knocking  on doors, s i g n s , newspaper*:'ad-  v e r t i s i n g , and s o c i a l g a t h e r i n g s . o f responses  From the number and  type  g i v e n 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 t h a t over 31 percent of the sample d i d not name more thanttwo ways f o r e i t h e 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 w h i l e o n l y 4 percent c o n s i d e r e d a trade area a n a l y s i s as an e f f e c t i v e method f o r l o c a t i n g p r o s p e c t s . p r a c t i c e s of trade area  By r e f i n i n g  (location) analysis, realtors  their should  be able t o use t h e i r analyses as e f f e c t i v e ways to l o c a t e l i s t i n g s and  prospects.  For example, a trade area a n a l y s i s can be used t o i d e n t i f y p r o p e r t i e s t h a t have development or redevelopment potential.  I f an area i s understored, p r o p e r t y owners c o u l d  be contacted to determine i f they wished t o develop l a n d or redevelop o l d e r improvements.  During these meetings,  the r e a l t o r would s t a t e h i s f i n d i n g s and w i t h s u b s t a n t i a t i n g data.  vacant  support the same  The outcome may  to s e l l or l e a s e , depending on the owner's  be  instructions  investment  objectives. S i m i l a r l y , a r e a l t o r who  i s asked to l e a s e / s e l l r e t a i l  121  space,  can use i n f o r m a t i o n from a trade area a n a l y s i s t o  i d e n t i f y prospects.  H i s trade area a n a l y s i s w i l l  assist  him t o i d e n t i f y uses which p o t e n t i a l l y c o u l d d e r i v e maximum p r o f i t s i n the space compared t o other uses. prospects t h a t the r e a l t o r can c o n t a c t .  These uses are  In t h i s manner,  the r e a l t o r can reduce h i s search time f o r a buyer/user by t r a n s f e r r i n g h i s c o n c e n t r a t i o n o f s e l l i n g e f f o r t s from the g e n e r a l market t o s p e c i f i c buyer/users. search time w i l l enable  This reduction i n  the broker t o improve h i s p r o d u c t i -  v i t y by a l l o w i n g him more time t o spend on o t h e r p r o j e c t s . In a d d i t i o n , h i s s u c c e s s f u l s a l e s / l e a s i n g r e c o r d may!, cause more s u p p l i e r s t o demand h i s s e r v i c e s .  6.4  C o n c l u s i o n and; Recommendations f o r F u r t h e r Research  In c o n c l u s i o n , t h i s study has drawn' a t t e n t i o n t o s h o r t comings i n the trade area analyses being developed As i n i t i a l steps towards improving recommendations are o f f e r e d .  by r e a l t o r s .  these d e f i c i e n c i e s , two  F i r s t , real estate  marketing  l i t e r a t u r e should d i r e c t more a t t e n t i o n to i n c l u d i n g cedures  t h a t a" broker c o u l d f o l l o w t o develop  a n a l y s i s r a t h e r than simple statements i s important" procedures  a trade area  such as "trade area  o r "trade area should be c o n s i d e r e d . "  These  would.encompass a l l o f the major trade area  components from trade area d e l i n e a t i o n through forecasting  pro-  to sales  techniques.  Second, 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 o f r e a l e s t a t e  122  literature. to  The survey found t h a t no r e a l t o r was  able  recommend a book on commercial r e a l e s t a t e and  that  few respondents  or t h e i r o f f i c e s s u b s c r i b e d to r e a l  e s t a t e magazines or j o u r n a l s .  In a f i e l d as t e c h n i c a l  as  r e a l e s t a t e , reading r e l a t e d l i t e r a t u r e could a s s i s t p r o f e s s i o n a l ^ r e a l t o r s to improve t h e i r a n a l y t i c a l  skills.  Through r e a d i n g , r e a l t o r s c o u l d become i n c r e a s i n g l y aware of  the importance of trade area, how  hensive trade area a n a l y s i s and how be used as a marketing  aid.  to develop  a compre-  t h e i r analysis could  T h i s i n c r e a s e d awareness  may,  i n t u r n , h e l p them to o f f e r a h i g h e r l e v e l of p r o f e s s i o n a l s e r v i c e s to t h e i r c l i e n t s and The  customers.  r e s u l t s of t h i s study a l s o suggest a need f o r  f u r t h e r r e s e a r c h c l a r i f i c a t i o n of r e a l t o r marketing Here some important  questions remain.  i n v e s t o r / u s e r s conduct research?  t h e i r own  practices.  To what extent  do  trade area ( l o c a t i o n )  Do e x i s t i n g c o s t / b e n e f i t r e l a t i o n s h i p s  preclude  an i n c r e a s e d l e v e l o f . r e a l t o r s e r v i c e s w i t h r e s p e c t to trade area  (location) analysis?  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"Customer Information Strengthens '" Market Information Systems." J o u r n a l of R e t a i l i n g 47 (Spring 1971): 49-54.  