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Growing franchisors seek an intricate balance when selecting expansion markets. A strong economy is critical for success, however, the stronger the economy the higher the cost and greater the competition will be for retail space.
Javelin Solutions has created the Retail Market Bull’s-Eye to track the condition of the retail markets in 30 major US cities. A “healthy” market will have a 5% vacancy rate and 5% of the retail inventory under construction. Healthy markets offer franchisors stable, growing economies to support their new business with attainable real estate options.
The Retail Bull’s-Eye is broken into quadrants, Over Stimulated and Over Reactive, representing extreme market conditions, and Playing Catch-up and Back To Reality, representing transition markets.
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 (12%) Austin
Dallas/Ft Worth (13%)
 Denver
Ft Lauderdale
Las Vegas
Los Angeles
Miami
New York City
Orange County
Phoenix
(9%) Salt Lake City
San Antonio (11%)
San Diego
Seattle
Washington D.C.
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First Quarter Market Commentary
Of the fifteen cities surveyed, Denver, Seattle, and Las Vegas are the closest to equilibrium, reflecting a healthy balance of demand and new construction. While San Diego maintains healthy construction, the Vacancy Rate remains very low suggesting a difficult market to penetrate.
Markets in which construction is outpacing demand include Austin, San Antonio, and Salt Lake City. These markets will likely see a marked increase in Vacancy Rates. Phoenix continues brisk construction, yet demand is low, suggesting that the Vacancy Rate will begin to climb as well.
In Los Angeles, NYC, and Miami, construction has slowed tremendously and the expected result is a Vacancy Rate decline, driven by continued high demand.
Disclaimer
Multiple factors should be considered when assessing new markets, including the condition of the retail market. Javelin Solutions Retail Market Bulls-Eye is intended to assist, but not be solely relied on, in a franchisor’s due diligence process.
Marcus & Millichap, Trammell Crow Company and CB Richard Ellis Research provided vacancy and construction statistics. Javelin Solutions does not assure the accuracy of this information but does cross-reference the information from these resources. |
