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Neighborhood Retail Market Study

Eastern Montgomery County

Prepared for the Eastern Montgomery County Master Plan, 1994

I. Summary

• Purpose
• Existing and Forecasted Population and Households
  • Summary Table 1
  • Summary Table 2
• Neighborhood Retail Supply and Demand
  • Summary Table 3

II. Introduction and Background

1. Introduction
   1. Scope of Study
   2. Explanation of Neighborhood Retail
2. Background
   1. Interviews and field work
   2. Market Area Boundary
   3. Overview of Retail Model
   4. Eastern Montgomery County Demographics
   5. Supply and Demand Analysis
   6. Completeness of Retail (Retail Mix)

I. Summary

Purpose

The primary objective of this report is to determine if there is adequate neighborhood retail space to support the retail needs of area residents in each of the seven neighborhood retail markets that make up the four Eastern Montgomery County Planning Areas. This report presents observations and descriptive and quantitative analyses of the neighborhood retail markets in Eastern Montgomery County.

The study evaluates the retail establishments that supply area residents with their day-to-day consumer purchases, termed neighborhood retail. The type of tenants evaluated are those that the average resident would visit on a regular basis. The neighborhood retail tenants analyzed in this study are: supermarket, drug, fast food and sit-down restaurants, pizza, sandwich, ice cream/yogurt, liquor/wine, florist, dry cleaner, hair salon/barber, video, convenience, auto parts and hardware/nursery/plant store.

The amount of space existing in the market area is compared to what the market can support today, given the market area population, households and incomes. Using the year 2020 forecast of households for the seven market areas, the analysis also shows the amount of neighborhood retail space the market can support in the future.

Existing and Forecasted Population and Households

Existing and forecasted population and household growth by market area are shown in Summary Tables 1 and 2. The study area's population is estimated at approximately 106,000 as of January 1992. The population estimate includes 4,900 residents from Prince George's County and 740 from Howard County. There are just over 39,000 households in the study area.

Households are forecasted to increase by 14 percent, accompanied by a population growth of 5 percent. The number of households is forecasted to increase from 39,100 in 1992 to 44,560 by 2020. The study area's population is forecasted to increase by 5,363 by the year 2020. The greatest growth is anticipated in the northern part of the study area. The market area with the largest forecasted population and household growth is Burtonsville, followed by the Briggs Chaney and then the Cloverly market area.

Summary Table 1

Summary Table 2

Neighborhood Retail Supply and Demand

Summary Tables 3 and 4 show the amount of neighborhood retail space supportable today and for the year 2020 in the seven market areas. The retail model shows that Four Corners, Briggs Chaney and Cloverly market areas can support additional neighborhood retail space today. The market areas of Hillandale and White Oak are close to equilibrium and Colesville and Burtonsville are oversupplied according to our retail model. (See Table 3 and the supply and demand map of the seven market areas in this section.)

According to our analysis, an additional 67,200 square feet of neighborhood retail space can be supported by the Briggs Chaney market area. About 51,000 square feet of the additional supportable space is for a grocery/drug store. The remaining 16,000 square feet of support is for the non-grocery retail type, such as a video store and dry cleaner. Some of that demand could be absorbed in the currently existing vacant retail space in the Briggs Chaney market area.

The Four Corners market area can support an additional 52,000 square feet of neighborhood retail. Almost two-thirds of the space is for additional grocery/drug store space. While there is market support for additional space, little room, if any, exists for retail expansion.

Today, the Cloverly market area can support another 21,000 square feet of grocery/drug space and 4,000 square feet of other accompanying neighborhood retail space. The Cloverly Safeway is considering expanding up to 50,000 square feet. This expansion would absorb most of the excess demand found in the market today and position the market closer to equilibrium in the future.

