Everything I've Learned About Real Estate Market Research

1. Conventional and
Non-Conventional
Retail Real Estate
Market Research
Everything I’ve learned about market research to
create extraordinary human centered marketplaces
By Rick Hill // August 2023

2. Introduction

3. // 03
Prior to the Covid-19 Pandemic, I had the opportunity to create a retail strategy for
a five-star resort located on the Mexican Pacific Coast. Existing expenditures in the
resort’s three shops had combined average sales of approximately $1,650 per square.
Yet, I sensed the resort guests would have a more unique and curated retail experience
and recommended we add more shops. A senior level Asset Manager liked the idea but
requested extensive market research to support recommendations for any additional
shops and their merchandise assortments.
We therefore collected data on total occupied room nights, average daily room rates,
and in-resort expenditures on food and beverage (F&B), resort activities, and added
services. This data was used to estimate the household incomes of the resort’s guest
and their annual expenditures for travel, entertainment, and luxury retail. However, we
realized that this data was limiting in our quest to really understand the attitudes and
preferences of the resort’s guests.
Retail real estate research is often purely quantitative with a focus on hard data collec-
tion that rationalizes actual sales compared to potential sales, the capture of potential
sales, and market share. In the case of my five-star resort, I initially speculated that any
new shop would need to capture a percentage of something. Was it a percentage of
household incomes? A percentage of a vacation budget or would the new shops simply
take a percentage of existing resort retail sales?
To answer this, I asked a lot of questions; to gain qualitative insights the raw quantita-
tive data and research is not often designed to reveal. Neglecting qualitative data that
can reveal insights easily lost in quantitative research is a huge mistake and it is neces-
sary to understand the whole picture.
What I learned was intriguing: 38% of the resort’s guests arrived by private jet and on
average, stayed just over 5 nights and occupied 1.5 rooms. Surprisingly, the nightly
occupied room rate at an average of just over $1,000 generated an equal amount of
revenue for food & beverage, activities, services, and retail.
But that was about the limit of available information.
A few weeks ago, a potential client asked me, “who does your market research?” I
answered, “I do it—but it’s a complicated and ongoing process.”The potential client
asked, “how so?” I explained that I did not have a template with fill-in the blanks; that
my process is holistic and an iterative process. The potential client asked me to follow
up with an outline of my process. I provided a one-page overview with some circular
diagrams, but it hardly scratched the surface of my in-depth approach to a research
process developed over 40 years. Moreover, the request launched me into writing this
chapter-by-chapter guide on unconventional retail real estate research, which is part
science and truly part art. In doing so, I included the events that spurred various com-
ponents of my process. The fun part was recalling all the big “wow,” “aha,” and “light
bulb” moments that have occurred during my career.
In my many years of experiences in the field as a real estate and built marketplace
strategist, I have witnessed numerous “aha!” moments that have shaped the evolution
of shopping center formats, attractions, and events.
For instance, here is an ah! moment:

4. // 04
I decided I needed to observe and conduct what my anthropologist daughter
taught me was participant observation. I did that over several trips (I know what
you’re thinking. My response: Tough job, but somebody had to do it).
What my observations revealed were compelling. Within a few days of arrival,
activity fatigued and sunburnt guests visited the resort’s shops and made a
purchase. But a deeper dive revealed that a highly disproportionate share of
the resort’s retail sales came from a certain consumer segment that was differ-
ent from other shoppers. The resort’s prolific shoppers were older, a less active
females staying in the most expensive villas. They shopped while a companion
napped, worked, watched sports on TV, drank in the bar, deep sea fished, or
golfed. This prolific shopper made multiple purchases over an average of three
shopping trips per resort stay, and the largest expenditures were typically made
on the last full day in the resort.
As I studied the data in hand and reflected on the observed shopping behavior, a
more intriguing picture emerged.
An aha-moment occurred when I realized we didn’t need to capture anything as
the primary shopper already had everything. She was giving the resort their most
valuable commodity, her time.
Conversations with the executive team of the resort’s ownership shifted to
answering the question: how should the resort’s retail offerings respond to the
privilege of having time with a consumer who is not concerned with credit card
limits or exceeding a budget for their vacation?
We soon realized that if we created an environment where our best shoppers
wanted to spend their time that also encouraged a conversation around one-of-a-
kind, rare, local, high-quality art, handcrafted, customized, and unique goods, we
may be granted a portal into their life. This changed the notion of transactional
shops with products for a price served by salesclerks and cashiers to the need
for a more personal experience. We decided to build communities of connected
collectors and the local creators of objects with a meaning and facilitated through
local cultural ambassadors. As an example, we engaged a talented curator who
provided fully propped locations for the Quintin Tarantino’s “Night of the Iguana.”
Our curator introduced us and eventually our guests to the inside worlds of
Sergio Bustamante, Manuel Lepe, and many others.As an example, we engaged
an incredibly talented curator that had provided fully propped locations for the
Quintin Tarantino’s “Night of the Iguana.” Our curator was delighted to introduce
us and eventually our guests to the inside world of Sergio Bustamante, Manuel
Lepe, and many others.
The results of our studies was the remerchandising of two existing shops and the
addition of three more. The new shops were built over a lower level roof which
did not impact the oceanfront footprint of the resort.
In this white paper, I will share the stories about ah! moments and how I redevel-
oped the first regional mall into an outlet center as per the Wall Street Journal,
introduced IKEA to the United States, was the first to use the term lifestyle center
in print, partnered with an alligator showman to create Barefoot Landing one of

5. // 05
the first tourist destination resort villages that has successfully operated for over 35
years, created strategies for 11 national parks, created plans for the Sponsor Villages
for the 1996 Olympic Games in Atlanta, and created the nation’s premiere high school
athletic event in partnership with Nike, and many more.
In each case there were revelations stemming from meticulous data collection,
research, and analysis, accompanied by astute observations and attentive listening. In
each instance I encountered challenges and problems that defined conventional wis-
dom and proven successes in the marketplace.
Like the initial reaction to my Mexican Pacific Ocean resort, I’ve often heard asset
managers, brokers, and financiers dismiss new ideas with statements like “that will
never work” or “that’s been tried before, and it didn’t work.” These comments tend to
come from risk adverse professionals who only see real estate as a commodity. How-
ever, when the hard data from research, market analysis, and keen observation are
cross-pollinated with innovative ideas and years of experience I have discovered cre-
ative solutions that turned out to be very pragmatic and most importantly, ignited the
human imagination and transformed the ordinary, the unfeasible, and failed projects
into huge successes that lead to market transformations.
While land planners, architects, and communication experts play vital roles in creat-
ing innovative design and marketing solutions, their responsibilities typically do not
encompass market research and analysis. Although they possess a an outstanding
grasp of the market, it is often an insufficient understanding to fully inform their own
design, marketing, and positioning process. As a result, master plans, building styles,
and marketing themes are often conceived without a comprehensive market-driven
and financially viable program, which should be the end product of meticulous
research and the start of creative processes.
On the other hand, third-party experts who specialize in market research often fall short
in providing highly rationalized land use, area, and space programs. Their studies are
often conservative and backward-looking, lacking the forward-thinking predictive out-
comes necessary to navigate an ever-evolving marketplace. Consequently, their studies
conclude with economic projections that often fail to support new construction costs
and they are void of transformative market solutions.
When the hard data from research, market
analysis, and keen observation are cross-
pollinated with innovative ideas and years of
experience I have discovered creative solutions
that turned out to be very pragmatic and most
importantly, ignited the human imagination and
transformed the ordinary, the unfeasible, and
failed projects into huge successes that lead to
market transformations.

6. // 06
In my experience, I have found that a cooperative approach is paramount to fully
capitalize on the knowledge bank of the entire development team. By fostering a close
collaboration among leasing, operations, research, strategy, development, design,
and marketing professionals, we can create the market-driven, financially viable, and
transformative strategies necessary to provide extraordinary results for investors and
the community.
The initial product of a collective approach to project planning is the establishments
of a project program that thoroughly defines the land uses, activities, retail categories,
space requirements, and overall market position that is market driven and financially
viable before commencing the creative processes of master planning, building design,
merchandising, and branding.
I strongly believe that a combination of market research and innovative thinking is
essential in the creation of competitive retail real estate design, marketing, and leas-
ing strategies. Moreover, while research provides crucial insights, it cannot replace
the power of innovation. Innovation is necessary as today’s challenging environment
requires solutions that go beyond conventional analytical methods and quick-to-draw-
blue-sky visions. Extensive filtering and data distillation are necessary to find those
sparks in human imagination that results in transformative developments.
To help facilitate this process, this comprehensive white paper offers an in-depth anal-
ysis of conventional, non-conventional, and state-of-the-art retail real estate research
methodologies as used in my art of marketplace crafting to restore community in the
marketplace. I have incorporated intriguing anecdotes and examples that breathe life
into the research process, strategic planning, and pre-design programming.
This paper rests at the intersection of data-driven insights, imaginative problem-solv-
ing, and concept development. But what sets this paper apart is its detailed exploration
of innovative approaches that blend hard data, rigorous analysis, and inventive think-
ing. It showcases real-life examples, drawn from my own experiences, that integrate
consumer and market data collection, analytical methods, market dynamics, and
emerging trends, all of which drive innovation in retail real estate marketing, design,
and communication.
By infusing creative thinking into real estate market research, this paper provides a
treasure map for industry leaders seeking financially viable and market-driven oppor-
tunities. The reader will leave this white paper with a treasure chest of resources and a
new way of thinking about creating, developing, and redeveloping retail real estate for
maximum success.
To help facilitate this process, this comprehensive
white paper offers an in-depth analysis of
conventional, non-conventional, and state-of-the-
art retail real estate research methodologies as
used in my art of marketplace crafting to restore
community in the marketplace.

