Rev. of The Site Book: A Field Guide to Real Estate Evaluation

The Site Book: A Field Guide to Real Estate Evaluation

by Richard Fenker, PhD
Published by Mesa House, Forth Worth, TX, 1996

Review by Stephen Traub, ASA

[Bookcover]

IF YOUR EYES glaze over whenever you get near a demographic report because you don't know which numbers really matter, or if you wonder what location factors really drive retail sales, or if you haven't a clue whether the adjacent competing retail space is good or bad, then The Site Book is for you.

In addition to providing answers to the above, the book also provides objective methods for performing a site evaluation. If you make decisions about the potential of commercial real estate, this book will be useful.

In Chapter One, the author provides a tongue-in-cheek "Ten Easy Ways to Build a Bad Location". One way is not to bother to find out why no competitors exist near a site you are considering.

Later in Chapter Ten, in a more serious vein, you will learn about ways to distinguish between direct vs. indirect competition, cannibalism, and the advantages and disadvantages of business clusters.

A Site Walk

Once you're familiar with the basic concepts, the author walks you through a step-by-step site evaluation. This includes identifying trade areas, analyzing demographics, and distinguishing convenience locations from destination locations. The author shows you how to determine how successful a site will be. He presents an objective and logical process for evaluating site factors and for determining a final site rating.

"Site evaluation," states the author, "is the measurement of the relative quality of a parcel of real estate compared to other pieces of real estate." It is often confused with sales forecasting or prediction. Site quality considers demographics, site features (such as visibility and access), and competition.

Visibility is defined relative to other retail business sites in the area. Much of the relative quality rating, however, will depend upon whether a site is best suited for a convenience concept or a destination concept.

Convenience concepts typically are quick-serve (fast food) restaurants, convenience stores, and service stations which cater to "drop in" customers who make spontaneous visits.

[Supermarket]

Destination concepts, on the other hand, are specific restaurants, supermarkets, discount stores, and malls. Visits to destination locations often are planned and often involve driving longer distances or to less convenient locations.

MSA and Trade Areas

A retail market area may be defined as a town, city, or metropolitan statistical area (MSA). An MSA typically will include a core city and associated satellite towns. Trade areas refer to geographic areas that will contain 70% to 80% of a site's customers. Boundaries of trade areas, therefore, can result in a variety of sizes or shapes.

To determine the trade area, find out who one's customers are (or will be). This should include an analysis by age, income, household size, and education, etc. This also should include an analysis of frequency of product usage, distances normally traveled to get the product, and the locational origins of customers.

Give customers more
than one reason to
be in the area.

Not only may residents of an area be patrons, but also so may be employees, shoppers, travelers, and commuters. Since time is a valuable commodity, most consumers tend to link errands. The best retail locations, therefore, have linked clusters of retail activity that support each other by giving customers more than one reason to be in the area. The recent combining of convenience stores with gasoline service is an example of this type of linkage.

Demographic reports traditionally contain general information within a specified geographic radius of the subject property. Depending on the business type, however, a daytime-only population report (people who only work in the area) might be more pertinent. Other revealing reports may include those about existing competition in the area or the level of demand for certain products based on dollars spent. Be careful of general US census data, however. It is only collected once each decade and can become stale quickly.

Mauled by the Mall?

What's the effect of large shopping malls in a trade area? It can be a blessing to businesses located outside the mall. The "gravity" of a mall, however, has been known to prevent mall shoppers from visiting some businesses in the area. Still, positioning on major roads that feed into a mall will be a plus for most businesses. On the other hand, a business in a location beyond the mall-generated traffic pattern is a minus regardless of how close to the mall it may be located, particularly if its access or visibility is impaired.

When analyzing overall traffic counts, look at the details. If most of the traffic is commuter traffic, locating on the "going-to-work" side of the road would be an advantage for a coffee and donut shop. It would be a poor choice, however, for an evening meal restaurant. Conversely, a breakfast restaurant on the "going-home" side of the road would be a poor locational choice.

Stay Visible

Nevertheless, the key to good visibility is being able to locate a store and discriminate it from the surroundings when one is not really looking for it. Access (another key ingredient) can be measured as the time it takes once the sign or building is noticed to enter the parking lot, park, and walk to the entrance. The author warns that regardless of how good the ingress, difficult egress can hurt a site. If potential patrons know from previous experience that it will take forever to get out of the property, they will be reluctant to pull into it.

In summary, the author focuses on visibility, access, parking, and demographics, and using these ingredients, (as promised) he presents an easy-to-use, step-by-step, recipe for preparing accurate and objective site evaluations.

The book above is available on-line at Amazon Books.

Stephen Traub, ASA, the reviewer, is chief commercial appraiser for Property Valuation Advisors, 63 Hill St., Newburyport, MA 01950. He is a certified general appraiser in NH, ME, and MA.

To contact the author of this review, e-mail to: straub@shore.net or contact him at the address above, or call 978-462-4347.