The retail model shows that there is a surplus of neighborhood retail space in the Burtonsville market area. Market realities, however, show low neighborhood retail vacancy rates for both the old and new retail space. The Fairland section of this report discusses in more detail reasons the retail model shows a surplus of space while the market conditions reveal low vacancies. Briefly, the demand for neighborhood retail space may be underestimated because is does not account for 1) pass-by traffic, 2) the positive impact of a park and ride facility adjacent to Burtonsville Crossing, 3) long-term tenants at Burtonsville Shopping Center continuing to attract customers who have moved away, and 4) "cross-over" shopping from the Briggs Chaney market, specifically from Briggs Chaney Plaza.

Summary Table 3

An analysis of future neighborhood retail needs of the seven market areas also yields interesting results. See Summary Table 4. Additional forecasted household growth provides the basis for additional need. Assuming markets are in balance today, household growth normally yields additional supportable neighborhood retail space. Some markets are not in equilibrium today, however, and the amount of future need varies from market to market.

By the year 2020, the Briggs Chaney, Cloverly and Four Corners markets all will support additional neighborhood retail space. Colesville, White Oak and Hillandale markets will all be close to equilibrium. In the case of Burtonsville, the supply of competing retail space and the possible realignment of Route 29 make the supply/demand picture more unclear. Therefore, the 2020 analysis is not very applicable to market areas where several possible externalities could come to fruition. This is discussed in detail in the Fairland section of this report.

By the year 2020, the Briggs Chaney market could support another 33,000 square feet of neighborhood retail space with the addition of 1,583 market households. If Cloverly Safeway expands, then the amount of neighborhood retail space supportable by the Briggs Chaney market would decrease.

The Cloverly market could support another 16,900 square feet of neighborhood retail space, above the 1993 amount, by the year 2020. If the Cloverly Safeway expands, then the amount of additional space supportable would decrease by the size of the expansion.

II. Introduction and Background

A. Introduction

Scope of Study

This report presents observations and descriptive and quantitative analyses of the neighborhood retail market in Eastern Montgomery County. The primary objective is to determine if there is adequate neighborhood retail space to support the retail needs of area residents and to assist the Community Planning Division in identifying future land use options in the four Eastern Montgomery County Master Plan Areas.

Four sections comprise the Eastern Montgomery County Retail Study, one section for each of the four Master Plan Areas that make up Eastern Montgomery County, Fairland, Cloverly, Four Corners and White Oak.

Each section of this report contains: 1) a description of the market area boundaries that constitute the Master Plan Areas, 2) demographics, 3) supply and amount of supportable neighborhood retail space, 4) the retail mix and 5) general observations.

Explanation of Neighborhood Retail

The availability of retail is important to the vitality of a residential community. The proximity of retail goods and services that are purchased frequently are of particular importance to the residents of a neighborhood. This study evaluates the retail establishments that supply area residents with their day-to-day consumer purchases, termed neighborhood retail. Because convenience to consumers is essential, the neighborhood retail market area is geographically small compared to other types of retail markets. Neighborhood retail is typically found at the neighborhood shopping center.

The type of tenants evaluated in this study are those that the average resident would visit on a regular basis. The anchor store is usually a grocery or supermarket. The neigh-borhood retail tenants analyzed in this study are: the supermarket, drug, fast food and sit-down restaurants, pizza, sandwich, ice cream/yogurt, liquor/wine, florist, dry cleaner, hair salon/barber, video, convenience, auto parts and hardware/nursery/plant store.

The types of retail businesses not included in the neighborhood retail analysis are the comparison retailers usually found at, but not limited to, regional malls. Almost every center in Eastern Montgomery County offers some comparison retailers. Examples of these retailers range from department stores to apparel, furniture and specialty shops.

The neighborhood retail analysis also excludes professional services that may be found at neighborhood shopping centers, such as real estate offices, insurance agencies and health care providers. The large off-price centers, such as Home Depot, are excluded from the neighborhood analysis. Within the context of this report, all of these types of uses are referred to as non-neighborhood retail and in many instances, occupy space suitable for neighborhood retail. Auto dealerships, gas stations, auto repair shops and banks are also excluded from the study.