7. // 07
Real Estate Research: A Disclaimer on Sources
This white paper is focused on the sources and process of collecting market data to
plan multi-tenant retail properties.Good research provides a range of sustainable
gross building areas, optimum gross leasable area, projected sales, and obtainable
rents. But they also are often the source of value-enhancing big ideas, strategies to
create ideal merchant mixes, and drivers of innovation in the design, planning, develop-
ment, and redevelopment of human centered marketplaces.
This paper should not be read as an academic prescription or an absolute outline of
contemporary real estate research methods. I do not believe there are a set of formu-
las, calculations, and methods that stand alone in their ability to program a successful
development. Instead, hard data requires the infusion of thoughtful and informed
application to create the right strategies.
Within these pages the reader will gain an understanding of key sources of valuable
market data to make informed development, redevelopment, and on-going operational
decisions in specific and defined real estate locations. While the processes I use to col-
lect market data to develop successful real estate strategies for shopping centers, main
streets, resorts, and attractions are presented within this paper, an underlying theme
encourages real estate professionals to truly know their markets and to filter and distill
the personal visions of team members with a balance of up close and keen observation,
deep data collection, and creative thinking.
But one bit of caution: be careful with a survey of one, especially when it’s by the per-
son with the most power in the room. While managing a strong and opinionated leader
is a challenge; disarmament is best achieved with rhetorical questions to probe the
depth of knowledge followed by simple statements of well researched facts.
Informed knowledge comes from an intellectual curiosity that requires a deep dive
beyond reading news reports about a subject. Quick, unfounded, headline-driven
opinions fail to uncover the fundamental challenges and miss the real opportunities to
create successful strategies. As such, it is common to read media reports about a trou-
bled real estate asset class, failing malls, store closures, and online shopping replacing
brick-and-mortar shops. However, an analysis of the underlying facts often reveals a
different or certainly more complicated story.
Economic data and statistics related to shopping centers and retail in general are often
more complex than the media reports and are subject to interpretation. While there
Informed knowledge comes from an intellectual
curiosity that requires a deep dive beyond reading
news reports about a subject.

8. // 08
are a large variety of sources that provide data on key economic indicators that impact
the retail real estate industry such as GDP, inflation, interest rates, job growth, housing
starts, and consumer spending, it is important to verify the accuracy of the information.
Therefore, I recommend a thorough review of source data reports to obtain a more
complete picture of the economic environment impacting real estate, rather than that
of a headline writer.
Investors and analysts should therefore consider factors like market trends, demo-
graphic shifts, regional variations, new distribution channels, seasonality, and the
actual performance of operating properties at a micro level when making real estate
investment decisions. Additionally, economic indicators should guide rather than
dictate, and it is important to continually monitor and reassess economic data as it
evolves over time.

9. Chapter 1:
How to Collect National
Local Real Estate Data
A Source Guide to National Market
and Local Data Collection

10. Restoring community
in the marketplace
Data Collection Trend Analysis Knowledge
How to Collect National
Local Real Estate Data
Factors such as population, population growth, households,
household income, employment, job growth, consumer spending,
and new housing starts influence the entire real estate sector.
1

11. // 011
Introduction
I recall the first time someone asked me about the trade area of an enclosed mall for
which I was the marketing director.I was 24 years old, just started in the position at
The Mall in Louisville, KY, and I had the slightest idea, but took a guess and described a
general geographic area. Later that day I drove around the mall’s parking lot and noted
the name of the county on the license plates. A few weeks later, I mounted a map of Jef-
ferson County, Kentucky on foamboard and handed out chocolate bunnies to anyone
who would place a pushpin on the location of their home. I took my findings and made
some rough calculations (to be honest I really did not know how to do percentages. I
educated myself with a book purchased from Walden Books in the mall). Educated and
informed I told anyone who would listen that 55% of our market came from X and 12%
lived in Y. That was the start of my quest to know my market and it has never stopped.
This white paper examines various processes of real estate market research that I have
learned over a 40+ year career and I am still learning today. I maintain a position that I
only work on good projects with good people that will allow me to learn and do my best
work. As I have written this paper, I realize it’s been a long career, but I am excited to
continue my journey of discovery and love sharing my stories and insights, which may
help the reader in the development, redevelopment, positioning, leasing, marketing,
and value enhancement of shopping centers, attractions, destinations, and resorts. But
my goal is far more reaching; I want to simply share my knowledge on market driven,
pre-design, and planning processes to help create superior human centered market-
places.
For the purpose of this paper, retail real estate consists of shopping centers, malls, main
streets, high streets, urban districts, attractions, and non-traditional destinations where
consumers gather and make meaningful purchases such as resorts and festivals. In
the context of this paper, the retail marketplace is essentially any physical place where
people buy goods often accompanied by opportunities for enjoying food and beverage
and forms of entertainment and leisure.
The paper moves from the macro-overview of the resources I use to understand the
national retail real estate market to more detailed retail project specific processes of
data collection that inform the creation of implementable strategies for the design,
positioning, marketing, development, and redevelopment of real properties. The
paper starts with an overview of the available resources for the collection of national,
regional, and local data at the macro level that impacts the real estate industry in gen-
eral and more specifically the retail marketplace. You will also find information on how
job growth, housing starts, retail sales, and inflation impact interest rates, retail rents,
and capitalization rates that set the value of retail properties. Moreover, this paper
focuses on the unique relationship between the demographic makeup of a trade area,
consumer buying behavior, and the ability of a shopping center to capture the market’s
sales potential.
Sections on consumer expenditures, the size and scope of the retail market, and the
shopping center industry are highlighted to assist in understanding how individual
properties capture a sustainable share of the sales potential of their markets.

12. // 012
Throughout this paper, you will read about a reoccurring pattern of successful mall and
store openings, rapid store expansion, and big crowd generation from one-time spe-
cial events that are unsustainable. But there’s a parallel story of a thriving low country
Barefoot Landing in Myrtle Beach, SC that has served as a nightly family destination
for weekly vacationers for almost 40-years. There is the story of how I found IKEA on a
rainy late fall day outside of Munich Germany and introduced the Scandinavian home
furnishing store to their first U.S. location that spurred their 35+ year methodical march
across the U.S. while opening only 1 to 2 stores a year.
I take you on a journey from small mall to mega mall, and from shopping at the neigh-
borhood grocery to retail resorts. Along the way you’ll learn how to estimate a market
area for a potential shopping center and how to project its capture of the sales poten-
tial. I’ll explain how the size of a shopping center is determined and how rents are
projected in order to determine the cost of a development which can be supported by
the rents. I’ll conclude my paper with discussions on how merchant mixes are created
and how retail sales can be maximized.
With that introduction, I will begin with my approach to national real estate data collection.
National Real Estate Data Collection
Real estate research is broadly categorized into quantitative and qualitative meth-
ods at both the macro and micro levels.At the macro level, it’s essential to analyze
the overall national economic and financial environment that impacts the real estate
sector. Factors such as population, population growth, households, household income,
employment, job growth, consumer spending, and new housing starts influence the
entire real estate sector.
Key national economic indicators such as gross domestic product (GDP), inflation,
and interest rates also provide valuable insights into the state of the economy and its
impact on the real estate market.
Much of this information is on websites such as the Bureau of Economic Analysis, the
Federal Reserve, and the National Association of Realtors. Additionally, many financial
news outlets, such as the Wall Street Journal, Financial Times, Bloomberg, and CNBC
report on economic indicators regularly. National economic indicators that influence
residential and commercial real estate, include:
1. Gross Domestic Product (GDP): GDP is a measure of a country’s economic output.
When GDP is growing, there is often increased demand for both residential and
commercial real estate.
2. Inflation: Inflation is the rate at which the general price level of goods and ser-
vices in an economy is increasing. High inflation can lead to higher interest rates,
which limit the supply of capital to build shopping center and the buying power of
consumers,
3. Interest Rates: Interest rates have a significant impact on the real estate market.
Lower interest rates make it easier for people to afford homes and reduces the cost

13. // 013
of commercial development, leading to increased demand. Conversely, higher
interest rates can make it more difficult for consumers to buy homes and pay mort-
gages and have credit available to make purchases.
4. Employment Rates: When employment rates are high, more people have steady
incomes, making it easier to purchase homes, eat out, and buy goods. Conversely,
high unemployment rates can lead to a decrease in demand for real estate.
5. Consumer Confidence: Consumer confidence reflects how optimistic consumers
are about the economy’s future. Higher confidence levels can lead to increased
demand for homes and more purchases.
6. Demographic Trends: National demographic data such as population size, growth
rate, age distribution, income levels, and education levels provide base lines for
comparisons to local data and insights into the demand for various types of prop-
erties.
7. Employment and Labor Market Data: Data on employment rates and job creation
provide insights into the potential demand for commercial and residential properties.
8. National Housing Market Data: National housing data sources that are commonly
used as benchmark data to compare local housing trends include:
a) National Association of Realtors (NAR) data: The NAR provides monthly
reports on existing-home sales, pending home sales, and home prices at the
national level.
b) Case-Shiller Home Price Index: The Case-Shiller Home Price Index tracks
changes in home prices across major metropolitan areas in the United States.
This index can provide a benchmark to compare local housing trends.
c) U.S. Census Bureau data: The US Census Bureau provides data on homeowner-
ship rates, vacancy rates, and housing starts at the national level. This data can
serve as a benchmark to compare local housing trends in terms of homeowner-
ship rates, vacancy rates, and new construction.
d) Federal Housing Finance Agency (FHFA) data: The FHFA provides quarterly
reports on the performance of the housing market and trends in home prices
at the national level. These reports can provide a benchmark to compare local
housing trends to in terms of home prices.
e) National Housing Market Indicators: The National Association of Home Build-
ers provides monthly data on key housing market indicators, such as builder
confidence, housing starts, and new home sales. These data can provide a
benchmark to compare local housing trends to in terms of new construction
and builder activity
9. Retail Sales: Information on retail sales for defined areas can be found from sev-
eral services. Retail sales data can provide developers with valuable insights into
retail sales trends and patterns. Examples are as follows:

