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EVIDENCE-BASED ADVISORY: SUPPORTING STRATEGIC PROPERTY DECISIONS IN THE RETAIL MARKET

Bernice Swanepoel

When retail property decisions can impact performance for years to come, how do leading retailers ensure they are betting on the right locations?


Property decisions represent some of the largest capital investments retailers make.  With planning approvals and construction typically taking over two years, and significant capital commitments involved, getting location or timing wrong can impact performance for years. This article shares how population forecasting helps clients who work in retail property teams understand the future revenue potential of sites to make better location, timing, and investment structure decisions. 


Evidence-based advisory

Property decisions sit at the heart of retail strategy. Whether building new stores, renovating existing ones, or negotiating leases, these choices lock organisations into long-term commitments. The stakes are particularly high in today's environment, where construction costs have risen dramatically while population growth creates uneven opportunities across different locations.


Comprehensive population and housing forecasts provide retailers with an independent, detailed view of future revenue potential to help evaluate specific locations.  This evidence base supports strategic decision-making and strengthens negotiations with developers and other stakeholders. Retail property professionals using such forecasts report improved confidence in investment decisions, stronger negotiating positions, and more accurate, reliable and respected revenue projections for both new and existing sites.


For retail property professionals, one critical calculation underlies all investment decisions: what is the revenue potential of a given location? This determines the viable investment per square meter – albeit construction cost, purchase price, or lease terms. The key assumption in this type of calculation is the population multiplier – i.e. the number of households/people within the store/centre’s catchment area.  While current population data might be readily available, understanding future population is far more challenging.  Yet it is exactly this forecast which is essential for calculating potential revenue, and by extension the supportable cost per square meter of retail space.


The Middle East and Africa's population growth creates opportunities, but these vary dramatically across locations. No two places are the same – each has its own growth trajectory, demographic profile, and development patterns. Some areas are experiencing rapid transformation through new development and demographic change (e.g. rising incomes), others are stable mature suburbs with gradual evolution, while still others are going through generational changes and gentrification.  To understand these patterns requires specialist knowledge of demographics, migration patterns, current housing stock and planning controls, and the development pipeline. 


Patterns are established through independent, evidence-based forecasts looking at single-scenario forecasts of the most likely outcomes.  Housing development is seen as a bottom-up driver of population change.  This reality requires that potential future housing development be combined with population growth projections to give a balance view of future demographic change.  Further, this forecast is required in granular geographic detail in order to give the ability to match specific catchment areas.


Evidence-based advisory

When done correctly and thoroughly, this evidence-based forecasts should give the client detailed timing, sequence and capacity information, detailed demographic breakdowns, and comprehensive forecasts underpinned by substantiated development research.  These forecasts can then be applied by retail property professionals to evaluate purchases of existing properties, assess development opportunities, calculate sustainable rent levels, time market entry and exit, identify emerging opportunities, optimise store networks, match store formats to market potential, etc.


The value of independent evidence-based advisory manifests in several ways.  It helps with better decision making by giving more accurate revenue projections, giving a clearer understanding of growth patterns and reducing the risk of poor location choices.  It enables stronger negotiating power by providing a clear, evidence backed, rationale for investment decisions. It also provides a strategic advantage through the ability to identify opportunities early on, better time market entry, and increase confidence in long-term planning.


To summarise, there are several key reasons that evidence-based advisory in retail property decision-making is required. Firstly, while population growth remains fundamental to retail success, understanding its patterns is increasingly complex and most often requires expert input.  Secondly, different property strategies (ownership, development, leasing) each requires different approaches to assessment, but all benefit from accurate population forecasting.  Further, rising construction cost pressures make accurate revenue forecasting even more critical.  Lastly, independent, evidence-based forecasts strengthen negotiations and decision-making. 


As Africa and the Middle East continues to grow and change, sophisticated analysis becomes increasingly vital for retail property decisions.  Success requires balancing cost pressures against growth opportunities, supported by detailed population and development forecasts. 


AIRE works with retailers and retail property professionals responsible for the full spectrum of property decisions – from network planning and site selections to property acquisition, development applications, construction management and project delivery. We provide our clients with the comprehensive, independent evidence base they need to make confident decisions about their property strategies, optimise their investments, and negotiate effectively with stakeholders.


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