While much of the national conversation about retail is on upcoming Holiday sales predictions and fourth quarter forecasts, I have an observation to share about the condition of the retail industry in the US.
The map below identifies the top 25 US cities that had compound annual real growth rates in retail sales between 3.8% and 9.3% for the period 2009 and 2013. These cities outperformed the US growth rate of 1.8%. Of interest is both the population range for these cities and their geographic location:
- #1 -- Midland, TX (pop. 123,933) had 9.3% real retail sales growth.
- #7 -- Seattle-Tacoma-Bellevue, WA, the most populated MSA in the top 25 (pop. 3.6 million), had 5.8% real growth.
- #21 -- Manhattan, KS, one of the smallest populated cities (pop. 56,143), had 3.9% real growth.
- #25 -- Tucson, AZ (pop. 1.0 million) had 3.8% real growth.
Noteworthy is the #30 performance of the Phoenix-Mesa-Scottsdale area at 3.5% real growth in retail sales. This was one of the areas in the US hardest hit by the home mortgage bubble-burst in 2008.
These cities offer an opportunity to evaluate new or first store locations for retailers. For example, Warby Parker, the leading online retailer of designer eyewear, may add one or more of these cities to their existing five store locations. New restaurant concepts such as The Kitchen, a Boulder, CO-based family of restaurants creating community through food, has locations in Boulder, Denver, and Fort Collins, and one newly opened in Chicago. What's next? Seattle? San Antonio?
There are opportunities for developers, too, that requires careful micro-targeting in these markets for grocery-store anchored malls; improving cap rates on low-occupancy centers through various tenant mix and repositioning strategies; and, incorporating ground-level retail as part of dense mixed use development for urban infill, downtown entertainment districts, and larger master planned urban spaces. (See Rancho Sahuarita.)
Certainly, this backward-looking five year measure does not imply future performance. But, one predictive set of indicators of future growth in these cities are the segmentation profiles of consumers. Specifically, one key common characteristic among these top 25 cities is the large proportion of households made up of early career, college-educated young singles, couples without children. and young families; the now-familiar Millennial generation.
I, too, will carefully watch what happens with retail sales over the Holiday season. Of greater interest is keeping an ever-present watchfulness on the cities that pose the greatest opportunity for next generation retailers, chef-driven restaurant concepts, and urban mixed use development.