14. // 014
a) Census Bureau: The U.S. Census Bureau conducts surveys and collects data on
retail sales as part of its economic census, which is published every five years.
At the time of writing, the last fully published economic census was for 2017.
The Bureau will publish the data for the 2022 census will not be published until
2024. Economic census data is broken down by region, state, and metropolitan
area, and can provide businesses with valuable insights into retail sales trends
and patterns.
b) Bureau of Economic Analysis (BEA): The BEA, an agency of the U.S. Depart-
ment of Commerce, publishes the monthly Retail Sales report, which provides
estimates of retail sales at the national level. This report covers a broad range
of retail sectors and helps gauge consumer spending patterns and overall eco-
nomic activity.
c) Federal Reserve: The Federal Reserve releases several reports that include
retail-related data. The Federal Reserve Economic Data (FRED) platform
provides access to various economic indicators, including retail sales and
consumer sentiment. The Beige Book, published eight times a year, contains
anecdotal information on economic conditions, including retail activity from
each of the Federal Reserve districts.
d) Department of Labor: The Department of Labor’s Bureau of Labor Statistics
(BLS) produces the monthly Retail Trade Report as part of the Employment
Situation report. This report provides data on employment, hours worked, and
earnings in the retail sector.
e) Nielsen: Nielsen is a leading market research company that provides data on
retail sales and consumer behavior. Its retail measurement services provide
information on sales trends and performance for different categories of con-
sumer products, including grocery, health and beauty, and home improvement.
f) Claritas SPOTLIGHT: Claritas, a Nielsen owned company, provides detailed
demographics, industry sales projections, and consumer segmentation stud-
ies for the current year with 5-year projections by user defined areas. When I
benchmark at the national level, I use SPOTLIGHT and the defined area is the
entire US.
g) Circana (Formerly NPD Group): Circana is a market research company that
provides insights into consumer behavior and retail sales trends. Its services
include point-of-sale tracking, consumer panels, and market sizing, which
help retailers and developers understand their market share and competitive
landscape.
h) Mastercard SpendingPulse: Mastercard SpendingPulse is a service that pro-
vides data on retail sales trends based on aggregated data from Mastercard
transactions. It provides information on sales trends and consumer behavior
across a wide range of industries and regions.

15. // 015
i) International Council of Shopping Centers (ICSC): The ICSC is a trade asso-
ciation that represents the shopping center industry worldwide and maintain
statistics on shopping center development, occupancy rates, and other key
indicators. The ICSC website offers a range of reports and data, including shop-
ping center counts by region, and vacancy rates for different types of centers.
j) CoStar Group: CoStar is a commercial real estate information company that
provides data on commercial real estate including leasing activity, occupancy
rates, and market trends for shopping centers.
k) Market Surveys and Market Analysis: Market surveys and market analysis pre-
pared by major national brokerage and consultancies such as CBRE and JLL pro-
vide a good overview of the local real estate market by sector and area of a city.
l) National Retail Federation (NRF): The NRF is a US trade association which
provides research and data on retail trends, including shopping center devel-
opment and occupancy rates.
m) Reis: Reis is a Moody’s Analytics Company that provides market data and
analytics for the commercial real estate industry, including shopping center
vacancy rates and trends
n) Esri: Esri is a data analytics company that provides excellent mapping tools
with a range of data products and services, including retail sales data broken
down by zip code. The data can be used to understand sales trends and con-
sumer behavior in specific geographic areas.
National Benchmark Conclusion
In summary, national benchmarking is an on-going process. I recommend you create a
comprehensive outline of national benchmarks and develop your “go-to” sources. My
outline is five Excel worksheets organized under demographics, economics, housing,
commercial real estate, shopping centers, retail, food beverage, entertainment, and
consumer trends. I consistently update my benchmark knowledge base throughout
the year. Spread sheet data points can be linked to sources to be automatically update
every time the document is opened.
As an example, I frequently come across headlines that appear to be at odds with the
benchmarks I have established. For instance, I might come across a headline reporting,
“Local mall now boasts the highest sales per square foot in the nation” or “online sales
now estimated to be over 20%.” However, upon reviewing the report, I often discover
inaccuracies or flawed methodologies used to substantiate these claims. In the exam-
ple of the mall with the reported highest sales, I found that the mall took December
sales and multiplied it by twelve and divided it by the square footage of the mall. But no
mall does the same volume each month. December sales could easily be twice the sales
of other months.
To conclude: well researched national residential and commercial benchmarks provide
valuable baselines for comparison to findings, assumptions, and the “survey of one.”

16. // 016
Local Real Estate Data Collection
Local factors that I consider in parallel to national benchmarks include population,
population growth, households, household income, employment, job growth, new
industries and corporate relocations, new housing starts, income levels, education,
transportation changes (i.e., new roads, bridges, rapid transient), and more.
For instance, the number of new housing starts can indicate the level of demand for
housing in a particular market. Still, too many new housing starts can lead to over-
supply and lower property values, while too few can lead to a shortage of housing and
higher prices.
Income levels also play a significant role in both the demand for housing and the abil-
ity of potential buyers or renters to afford it.
While commercial property occupancy rates and absorption rates are often widely
stated by the local offices of national brokerage firms, they are often broad overviews.
However, cities are typically broken down into zones such as the center city, southeast,
and northeast, which provides a more accurate look by area of a city. However, when
it comes to retail, a property’s specific location, design, amenities, and tenant mix are
major factors in its performance. Consequently, it is critically important to understand
the metrics behind the best performing properties and the factors that created a poorly
performing retail center.
These variance within property types are often adjusted in some area wide surveys by
classifications such as “Class A “and “Class B” properties. But again, when the lowest
common denominators of a market is factored into averages it distorts the ability to
understand the real performance of successful properties. As such, I have long stated
retail rents are a factor of retail sales and retail sales are a factor of household incomes
of the market attracted to the property.
However, the market tend to price retail rents, especially in ubiquitous commercial
corridors, as a commodity and not as a factor of the actual sales being generated in the
development. This is highly problematic: if all properties located along a commercial
corridor are generally the same with the same relative access and if there is a plentiful
supply of space, the rents will tend to be lower than what the sales could support.
I have outlined below the key indicators that I study at the local level:
1. Population Growth: A growing local population is generally a positive sign for a
real estate market. More people mean more potential home buyers and apartment
renters, which can lead to an increased demand for retail goods, services, dining,
and entertainment. One measure that is often reported is retail space or shopping
center space per capita. As an example, you may hear that the U.S. has something
like 23.5 square feet of shopping center space per capita and with a comparison
to Canada and Germany. However, this data point is one of the most misunder-
stood and misquoted statistics, which is covered later in this paper. In brief, retail
in older densely populated cities tends to concentrate in commercial districts,
downtowns, and high streets and not in traditional shopping centers. Moreover, in

17. // 017
areas of rapid population growth, such as in sunbelt cities with many new planned
communities, new roads, and major new employment centers we see a lot of new
retail development. In the densely populated urban city, there will obviously less
shopping center space per capita than a rapidly growing suburban market.
2. Job Growth: Job growth is a crucial factor in the health of a real estate market.
When there are more job opportunities, people are more likely to move to an area,
which can increase demand for housing and commercial space. Strong job growth
also generally leads to higher incomes, which provides more disposable for retail,
dining, and entertainment.
3. New Housing Starts: The number of new housing starts can indicate the level
of demand for housing in a particular market. If there is a large quantity of new
housing starts, it can suggest a high demand for housing. However, too many new
housing starts can lead to oversupply and lower property values, while too few can
lead to a shortage of housing and higher prices.
4. Income Levels: Income levels can impact both the demand for housing, and it is
a key indicator of the market potential for retail sales, which are a factor of house-
hold income. In areas with higher incomes, people are generally more able to dine
out, enjoy entertainment, and make retail purchases for lifestyle retail.
5. Infrastructure and Transportation Data: Infrastructure and transportation play
a critical role in the real estate market. Data on public transportation, highways,
airports, and other infrastructure can provide insights into the potential demand
for properties in different locations.
6. In regard to planned communities, I have long observed that the cost of the
private development of infrastructure and roads can exceed the ability of the
developer to build enough homes and commercial uses fast enough to cover the
cost to carry the improvements.
7. Land Use Regulations and Zoning: Understanding the land use regulations and
zoning in a particular city or district is crucial to assessing the potential for devel-
opment. Zoning maps, land use regulations, and building codes can provide
insights into the feasibility of different types of development projects. Additionally,
innovative zoning and rezoning that encourages transit, traditional neighborhood,
and higher density mixed-use development should be closely followed. A low den-
sity and somewhat marginal commercial corridors can experience rapid growth
when rezoned for higher density.
8. Quality of Life Factors: Quality of life factors, such as crime rates, school and hospi-
tal ratings, transportation, and access to amenities also impact the real estate mar-
ket. Areas with better quality of life factors are more attractive to potential residents
and tenants, which can lead to increased demand and higher property values.

18. // 018
Summary:
A major premise of this paper is one that holds the position that developers must
truly understand national, regional, and local economic indicators that impact the
real estate development environment.The key national data points include GDP, infla-
tion, employment, job growth, housing starts, and national occupancy trends of the
various real estate sectors.
At the local level, population, households, average household income, housing starts,
and job growth are among the key data point to know.
Likewise, trends in land costs, building costs, occupancy rates and their rental rates are
vital indicators of the health of a market. Additionally, new corporate relocations, new
roads, new bridges, and other public improvements such as new schools and parks
should be closely followed. In summary, great real estate market research begins by
obtaining, knowing, and understanding both national and local factors that drive real
estate success.

