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Landlords urged to assess nearby shopper demand before leasing retail space
A Commercial Observer analysis argues landlords should use local spending and visitation data, like Esri’s survey-based estimates, to reduce tenant-failure and vacancy risk.
Commercial Observer says many retail landlords focus their underwriting on tenants’ finances, but they rarely underwrite the tenant’s customer base. The outlet argues this gap leaves landlords exposed to tenant failure, months of vacancy, and additional leasing commissions and negotiations when the local neighborhood cannot support the intended retailer.
The standard leasing workflow described as too reactive involves reviewing comparable rents, listing space on platforms such as Crexi and LoopNet, waiting for responses, and then checking an operator’s financials. Commercial Observer contends that process does not answer whether enough of the retailer’s customers live near the site.
Instead, the outlet recommends flipping the approach by starting with local household behavior. It suggests landlords examine who lives nearby, how area households spend, and which retail categories over-index, using that information to define the customer profile before outreach to relevant brands.
As an example, Commercial Observer cites an analysis of a hypothetical vacant restaurant on Manhattan’s Lower East Side, using Esri Consumer Spending Survey and Esri Market Potential data for a five-minute walk radius. The outlet reports Esri estimates households in the area spend $50,243,250 annually on food and beverages away from home, or about $5,043 per household, and that 20.4 percent of adults visited a fine-dining restaurant in the previous six months, an index of 124.
It also points to fine-dining behavior, including that 29.01 percent of fine-dining consumers spend more than $200 a month and 51.42 percent of adults who visited fine dining in the previous 30 days went at least twice. Commercial Observer says these indicators suggest spending power and repeat demand in the local market rather than demand limited to special occasions.