B. Background

Interviews and field work

To evaluate the amount of neighborhood retail space that is supportable by area residents, a complete inventory of the retail space in the four Master Plan Areas was taken. The tenant type along with the size of each retail establishment, was determined. The retail space was then categorized as either neighborhood or non-neighborhood retail space. The neighborhood retail space was further subdivided into grocery/drug space or other neighborhood retail to allow for separate analysis.

Retail space outside the four Master Plan Areas considered to be competition to area retailers was also assessed for market strength and potential draw of dollars from the retail study area. Outside competition included retail centers as far west as Georgia Avenue, Silver Spring and Takoma Park to the south, Route 1 in Prince George's County to the east and MD 216 to the north.

Interviews with the major retail center owners and/or managers located in the retail study area were conducted to verify center sizes and vacancy information. Market area boundaries and general market conditions were also discussed to help assist in delineating sub-markets for the retail areas in the four planning areas.

Market Area Boundary

The market area is that geographic area from which a majority of the steady customers will shop at a given shopping concentration. The boundaries of the market area are determined by many factors, including the size, quality and location of competing centers; accessibility and physical barriers.

New shopping centers do not create new buying power. Rather, they attract customers from existing districts or capture a portion of new purchasing power in a growing area. A forecast of household growth in a market area helps estimate the amount of retail space that is supportable.

1. The locations of the existing neighborhood retail nodes help identify the market area boundary.
   Having a neighborhood retail center nearby does not in itself mean that nearby households will shop there. It is not only the location of retail centers, but their size, quality and accessibility that attract shoppers from the vicinity.
2. The size and quality of the retail competition are important characteristics in delineating market area boundaries.
   The size is important because more space normally indicates more product breadth and depth. More products and better selection within a product line normally attract shoppers. Therefore, the larger the center, the stronger its pull of area households than a smaller retail center. And the newer the center, the stronger its pull of area households than an older competitor.
3. Accessibility of neighborhood retail centers plays a role in a household's decision of where to shop.
   Accessibility refers to both the road network around the center, any physical barriers to the center, the ingress and egress to the center and the circulation within the center. These accessibility characteristics play a role in a shopper's decision of where to shop.

market area map

Overview of Retail Model

The retail model calculates supportable square feet of neighborhood retail space. The model calculates space needs by using three different approaches. An average of the three methods is the estimated amount of neighborhood retail space supportable by market area households. The three approaches used to calculate supportable square feet (or household demand) are the income, the household and per capita methods.

The first approach, the income method, determines the amount of retail space supportable given the percent of income spent by households in the County on neighborhood retail goods and services. Market area average household income as a percent of average County income is used to estimate market area spending under this approach. The result is divided by the dollars spent per square foot of neighborhood retail space (from Urban Land Institute) to derive supportable space.

The second method used in calculating supportable square feet uses the County average spending per household. The third approach uses County average dollars spent per person to calculate per capita supportable square feet.

An average of the three approaches is the estimated supportable square feet of neighborhood retail. The averaging of three calculations simulates the observed retail spending behavior of lower income households spending a higher portion of their income on retail consumption and higher income households spending a lower portion of their income on retail purchases. It also simulates smaller households spending less in total but more per person than larger households.

Eastern Montgomery County Demographics

Household and population growth are important determinants in assessing the potential need for future neighborhood retail facilities. The actual location of additional growth assists in determining where increased demand for retail may come from and potential sites for additional retail space.

The demographics used in this study are based on block data from the 1990 U.S. Census of Population and Housing. By aggregating block data, it is possible to closely match demographic information with the seven market area boundaries. To show the number of households for each market area as of 1992, housing units completed during 1990 and 1991 are converted to households and added to the 1990 base household numbers. Occupied completions are then multiplied by the 1990 average household size by unit type to estimate the 1992 population.