19. Chapter 2:
Introduction
to Retail Sales

20. Restoring community
in the marketplace
Households Expenditures Retail Sales
Introduction
to Retail Sales
Sustainable retail rents are a factor of sales and obtainable rents are
a factor of a market’s household income.
2

21. // 02 1
Introduction to Retail Sales
In the last chapter we looked at broad national and local factors that influence and
often determine the environment for successful real estate development. In this
chapter, we will examine the relationship of households, household incomes, and
retail sales.
Please note that the Covid-19 Pandemic in 2020 through 2022 significantly impacted
the shopping center and restaurant industries. There were long periods when non-es-
sential stores and restaurant were closed. Online shopping, curbside pick-up, and home
deliveries became the norm. Consequently, consumer data for the years 2020 through
2022 were greatly skewed. Likewise, the first results of the 2020 US decennial census
were not released until March of 2022 and releases were still occurring well into 2023.
For these reasons, I look most closely at data from 2019 and use that as predictor of
2023; however, Covid-19 may have permanently changed shopping patterns.
Households
Assessing the market potential of a shopping center requires collection of key data
points regarding households and household income.
A household refers to a group of people who live together in the same dwelling, sharing
common spaces and resources such as cooking, eating, and sleeping areas. A house-
hold can consist of a single person, a couple, a family, or a group of unrelated individu-
als who share living arrangements.
In 2019, the US population was approximately 331 million residing in 132.242 million
households. Estimates of retail space in the US per capita for the year 2019 was 23.5.
Of this total, approximately 5.48 billion square feet was in shopping centers represent-
ing 16.57 square feet per capita. Conversely, there was 6.93 square feet per capita for
non-shopping center retailers.
However, I lean toward analyzing retail expenditures by household rather than on a per
capita basis as it provides a more accurate understanding of consumer behavior. I have
sound reasons for this. I have reviewed several research studies on shopping centers
that project sales on a per capita basis. This approach is typically used by researchers
that primarily work in the theme park and attraction industry. In theme parks, retail
and food expenditures are not the primary reason for the visit. Purchases are uniform
by park type, and they are a factor of overall attendance and they are easily calculated
when a park operator has detailed attendance records. In the theme park scenario
visitors enter the theme park primarily to be entertained. Getting something to eat and
drink may be part of the entertainment, or a mere pit stop to rest and refuel. Buying
a souvenir for children often completes the theme park trip. In any of these cases it is
relatively easy to calculate expenditures per capita and souvenir and gift purchases are
clearly a factor of attendance.
Conversely, most shopping trips are focused on the acquisition of goods at the house-
hold level such as a grocery or hardware. Households have weekly grocery expenses

22. // 02 2
and households have home repairs. It’s unlikely the head of a household has a home
repair budget and someone else in the household had another home repair budget.
Both could make home repair purchases but both purchases would be for the same
household. On the other hand, entertainment centers such as Barefoot Landing in Myr-
tle Beach, SC, or Disney Springs in Orlando, Florida, or the Festival Markets developed
in the late 1970s and early 1980s such as Boston’s Faneuil Hall Marketplace and Balti-
more’s Harbor Place or Fisherman’s Wharf in San Francisco may more closely align with
theme park expenditures.
I have therefore outlined a summary of reasons why analyzing household expenditures
is my preferred approach.
1. Varied Household Structures: Households can vary significantly in terms of their
composition, including the number of individuals, family size, and dependency
ratios. Per capita analysis treats every individual equally, regardless of their eco-
nomic contribution or purchasing power. Instead by focusing on households we
can account for a household with multiple working members contributing to the
total household income and therefore may have higher overall purchasing capac-
ity compared to a single-person household.
2. Economic Decision-making: Households make consumption decisions collec-
tively, considering factors such as income, budget constraints, and the needs and
preferences of multiple individuals. As an example, a decision is made to keep the
entire household cool in the summer by purchasing an air conditioning unit when
the old one fails. Analyzing expenditures at the household level provides insights
into how these economic decisions are made and allows for a better understand-
ing of how households allocate their resources.
3. Income Disparities: Per capita analysis overlooks income disparities within a pop-
ulation. For example, if a population consists of a small number of high-income
earners and a larger number of low-income earners, a per capita analysis sug-
gests an average level of income that doesn’t accurately reflect the reality of the
majority. Analyzing expenditures at the household level helps capture the varying
income levels and disparities that exist within a population.
4. Market Segmentation: Retailers often target specific consumer segments based on
demographics, such as household income, family size, or life stage. Analyzing retail
expenditures at the household level allows for better correlations with market seg-
mentation studies that are conducted by household. It also helps developers under-
stand the specific needs and preferences of different household types, enabling
them to tailor their products, services, and marketing strategies accordingly.
Sources of household income can vary depending on the household’s composition and
their access to education, skills, and employment opportunities. Common sources of
income for households include wages and salaries, self-employment income, invest-
ment income, and government transfer payments such as social security benefits,
welfare, and disability payments.

23. // 02 3
The estimated 2023 average household income in the U.S. is $87,864 and the median
is $61,937. One important note is that average household incomes are often confused
with median household incomes. The average (or mean) household income is calcu-
lated by summing up the total income of all households in an area and dividing the sum
by the number of households in that same area. On the other hand, the median house-
hold income represents the middle value in a distribution, where half of the incomes
are above the median point and the other half are below the median point.
Individuals and families can spend household income on various expenses such as
housing, food, transportation, healthcare, education, food, apparel, and entertainment.
The percentage of income spent on each category can vary depending on a household’s
income level, location, age, and family composition. For example, households with
higher incomes may allocate more of their income towards discretionary spending,
while those with lower incomes may spend a larger portion of their income on necessi-
ties such as food and housing. In its simplest form, consider two households with two
set of parents and two children in each household, but one is a high household income
and the other is a low-income household. Each household will theoretically spend the
same amount of money annually on milk and bread. The expenditure for these neces-
sities will be the same, but the percent of the household income spent on the neces-
sities of milk and bread will be very different. The high-income family will have a large
amount of discretionary income for other retail purchases after necessities and the
low-income family may have very little discretionary income.
Retail sales are the value of purchased goods by consumers on items such as clothing,
electronics, and home goods. In contrast, the foodservice industry involves the sale of
prepared meals and beverages to consumers in restaurants, cafes, and other foodser-
vice establishments.
However, some data sources may combine retail sales and food service sales into a
broader category of “consumer spending.” This can provide a more comprehensive
picture of consumer behavior and economic activity, but it is important to understand
how the data is defined and measured before drawing conclusions.
This report covers retail sales in the conventional sense, which includes grocery sales,
but not restaurant sales. Additionally, food and entertainment consumption away from
home are addressed as part of shopping center research as dining out more and more
is part of the non-commodity shopping trip or discretionary shopping such as visits to
lifestyle centers.
Discretionary spending refers to the portion of a person’s income or budget that is
allocated to non-essential or optional expenses. It represents the money available for
spending on wants and desires rather than necessities.
I have listed below examples of discretionary spending include:
1. Entertainment and leisure activities: Expenses related to movies, concerts, sport-
ing events, visiting theme parks, hobbies, and recreational activities.
2. Personal care and grooming: Costs associated with spa treatments (i.e., facials

24. // 024
and massages), salon services, beauty products, and other self-care indulgences.
3. Electronics and gadgets: Purchasing items like smartphones, tablets, gaming
consoles, televisions, and other electronic devices that are not essential for basic
needs.
4. Fashion and accessories: Buying fashionable clothing and shoes, accessories,
jewelry, and luxury handbags beyond basic necessities.
5. Dining out or eating out: Expenses incurred by eating at restaurants, cafes, or
ordering takeout instead of cooking at home.
6. Travel and vacations: Costs associated with travel accommodations, flights, trans-
portation, sightseeing, and exploring new destinations.
7. Gifts and donations: Money spent on buying presents for birthdays, holidays, spe-
cial occasions, and making charitable donations including giving to a church.
8. Hobbies and recreation: Expenses related to pursuing hobbies such as photogra-
phy, sports, arts, crafts, collecting items, or participating in clubs and organizations.
Household Expenditures1
Households spend and save their income. Spending can occur on a wide variety of
goods, services, products, and obligations. Some of the most common expenses that
households may incur on a national average are listed below:
▪ Housing: 33% of household income is spent on housing-related expenses, which
is the largest household expenditure. Housing expenses include rent or mortgage
payments, property taxes, and home insurance.
▪ Transportation: 15% of household income is spent on transportation-related
expenses, which includes owning or leasing a vehicle as well as expenses related to
public transportation, ride-sharing services, or other forms of transportation.
▪ Healthcare: 8% of their income on healthcare-related expenses, which includes
medical care, insurance premiums, and prescription drugs.
▪ Food: 9.7% of household income is spent on food. Of that 9.7%, approximately 54%
is spent on food at home (groceries) and 46% is spent on food away from home
(eating out or ordering in2). To break it down further, on average, households spent
approximately 5.2% of their income on groceries and 4.5% on eating out.
▪ Utilities: 7% of household income is spent on utilities, which includes expenses
related to electricity, gas, water, and other basic utilities.
1 Expenditures exceed 100% of household incomes because households go into debt, and certain categories
include purchases that may also be included in other categories.
2 The CES survey for the 1st four months of 2023 indicated that eating out as a percentage of Household Income
was 37%. Explanations could include seasonality, weather, labor shortages, in restaurants, and inflations impact
of the cost of eating out.