Weal W. "Measuring t h e Customer's Image o f a Department Store." J o u r n a l o f R e t a i l i n g 37 (Summer 1961) : 40-48. Weimer A. and Hoyt H. P r i n c i p l e s o f Real E s t a t e . 4ed. New York: The Ronald Press Co., 1960. Zaloudek Robert F. " P r a c t i c a l L o c a t i o n A n a l y s i s i n Market Areas." The Re a l E s t a t e A p p r a i s e r 38 (May-June 1972): 47-50.  132  SURVEY OF PROFESSIONAL REAL ESTATE AGENTS SECTION I  J.  (This section helps us learn about your listing commercial properties.)  About what percent of the properties listings?  Page 1 of 5  and prospecting  you work are exclusive  methods for business/  or exclusive  right  to sell %  2. In order of importance, please describe your three most effective I (1) listings and (2) prospects.  ways to locate:  Listings 1/  2/  3/ Prospects 1/  ;  2/  ;  3/ ?. Please estimate what percent of your prospects  SECTION II  result  from: a.  Newspaper a d v e r t i s i n g  %  b.  On premise s i g n s ....  %  (This section will assist us in determining when location corrmercial properties are helpful to you.)  1. If you never consider location (the surrounding cial properties please check here and skip to SECTION III.  analyses for business/  area) in your marketing  of business/commer-  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.? P l e a s e comment  Yes No .  3. Do you use location properties?  analysis  to help you identify  specific  propsects  for  individual Yes No  133  Page 2 of 5 If yes, please outline the steps that you follow identification of specific prospects.  Do you use a computer (in-house or outside)  in your location  to assist  analysis  in your location  that lead to the  analysis? Yes No  If yes, how does the computer assist  Do you use statistical  data to assist  you?  in your location  analysis? Always Often  z  Seldom  '  Never  If you use statistical data, please tell publications that contain these data.  Do you prepare a written analysis aid in your sales efforts?  us as specifically  of location  as possible  the reports and  (as opposed to making mental notes only) to 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.  134 Page 3 of 5 11.  On what basis do you decide  to prepare a written  location  analysis?  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 location analyses by using the following code. Code Always  = A  Sometimes  = S  Infrequently or never = leave space blank a. b. c. d. e. f. g-  h.  Jk.  1.  m.  On-site parking O f f - s i t e 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 o f trade area L i s t i n g existing/proposed competing shopping areas Conducting consumer surveys L i s t i n g competing stores i n area . Changing land uses i n area Origin/destination of local t r a f f i c  SECTION III (This section 1. Who usually  deals with pricing  n. o. Pqr.  t. u. v. w. X.  Accessibility of site V i s i b i l i t y of s i t e L i s t of neighboring uses Vacancy rates i n area Street location, i . e . , corner, middle, etc Type o f street, i . e . , main, side, etc Population o f trade area Income levels i n trade area ... Household expenditure patterns i n trade area Economic outlook of trade area Sales forecast for present or potential users of s i t e Rate of trade area population growth  and financial  determines the asking price of properties  Please comment  2.  What factors do you believe properties?  returns.) that you a. b. c. d.  are the major influences  list? Owner Fee appraiser.... In-house appraiser Myself \  on value for business/commercial  135-  Page 4 of 5 3. In the last two years approximately how many properties zoned business/commercial and undeveloped) have you sold in each of the following price ranges? Developed 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  (developed  Undeveloped  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  1. Are real estate books and magazines useful  2. What real estate magazines or journals  to you as a  practitioner?  do you or your office  3. Can you tell us the titles and/or authors recommend to other agents or students?  publications.)  subscribe to?  of books on commercial real estate  4. Do you think there is a need for a real estate magazine featuring  Canadian  that you could  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?  5.  $  (please check) a.  Under grade 6  b.  Grade 6-12  c.  Secondary school graduate .  d.  Attended post-secondary ...  e.  Post-secondary graduate ...  Approximately what percentage of your annual I.C.I, earnings are accounted for by properties (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 B r i t i s h Columbia Vancouver, B.C.  

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