Block group income data from the 1990 U.S Census of Population and Housing are used to derive the mean household income for each market area as of 1989. Using the average change of two indicators, the Consumer Price Index For All Urban Consumers for the Washington Metropolitan area (CPI-U) and the U.S. Bureau of Economic Analysis (BEA) estimates of average household income for Montgomery County, incomes are inflated to the 1992 level.

1. The Eastern Montgomery County neighborhood retail study area covers approximately 43 square miles. The study area's population is estimated at 106,000 as of January 1, 1992. The population estimate includes 4,900 residents from Prince George's County and 740 from Howard County. There are just over 39,000 households in the study area, with an average household size of 2.72.
2. Households are forecasted to increase by 14 percent accompanied by population growth of 5 percent.
   Household growth is forecasted to increase at a greater rate than the area's population due to an expected decrease in household size. The number of households is forecasted to increase from 39,110 in 1992 to 44,556 by 2020, an increase of 13.9 percent. As shown in the following table, the Eastern Montgomery County market area's population is projected to increase by 5,336 by the year 2020, an increase of 5.0 percent over the estimated 1992 population. Increases in population are anticipated for only three of the seven sub-market areas: Burtonsville, Briggs Chaney and the Cloverly. Population will decrease in the other four retail markets by 2020 as a result of smaller average household size.
3. In the Eastern Montgomery County market, the average household spends 14.2 percent of household income on neighborhood retail.
   The 1992 average household income for the study area is estimated to be $68,267, compared to $75,302 county-wide. The retail model estimates that the average household spends 14.2 percent of the household income on neighborhood retail, $9,688 annually. Spending on neighborhood retail by all households in the study area is estimated at almost $378 million.

Supply and Demand Analysis

The supply and demand of neighborhood retail space are compared in analyzing the need for additional retail space. We use primary and secondary sources to determine the amount of retail square feet in the market area. Retail space is categorized as being neighborhood retail and non-neighborhood retail. See page 1 for a definition of neighborhood and non-neighborhood retail types. This analysis focuses on the amount of neighborhood retail space supportable by the market area.

The amount of space the market area can support is called demand. We estimate demand using our retail model based on the number of market area households and population and their income. The supply data (existing space inventory) is 1993 data while demand data (households, population, income, etc.) is 1992 data. Sales per square foot are not available for 1993 and substituting 1993 households, population and income for 1992 imply only a 0.3 percent increase in demand for the entire area. Therefore, demand calculations are based on 1992 data.

1. A comparison of what the market can support today, given the market area households and incomes, and the amount of space existing in the market indicates either a surplus of space or need for additional retail space.
   If it is found that the amount of neighborhood retail space that the market can support exceeds the amount of space existing in the market area, then there may be a need for additional retail space. It could also mean that the retailers in the market area are doing very well and there are few marginal businesses and few vacancies. If, on the other hand, the analysis shows more space existing in the market than is supportable, some of the businesses may not be faring as well as they could be and there may be higher vacancies.
2. Given the year 2020 forecast of households and population for the seven market areas, the analysis also shows the amount of neighborhood retail space the market can support in the future.
   Factors other than households and population, such as sales per square foot, average household income and retail competition, are assumed at 1993 levels for this analysis. In some cases, market area boundaries will change by the year 2020 because of assumed retail development in the vicinity over the next 10 to 15 years.

Completeness of Retail (Retail Mix)

The supply and demand analysis is a quantitative approach to assessing need for retail space. Another way of looking at how well a market area is served is to analyze it's mix of store types. This gives a more qualitative or descriptive picture of how complete and convenient the retail choices are.

Urban Land Institute (ULI), an independent, non-profit research and education organization, ranks the top 20 retail tenant types found in neighborhood retail centers across the country. The top 11 are supermarket, drug, beauty/hair, cleaner, bank, sit-down and fast-food restaurants, video rental, jewelry, cards and gifts and flower and plant stores. Each market area is evaluated in terms of how well the top 11 are represented and how convenient their location is for one-stop shopping.

NOTE: A copy of the full report is available from the Research & Technology Center.

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