25. // 02 5
▪ Education: 2% of average household incomes are spent on education-related
expenses, which includes tuition, books, and other educational expenses.
▪ Retail Sales:3 The percentage of average household incomes spent on combined
retail purchases including grocery sales and auto sales has generally been in the
range of 48-50% of household incomes. Non-auto retail sales are approximately
36%-38% of household incomes.
▪ Entertainment: The percentage of household income spent on entertainment can
also vary widely, but a 2019 report by the Bureau of Labor Statistics found that
the average household spent around 5.3% of its income on entertainment-related
expenses such as movies, sports events, and recreational activities.
God’s Money
Church giving along with all forms of charitable giving is a household expense. The con-
cept of tithing, which means giving a tenth of one’s income (before taxes), has evolved
over time. In the Old Testament, tithing was established to support the financial needs
of ancient Israel. However, for many Christians today, the word “tithe” has come to
represent regular giving to the church.
3 The percentages of household income spent on retail sales, entertainment, and eating out can vary significantly
based on a variety of factors, such as income level, geographic location, and personal preferences.
According to the Bureau of Economic Analysis, total retail sales in the United States in 2020, including auto sales,
amounted to approximately $6.5 trillion. Using the average household income in the United States in 2020, which
was $78,635 according to the Census Bureau, we can calculate that the percentage of household income spent on
combined retail purchases and auto sales would be 24.4% of household incomes.
I was once riding around an affluent area in western Broward County with an
associate, and we drove by what looked like a large, gated estate.Behind pris-
tine light-yellow stucco walls with white caps, I could see beautiful Jubal Palm
trees and the colonnades, arches, and domes of Mediterranean structures. My
associate explained to me that it was the most prestigious synagogue in the area.
I asked him if he belonged to the temple, and he responded: “I can’t afford it.” He
continued, “they make you bring in your tax returns and they tell you want you
need to contribute.”
I had heard about tithing which means giving a tenth of your income back to
God, but I never thought about it in such extreme terms. In Judaism, there is a
strong emphasis on charitable giving and acts of kindness, which are known as
“tzedakah.” Tzedakah is considered a religious obligation and is seen as a way to
promote social justice and help those in need. However, the specific amount or
percentage that one should give is not a fixed percentage of income.
Instead of tithing a specific percentage of income, Jewish individuals are encour-
aged to give based on their means and their willingness to support charitable
causes. The principle of tzedakah is rooted in compassion and the belief in help-
ing others, rather than a rigid requirement to give a certain proportion of income.

26. // 02 6
Financial decisions and income levels play a significant role in giving patterns. As
people’s income increases, the ability to give obviously grows. But wealthier individuals
are not immune to living beyond their means, which can hinder their ability to give.
In the case of my client’s congregation, I could sense a lot of stress. The church had
a big mortgage of their own that needed to be paid down and tithing by the church’s
2,000-member households would certainly solve the problem. Big home mortgages,
paying private tuition, high real estate taxes, saving for the kid’s college education, and
retirement left little money—let alone taking the first ten percent off the top and giving
it back to the church.
But this one church, as many Christian churches believe that the first 10% of one’s
income is considered God’s portion of one’s income, and by tithing, individuals are only
returning to church what is rightfully God’s.
Interestingly, research shows that people with lower incomes are more likely to give
sacrificially, while wealthier individuals tend to give a smaller percentage of their
income. Conversely, research has also found that tithers are less likely to have signifi-
cant debt and often develop a deeper understanding of stewardship.
Furthermore, over the past decades there has been a measurable decline in religious
giving, partly due to the growing number of people who do not identify as religious.
This decline has implications for evangelism, service attendance, and institutional
charitable expansion.
Financial decisions and income levels play a
significant role in giving patterns. As people’s
income increases, the ability to give obviously
grows. But wealthier individuals are not immune
to living beyond their means, which can hinder
their ability to give.
A previous client was a notable mega-church where I helped them understand
that they were competing to capture all forms of discretionary expenditures.
They were also competing for the time allocations of their congregation that
largely consisted of households with dual earning professional trying the bal-
ance careers, parenting, over scheduled children’s activities, and church-related
obligations. The church was located in a rapidly growing affluent side of a major
southern city filled with gated neighborhoods with large homes and matching big
mortgages and in many cases challenging private school tuition. The church had
also taken on a lot of debt (over $35,000,000) to build an “edifice” as stated by the

27. // 02 7
Consequently, you will find in many Christian churches consumer debt and financial
education study groups and many following the financial principles of Dave Ramsey
who is a well-known personal finance radio show host. He is known for his teachings
on budgeting, debt management, and financial stewardship. While he is not directly
involved with a church, he clearly supports tithing from a theological perspective.
But here is the dirty little secret: Total charitable contributions in the U.S. are about
2.6% of Household Incomes and Total Charitable Contributions to Churches are about
1.1% of household incomes.
Retail Expenditures as a Percentage of Household
Income
Now that we understand household incomes and a sense of how incomes are generally
spent, we will take a closer look at retail expenditures as a percentage of household
income. But let’s take a step back for a moment. Average household income represents
the income of all households in any given area such as a primary market or secondary
market. With an average household income data point we can estimate, the retail sales
potential of a household or a group of households.
The calculation to estimate the US average percentage of household income spent on
retail purchases is as follows.
Let’s assume:
▪ 2021 Estimated US Average Household Income: $87,432 = X
▪ Estimated total retail sales in 2021: $11,680,478,040,000 = Y
▪ Total number of households in the US in 2021: 133,595,000 = Z
To calculate the average percentage of household income spent on retail purchases the
formula would be:
X * Z = 2021 US Total Household Income
Y = 2021 US Total Retail Sales
Y/Z = Average Percentage of Household Income Spent on Retail Purchases
Retail Sales4
Total retail sales generally include all sales of goods to final consumers for personal,
household, or office use. This can include a wide variety of product categories, such as:
4 Auto sales are typically considered to be part of the retail industry, as they involve the sale of physical goods
(i.e., vehicles) directly to consumers. According to data from the US Census Bureau, auto and other motor vehicle
dealers accounted for approximately 19% of total retail sales in 2020. This includes sales of new and used cars, as
well as parts and accessories.

28. // 02 8
1. Auto Auto Parts
2. Clothing and footwear
3. Food and beverage stores5
4. Home appliances and electronics
5. Home furnishings and decor
6. Health and personal care products
7. Beauty and grooming products
8. Sporting goods and recreational equipment
9. Toys and games
10. Automotive Fuel,6 products, and accessories
11. Building materials and hardware
12. Office supplies and equipment
Allocation of Retail Sales
Outlined below are the major categories of retail sales7 for 2020 and their share of total
retail sales according to data from the US Census Bureau. Be careful to note that the
following percentages represent the share of total retail sales and not the percentage of
household incomes described above:
▪ Auto Sales: 19%
▪ Food and beverage stores: 11.4%
▪ General merchandise stores: 11.1%
▪ Health and personal care stores: 8.2%
▪ Building material and garden equipment and supplies dealers: 6.7%
▪ Clothing and clothing accessories stores: 5.6%
▪ Sporting goods, hobby, musical instrument, and bookstores: 3.9%
▪ Furniture and home furnishings stores: 3.3%
▪ Electronics and appliance stores: 3.1%
▪ Non-store retailers (including online sales): 12.0%
5 Excludes sales from restaurants and bars. Includes grocery stores and liquor stores.
6 Gasoline sales are often included in total retail sales data, which provides a broader picture of consumer spend-
ing across different industries. However, gasoline sales can also be analyzed separately as a distinct category, as
they are influenced by factors such as global oil prices, consumer driving habits, and government regulations.
7 Includes online sales, retail sales, and direct to consumer (DTC) sales.

29. // 02 9
▪ Other retailers (i.e., florists, and office supply stores): 10.4%
Online Retail Sales
In recent years, online sales have become an increasingly important component of
total retail sales as more consumers have turned to e-commerce channels to shop for
goods.This trend was accelerated by the COVID-19 pandemic, which led to a surge in
online shopping as stores were closed and consumers sought to minimize their in-per-
son interactions. As of the summer of 2023, it remains unclear if online shopping has
maintained its share or if physical retail has regained market share but reports in mid-
2023 indicated online retail sales were 15-16% of all retail sales.
Non-retail sales
It may be helpful to the reader if I listed examples of non-retail sales. Examples of cate-
gories that are excluded from retail sales are as follows:
1. Restaurant sales are typically not considered retail sales as they are part of the
food service industry rather than the retail industry. While both industries involve
the sale of goods to consumers, they differ in many ways. However, restaurant
sales are an increasingly important part of shopping center sales and are major
traffic generators for non-essential retail shops and entertainment.
2. Wholesale sales: Wholesale sales refer to the sale of goods or services to other
businesses, rather than to final consumers. This can include sales of raw materials,
intermediate goods, and finished products to other businesses that use them in
their own production processes.
3. Services sales: Services sales refer to the sale of intangible services such as legal
services, accounting services, consulting services, and healthcare services. These
are not physical products and are typically not sold through traditional retail chan-
nels.
4. Real estate sales: Real estate sales refer to the sale of land, buildings, and other
real property. This is not a product in the traditional sense but is an important
sector of the economy and often represents a significant portion of total economic
activity.

30. Chapter 3:
Shopping Center
and Retail Formats

31. Restoring community
in the marketplace
Malls Main Streets Attractions
Shopping Center
and Retail Formats
Centers of shopping are any physical place where retail purchases
are made including shopping centers of all types, main streets, and
flea markets, resorts, and theme parks.
3

32. // 032
Prelude
In the early 1980s, I found myself at a major intersection point in retail distribu-
tion channels and their facilitating shopping center formats. In the 1980–1982
time frame I successfully redeveloped two small, enclosed malls in suburban
Philadelphia for my employer, The Rouse Company. The malls were initially
called Clover Square and they were anchored by an 80,000 square foot Clover,
which was the discount store developed by Strawbridge Clothier, Philadelphia’s
flagship department store which rivaled Wanamaker’s. The mall portion of Clover
Square consisted of 65,000 square feet of retail space and was planned to be
occupied with local hardware stores, butcher shops, florists, and cheese shops.
The merchandising strategy failed, and shops closed as consumers expected
the mall to have only discount stores. I released the space of numerous failed
shops to off-price retailers which were an emerging retail format where retailers
sold brand name goods at everyday low prices. The remerchandising strategy
featuring these types of stores was successful, and it landed me the challenge to
redevelop a much larger regional mall.
In 1982, I redeveloped another Rouse property, Charlottetown Mall, the fourth
enclosed mall in the United States that had originally opened in 1958 just out-
side of the Central Business District of Charlotte, NC, into a new concept with the
name Outlet Square. The mall’s redevelopment was a success with the replace-
ment of Ivy’s Department Store with a Burlington Coat Factory and national chain
stores such as Walden Books, Radio Shack, Firestone, and Lerner’s were replaced
by Dansk Factory Outlet, Linens ‘N Things, Dress Barn, Finish Line, Famous
Footwear, and Childrens Outlet. The Wall Street Journal featured an article about
the redevelopment of Charlottetown and called it the first redevelopment of a
regional mall into an outlet center. A lot of developers visited Outlet Square—
even the Simon brothers from Indianapolis. Today, Simon is the largest owner
of malls in the U.S. and has a large portfolio of Premium Outlet Malls, which are
predominately leased to discount and off-price divisions of national chain stores
such as Nike, Coach, Gap, Brooks Brothers, and Ann Taylor.
Shortly after the opening of the remerchandised Outlet Square in Charlotte I
invited Eugene Kalkin, founder of Linens ‘N Things and David Bishop, Senior
Vice President of Waccamaw Pottery, to travel to Europe to search for new retail
concepts.
Perhaps it would be helpful to provide some background. In 1975, Kalkin pur-
chased out of bankruptcy seven of his leased domestic departments operating
as Daylin discount stores to form Linens ‘N Things. His early stores were stacked
from floor to ceiling with racks of towels, linens, comforters, and bathroom acces-
sories. By 1983, he had built a highly profitable chain of 55 stores, when it was
sold to Melville Corporation, which also owned Marshalls and CVS drug stores.
Melville was the largest US shoe retailer by the end of the 1960s with approxi-

33. // 033
mately 1,400 Thom McAn stores operating in almost every major U.S. mall. It also
operated the popular Chess King and Foxmoor stores in hundreds of US malls.
Shortly after the sale to Melville, Eugene told me, “the merry-go-round keeps
coming around and around and you need to know when to get on and when
to get off.”
On May 2, 2008, Linens ‘N Things filed for Chapter 11 bankruptcy and all stores
were liquidated within 18 months. Melville eventually sold or closed all Thom
McAn, Chess King, and Foxmoor stores. In 1995, T.J. Maxx acquired Marshalls. In
1996, Melville spun off CVS into a standalone entity and in 2017 CVS purchased
Aetna Insurance.
While on the 1982 European trip we hired a taxi driver to drive us around Munich
to show us interesting retail stores. After an hour or two of seeing nothing special
the taxi driver asked us if we wanted to go see IKEA. We had never heard of IKEA,
but off we went into the Bavarian countryside on a foggy November Saturday
morning. On a desolate section of the autobahn, traffic started to back up before
the exit ramp and then we saw off into the distance an imposing building with
fields of parking. It was IKEA. Once inside, Eugene stopped and said, “this is going
to change retail in the U.S.” I responded: “But we never knew IKEA existed until
just now and we don’t know if they will ever be in the U.S.” Eugene responded.
“they will be in the U.S.”
So, I tracked down the store general manager and asked for the contact informa-
tion for the CEO of the company.
He then ran back to his office and came back with a scrap of paper with the name
and mailing address of the person in charge. He explained to me that the I and K
were the initials of Ingvar Kamprad, the founder of IKEA. The E stands for Elm-
taryd, the farm on which he grew up on in Sweden, and the A stands for Agun-
naryd, a nearby village.
Upon my return home, I wrote Mr. Kamrad a letter inviting IKEA to the U.S. A few
weeks later I received a return letter on IKEA stationery telling me he was plan-
ning to enter the U.S. market and would be pleased to work with my employer
The Rouse Company of Columbia, MD. He gave me the contact for Bjorn Bayley,
his son-in-law who was living in Vancouver, Canada, and Jim Lucas, a consultant
living in Toronto. Bayley was planning the first North American IKEA mega store
in Vancouver. I followed-up with both and soon I was in Vancouver. I learned they
would only commit to the U.S. when they had three store locations tied up.
I had a follow-up meeting with Lucas in Toronto. In conversations with both I
learned they wanted to open their first U.S. stores in old shipping port cities with
Boston, Philadelphia, and Baltimore at the top of the list. New York, they felt needed
to follow because of the complexities of the market. IKEA had a logic to their old
port city strategy that was tied to the Scandinavian influences in those markets.

34. // 034
Eugene Kalkin asked me if it was OK to let Western Development, who was
developing Potomac Mills, in Dale City, VA know about IKEA. Herb Miller, West-
ern’s CEO, moved quickly and made a deal to open IKEA in Potomac Mills and The
Rouse Company made deals for two of its malls.
IKEA opened its first U.S. store in Rouse’s Plymouth Meeting Mall, northwest of
Philadelphia on June 12, 1985, in Plymouth Meeting, PA and less than two miles
from Clover Square.10 months later IKEA opened its second store in the Potomac
Mills Mall. The third IKEA opened as a free-standing store adjacent to Rouse’s
White Marsh Mall in Baltimore.
Following the success of IKEA and the outlet malls, I pitched to The Rouse Com-
pany that they make an aggressive move into the development of off-price and
big box lifestyle centers anchored by IKEA, and LL Bean, Cohoes, and others.
Rouse senior executives declined and stated the future of the company was in the
development of its festival waterfront marketplaces such as Baltimore’s highly
successful, at the time, Harborplace, Miami’s Bayside, and New York’s South
Street Seaport.
Yet, I felt they were missing a key component of retail. After my return from
Europe, I spoke at a shopping center conference in Atlanta and made the bold
statement: “retail is like water in a river—over time it will find its most efficient
means of distribution to the consumer.” I’d like to say that was a very insightful
statement, well before the internet, and way before Amazon. Perhaps it was a
premonition, but more likely informed insight after seeing IKEA, understanding
its distribution model, and the words of Eugene Kalkin. Either way, 36 years later
the statement holds true today.
It was also during this time that I wrote an article for Shopping Centers Today
about a shopping center concept that was a highly focused mall featuring exactly
what a consumer wanted, when they wanted it, and at the best possible price. I
called it a “lifestyle center,” which was the first time the term was used in print.
Shortly after our trip to Europe, Kalkin sold Linens N’ Things for $40,000,000+
to Melville Corporation and I resigned to open my own real estate development
company at the age of 29.
Rouse’s festival marketplace strategy fizzled and on November 12, 2004, The
Rouse Company was sold to General Growth Properties. Harborplace perma-
nently closed on December 31, 2021. Today IKEA has 52 stores in the United
States. Their early stores were 145,000 to 155,000 square feet and stores today are
in excess of 300,000 square feet.

35. // 035
Shopping Centers
To better understand merchant mix and retail strategy, we must also understand vari-
ous shopping center types and retail shopping formats and their capture of retail sales.
Consumers make retail purchases in multiple types of shopping centers. In the context
of this white paper, I go beyond the standard shopping center to also consider centers
of shopping as any physical place where retail purchases are made including malls,
power centers, outlet centers, lifestyle centers, main streets, commercial strips with
freestanding stores, and other centers of shopping such as flea markets, door-to-door,
festivals, stadiums, resorts, and theme parks. Likewise, retail purchases may occur
through direct to consumer (DTC) channels, catalogues, over the telephone, and online.
In 2019, there was an estimated 3.8 million retail establishments in the US operating in
approximately 7.8 billion square feet of total retail space located in shopping centers,
freestanding stores, and all other places of shopping. A recent study by the Interna-
tional Council of Shopping Centers (ICSC) estimated there were approximately 109,500
shopping centers in the United States. However, this number includes a wide range of
shopping center types ranging from large regional malls to small strip centers. The ICSC
estimate may also exclude small shopping centers less than 25,000 square feet.
The National Retail Federation estimated that 33% of all retail sales are made in shop-
ping centers. But consumers typically do not purchase an auto or their fuel from shop-
ping centers and online sales are just that: online. Consequently, if auto-sales, gasoline
sales, purchases in free standing stores, online sales, and other similar formats were
excluded from the National Retail Federation’s analysis, consumers purchases of the
remaining retail goods in shopping center sales may be more in the range of 70%.
In 2021, the total square footage of shopping centers in the United States was estimated
around 6.1 billion square feet.
In terms of how the total gross leasable area (GLA) of shopping centers are found in
different types of properties, here are some approximate figures provided by the ICSC
for 2021, followed by their percent of total shopping center space:
▪ Regional malls: 1.15 billion square feet (18.9%)
▪ Power centers: 1.1 billion square feet (18.0%)
▪ Community centers: 1.05 billion square feet (17.3%)
▪ Strip centers: 1.0 billion square feet (16.5%)
▪ Lifestyle centers: 0.45 billion square feet (7.4%)
▪ Outlet centers: 0.25 billion square feet (4.1%)
Types of Shopping Centers
Outlined below is a summary of various types of shopping centers:
1. Super Regional Mall: These malls are typically over 1,500,000 square feet and have

36. // 036
at least four department stores, over 175 specialty stores, and generate over $300
million in annual sales.
2. Regional Mall: These malls are typically between 500,000 and 1,000,000 square
feet and have at least three department stores and around 100 specialty stores.
3. Fashion Center: A fashion center is a type of mall that is focused on high-end
fashion and luxury brands. Fashion malls may have fashion anchor stores such as
Neiman Marcus and Saks Fifth Avenue, and luxury retailers such as Louis Vuitton,
Tiffany, Chanel, and Hermes.
4. Power Center: A power center is a type of shopping center that is focused on large,
big-box retailers, such as Walmart, Target, Dick’s Sporting Goods, Michael’s, and
Best Buy.
5. Power Town: A power town is similar to a power center but typically includes a mix
of retail, entertainment, and dining options as well as other amenities. It is a bridge
between a lifestyle center and power center.
6. Lifestyle Center1: A lifestyle center is a type of outdoor shopping center that is
designed to provide an upscale shopping and dining experience in a more relaxed
and open-air environment.
7. Community Center: A community center is typically a smaller shopping center
that serves the immediate surrounding community and is anchored by a grocery
store or other essential retail store.
8. Neighborhood Center: A neighborhood center is similar to a community center
but typically has a broader mix of retail and service providers.
9. Convenience Center: A convenience center is typically a small strip mall that is
designed to provide easy access to daily necessities such as groceries, pharmacies,
and other everyday goods and services.
10. Main Street: A main street is a commercial district in a town or city that is typically
lined with shops, restaurants, and other businesses.
11. Retail District: A retail district is an urban area of a town or city that is dedicated to
retail and shopping and typically includes a mix of restaurants, entertainment and
smaller shops and stores. Retail districts are located on the edge of downtowns
and in first ring neighborhoods. Example include the West End of London around
Covenant Garden, Toronto’s Distillery District, Beverly Hill’s Rodeo Drive and sur-
rounding streets, and Deep Ellum in Dallas.
1 In 1982 Rick Hill wrote an article for Shopping Center’s Today and used the term Lifestyle Center which was the
first time the term was used in print. He expanded on the concept in a subsequent article published on Chain
Store age and an address he make at an ICSC Convention in Atlanta.

37. // 037
12. Outlet Center2: An outlet center is a type of shopping center that features retail
stores selling brand-name merchandise at discounted prices. Outlet centers are
typically located near major highways and tourist destinations, and they often
feature many stores in a single location.
Performance of Malls and other Shopping Centers
A common standard to measure the success of a shopping center is sales per square
foot. Outlined below are some rough estimates of typical sales per square foot for dif-
ferent types of shopping centers:
▪ Super regional mall: $600-$950
▪ Regional mall: $350-$700
▪ Fashion center: $800-$1,200
▪ Convenience center: $200-$350
▪ Power center: $250-$450
▪ Power town: $200-$400
▪ Lifestyle center: $500-$800
▪ Community center: $200-$350
▪ Strip center: $200-$350
▪ Neighborhood center: $250-$400
▪ Main street/Retail district: $200-$500 (can vary widely depending on location and
mix of tenants)
To further examine the performance of shopping centers, I have provided examples of
some of the reported highest sales-producing shopping center types below:
1. Super Regional Mall: The Mall of America in Bloomington, Minnesota is one of the
largest super-regional malls in the US and generates around $1.9 billion in sales
per year in 500 stores with a total GLA of 2.8 million square feet. The King of Prussia
Mall, located outside of Philadelphia, generates around $1.4 billion in 2.9 million
square feet and 450 stores.
2. Regional Mall: Aventura Mall in North Miami, Florida is one of the top-performing
regional malls in the country and generates around $1.2 billion in sales per year.
2 In 1982 Rick Hill redeveloped Charlottetown Mall, located in Charlotte, NC into Outlet Square which was reported
to be the first regional mall converted into an outlet center as reported by the Wall Street Journal.
Examples of outlet centers with their size, names, and locations:
1. Woodbury Common Premium Outlets—928,000 square feet, located in Central Valley, New York
2. Orlando Vineland Premium Outlets—750,000 square feet, located in Orlando, Florida.
3. Las Vegas South Premium Outlets—603,000 square feet, located in Las Vegas, Nevada.

38. // 038
3. Fashion Center: Bal Harbour Shops located north of Miami had reported sales of
$2.8 billion in 2019, which averaged sales of over $3,500 per square foot, consid-
ered to be the highest sales per square foot for a shopping center.
4. Outlet Center: The Woodbury Common Premium Outlets in New York is one of the
top-performing power centers in the US and generates around $1.3 billion in sales
per year.
5. Lifestyle Center: The Grove in Los Angeles is one of the top-performing lifestyle
centers in the country and generates around $700 million in sales per year.
Classes of Malls
The terms A, B, and C mall are used to classify malls based on their quality, level of
tenant mix, and location. Here’s a brief overview of each category:
1. Class A Mall: Class A malls are typically high-end, luxury shopping centers with
a wide range of upscale retailers and anchor tenants. They are often located in
prime, high-traffic areas and have strong foot traffic. South Coast Plaza in Orange
County, CA is a good example. Class A malls have traded at cap rates ranging from
3.5% to 5%.
2. Class B Mall: Class B malls are mid-level shopping centers with a mix of anchor
tenants and smaller retailers. They are often located in secondary locations within
a prime market or in prime locations in secondary markets. They often have lower
foot traffic than Class A malls. These malls typically have cap rates ranging from
6% to 8%.
3. Class C Mall: Class C malls are older and lower-quality shopping centers with a mix
of high vacancies, discount retailers and smaller, local businesses that replaced
the typical mall line-up found in many of the original malls. They are often located
in tertiary markets and may have low foot traffic. These malls typically have cap
rates ranging from 8% to 10% and some 11% to 12%.
Allocation of Mall Sales
Department stores were historically the cornerstones of regional malls by occupying a
large percentage of the gross leasable area (GLA) or gross building area (GBA).3 Accord-
ing to a report by Green Street Advisors, department stores accounted for approxi-
mately 50% of the GLA in regional malls in the 1980s and 1990s. According to the same
report, department stores now account for only around 25%4 of the GLA in regional
malls as of 2019.
The balance of mall GLA was historically occupied by smaller shops, restaurants,
entertainment venues, and other types of tenants. These tenants were often chosen
3 Many department stores own their own buildings and do not lease space in the shopping center.
4 Former department spaces still existing but they have been converted into cinemas, entertainment centers, bix
box retailers, and other uses.

39. // 039
to complement the department stores and to create a well-rounded merchant mix for
shoppers.
However, as consumer shopping behavior shifted in recent years and new retail formats
developed as a response such as big box stores, department stores have seen a decline
in their market share and overall importance to the mall industry. This led to a shift in
the allocation of GLA, with more space dedicated to non-traditional tenants such as
entertainment venues, coworking spaces, and experiential retail concepts.
GAFO
GAFO is an acronym that stands for General Merchandise, Apparel, Furniture5 Home
Furnishings, and Other Sales. Historically, GAFO was synonymous with full-line depart-
ment store sales in the 1960s when 80% or more of a mall’s sales were GAFO. A report
by Green Street Advisors estimated that GAFO sales accounted for approximately
70-75% of mall sales in the mid-1980s, before declining gradually over the next few
decades. According to a report by the International Council of Shopping Centers (ICSC),
the GAFO category accounted for approximately 63% of mall sales in 1995. This figure
continued to decline over the next two decades, with GAFO sales accounting for around
56% of mall sales in 2015. More recently, the COVID-19 pandemic has accelerated the
move away from GAFO sales in malls, as consumers have shifted their spending towards
online shopping and off-mall locations. According to a report by CoStar Group, GAFO
sales accounted for only 45% of mall sales in the third quarter of 2021, down from 60%
in the third quarter of 2019 (before the pandemic).
This decline in GAFO sales in malls has been partially offset by an increase in sales from
other categories, including food and beverage, entertainment, and personal services.
These categories are seen as more immune to the threat of online competition and are
increasingly important to the success of shopping malls in recent years.
Department Store Capture of GAFO Sales
The percentage of GAFO sales captured by traditional department stores, mass mer-
chandisers, and small shops can vary from year to year, and it can be difficult to provide
a precise breakdown. According to data from the US Census Bureau, department stores
have been experiencing a decline in their share of GAFO sales over the past decades. In
2010, department stores accounted for approximately 14% of total GAFO sales in the
United States. However, by 2020, their share had declined to around 5% of total GAFO
sales. This represents a significant shift in the retail landscape as department stores
were once among the most dominant retailers.
Note of Caution
5 It should be noted that the Furniture category includes home furnishings such as linens and cookware, and the
Other includes sporting goods, hobby, books, and office supplies. It is a common way of categorizing retail sales
data in the United States, with the categories representing some of the largest and most diverse segments of the
retail industry.

40. // 04 0
This paper provides data on total retail sales as a percentage of household income and
also the share of total retail sales among all retail categories expressed as a percent-
age of all retail sales. The percentage allocations of total retail sales over various retail
categories should not be confused with retail sales or retail categories expressed as a
percentage of household income. As an example, GAFO sales may represent 34% of
non-auto retail sales, but only 10% of household incomes.
I also want to point out that I usually remove auto sales from total retail sales before
allocating the balance of non-auto retail sales over various categories. This is an import-
ant step because online sales are reported to be 12-14% of all retail sales. But when
auto sales are deducted from total retail sales, online sales capture a much higher share
of remaining retail sales in many categories but not all.
Department Stores: Changing Market Share
I look closely (but not only) at department stores sales for a variety of reasons. First,
retail sales in full line department stores were the best indicator of GAFO sales until the
late 1990s. Second, the success of regional malls in their golden years (1960s-1980s)
were dependent on the draw of the department stores. Thirdly, department stores his-
torically generated over 60% of the sales of a shopping center.
However, as stated previously, department stores sales continue to decline, which can
be attributed to several factors, including increased competition from online retailers,
brands opening their own stores, fast-fashion, and the rise of outlet, off-price retailers,
and discount stores all responding to changing consumer preferences.
In the 1950s through the 1970s, dominant department stores in their flagship locations
included book, furniture, housewares, toy, and hardware departments within their
multi-level emporiums. However, over the past several decades classification dominant
retailers in key categories such as furniture, housewares, toys, books, sporting goods,
and hardware have opened in off-mall power centers. Likewise, specialty retailers,
which had long been dependent on their relationship with the major mall developers
and traffic generated by department stores finally began to break away from the mall
and opened lifestyle centers. Both changes in new store concepts and shopping center
formats significantly eroded the market share of department stores to a point where
they largely abandoned many of their former departments now being dominated by
newer, more focused and efficient shopping channels.
In the 1950s through the 1970s, dominant
department stores in their flagship locations
included book, furniture, housewares, toy, and
hardware departments within their multi-level
emporiums.

41. // 04 1
New Retail and Shopping Center Formats
Power centers are large retail centers consisting of mass merchandisers such as Target
and classification dominant retailers such as Academy, Hobby Lobby, Best Buy, Lowes,
and Home Depot. These centers typically offer a wide variety of merchandise, includ-
ing general merchandise, apparel, sporting goods, and home goods, and often attract
shoppers looking for a more convenient shopping trip to stores stocked with as much
or a greater depth of merchandise in a desired category than found in a department
store. As a result, power centers have captured a significant share of GAFO sales which
were previously captured by traditional malls.
Mass merchandisers like Walmart, Target, and Costco are estimated to capture around
25% of total GAFO sales in the United States.
Lifestyle centers are primarily outdoor shopping centers with traditional features such
as town squares, and main streets, and a mix of specialty retailers, restaurants, and
entertainment venues. These centers typically offer a more experiential shopping envi-
ronment than traditional malls and power centers, with amenities like village greens,
fountains, outdoor dining areas, live music, and art installations. As a result, lifestyle
centers have taken a large share of GAFO sales from regional malls.
Small and independent retailers can include a wide range of businesses, from national
specialty shops to local mom and pop shops. It is difficult to provide an estimate of the
percentage of GAFO sales captured by small shops, as this can vary widely depending
on the specific market and region. However, some studies suggest that small retailers
collectively capture around 30% of total retail sales in the United States.
What’s a Mall?
When I redeveloped Charlottetown Mall, the Wall Street Journal quoted an expert
who predicted that many existing malls would be obsolete by the year 2000 and con-
verting many into outlet malls could be a viable option.
I have heard similar statements almost every decade sense. The mall has been bashed
over and over. We constantly hear “malls are dying” and “malls are dead.” There is
hardly a week where I do not hear some form of “nobody shops at malls anymore.” But
this all seems like an unfair and inaccurate grouping of numerous physical shopping
formats under the singular classification of malls.
When it is declared that malls are dying, are we talking about all organized shopping
centers that have some type of internal circulation? Does that include open-air malls,
only enclosed malls, a shopping complex anchored by department stores and outlet
malls, or any pedestrian hallway lined with shops? Does a mall require department
stores to be qualified as a mall?
Where does Disney Springs, located just outside of Disney World fit into the discussion?
Its parking is in multi-level parking decks, there is no parking on the pedestrian only
interior, you can’t see the shops from the street, and it has a partially covered arcade?
Does it not fit the definition of a mall because it is not fully enclosed?

42. // 04 2
What about Bal Harbor Shoppes that has internal open-to-the-air courtyards lined with
covered walkways fronting the shops?
Does the Miami Design District fall into the open-air mall category because it has inter-
nal courtyards without automobiles or does if fit into another category because streets
bisect the retail courtyards?
To have meaningful discussions about the physical shopping industry, we need to
broaden the discussion to the consumer goods distribution channel, architectural
forms, the vast variety of physical retail formats, places for brand activation, urban and
suburban planning, and community building. Only when we broaden the discussion
can we then better discuss the appropriate form, function, design, and format for a
variety of physical shopping formats. In the future some shopping places will be pure
service, warehouse, distribution, and transactional in nature and, most importantly in
my mind, others will be vital places of connection, experiences, meaning, and socializa-
tion necessary to restore community in human centered marketplaces.
The Relationship between Sales Rents
I have already stated this once and will say it again: “Retail rents in shopping centers
are a factor of sales, which are in part a factor of household incomes of their trade
area.”
Retail rents can be a fixed base, a base rent plus a percentage of tenant sales over a cer-
tain breakpoint, or a percentage of sales only. If the rent is fixed there is no real upside
to the landlord unless there are guaranteed step-ups in the rent over time or if a lease is
renewed at a higher rent. In leases with a base rent and a clause to pay a percentage of
sales over a breakpoint the upside can be great for a landlord. However, many retailers
who have a percent rent clause in their lease try to negotiate a lower fixed minimum
rent to protect their downside. Therefore, if a shopping center generates higher sales,
the landlord can charge higher rents to its tenants upon renewals or capture higher
rents through the percent of sales.
Sales in a shopping center are largely dependent on the buying power of households
within the trade area, which is the geographic area surrounding the shopping center
where most of its customers live. However, some shopping centers generate a signif-
To have meaningful discussions about the physical
shopping industry, we need to broaden the
discussion to the consumer goods distribution
channel, architectural forms, the vast variety
of physical retail formats, places for brand
activation, urban and suburban planning,
and community building.

43. // 043
icant percentage of their sales from inflow sales, which are the sales flowing into the
center from shoppers living outside of the trade area which could be from nearby office
workers, regional shoppers who will drive past other shopping options for a better
experience, and tourists visiting the market.
In general, the higher the household incomes in the trade area, the more likely the
shopping center will generate higher sales. This is because consumers with higher
incomes have more discretionary spending power and are more likely to shop at high-
er-end stores with higher-priced goods. On the other hand, if there are other shopping
options in the trade area that offer similar goods and services at lower prices, the sales
in the shopping center may be lower.
The relationship between rents, sales, household incomes, and shopping options is a
complex one that varies depending on the specific location and market. As an exam-
ple, shopping centers in affluent areas with limited shopping options are likely to have
higher sales thus supporting higher rents. Conversely, shopping centers in areas with
lower household incomes and more competition may have lower sales which can only
sustain lower rents.
Rent to Sales
The rent-to-sales ratio is a measure of the percentage of a store’s gross sales that are
paid in rent. This ratio is commonly used in the shopping center industry to help deter-
mine the rent a retailer can pay as a factor of sales and remain profitable.
Retailer rents as a percentage of sales vary depending on the category of the store and
the location of the shopping center. Some retailers have high gross margins and others
have low gross margins. A merchant with high gross margins have higher net sales
(after the cost of goods) to allocate to rent. Conversely, a merchant with a low gross
margin has lower net sales to allocate to rent.
I have outlined guidelines indicating the rent that can be paid as a percentage of total
sales:
▪ Restaurants: 6-10% of gross sales
▪ Quick-service restaurants: 8-12% of gross sales
▪ Grocery stores: 2-4% of gross sales
▪ Fashion retailers: 8-12% of gross sales
▪ Small specialty shops with high gross margins—12-15%
Outside of some categories like food, the higher the sales in general the greater the
gross margins. To explain further, a retail shop may have fixed costs such as the salary
for store management, depreciation on the cost of the buildout, insurance, utilities, and
similar categories that remain relatively the same regardless of sales. Therefore, if sales
are high these fixed expenses go down as a percent of total sales which generates more
dollars to pay higher rents.

44. // 04 4
Summary
In the previous chapters we defined retail sales and indicated how they can be gener-
ally estimated as a percentage of household incomes. We also reviewed how sales can
be distributed over different retail categories. In this chapter we looked at the capture
of the retail sales potential by various retail formats and shopping centers types and
looked at the relationship of rents to sales.
These allocations should be viewed as trends and not necessarily a rule of thumb. As an
example, we saw during Covid-19 a dramatic increase in online retail sales along with
decreases in restaurant sales with a corresponding increase in grocery sales.
In general, a household spends 24% of its gross income on retail purchases.
Total retail sales are generated in categories such as auto sales, which make up 22% of
total retail sales and GAFO make up 26%. GAFO’s share of non-auto retail sales is 34%.
Different retail formats such as online retailers (i.e., Amazon) mass merchandisers
(i.e., Target and Walmart), Direct to Consumer—DTC (i.e., Nike) department stores (i.e.,
Macy’s and Nordstrom), and specialty shops (i.e., Louis Vuitton, RH, William-Sonoma)
and numerous other retail formats capture a share of retail sales. As an example, we
saw that department stores now only capture 5% of retail sales and online sales are
12-14% of all retail sales.
Consumers shop online from their homes, malls, lifestyle centers, outlet centers and
more. Enclosed malls capture 25% of GAFO sales; power centers capture 30% of GAFO
sales, and lifestyle centers capture 5% of GAFO sales.
In the next section we will look at how trade areas are estimated to determine the retail
potential of the market and then understand how to estimate the capture of sales from
the market area.
As an example, in 1996, I studied Sun Valley Mall in Concord, California for GE
Investments, a partner in the property with the Taubman Company. At one point
Sun Valley, with 1.3 million square feet, was the largest mall in the world. Sun
Valley was also the site of a tragic accident where a twin-engine airplane crashed
into the mall’s center court two days before Christmas on December 23, 1995.
I was surprised to find numerous national chains with a rent-to-sales ratio of
approximately 20%, considered a huge problem in most cases. I called Steve
Kaplan who headed up real estate for the Gap and its subsidiaries of Banana
Republic and Gap Kids to ask if the rent was sustainable. Steve told me Gap paid
the highest rent per square foot to Taubman owned malls than another other
national developer but had the highest sales per square foot in Taubman Malls
than any other national mall developer. He clued me in on how the numbers
worked with sales high.

45. Chapter 4:
Defining and
Understanding Shopping
Center Trade Areas

46. Restoring community
in the marketplace
Trade Area Mapping Quantifying Trade
Areas
A Barefoot
Adventure
Defining and
Understanding Shopping
Center Trade Areas
An operating shopping center has an actual trade area, and a planned
shopping center has a potential trade area. In this chapter we will learn
how to calculate and estimate both.
4