The timeless real estate mantra “location, location, location” has stood the test of time since it first appeared in the Chicago Tribune in 1926. Today, the importance of location is more pronounced than ever, shaping how markets, submarkets, and even micro markets are defined and analyzed in commercial real estate.
In this analysis, a cutting-edge approach was applied to the Philadelphia County submarket using the DBSCAN algorithm to identify clusters of retail buildings. These clusters were further refined by Uber’s H3 hexagonal grid system to create micro markets for detailed statistical evaluation.
Urban Retail Resilience in Philadelphia
Despite the challenges facing many urban cores across the U.S., Philadelphia’s Downtown/Avenue of the Arts North cluster has demonstrated impressive resilience.
Key Performance Insights
- Rent Growth: Over the past five years, this cluster has achieved a compound annual growth rate (CAGR) of 3.4%, significantly outpacing the broader market (1.6% CAGR) and the submarket average (1.8% CAGR).
- High Rents, High Demand: High rents, often perceived as a barrier, have not deterred retailers. On the contrary, areas with top-quartile rents continue to attract demand, thanks to their vibrant amenities and proximity to prime office spaces.
These insights highlight a persistent demand for urban retail spaces that offer access to amenities, solid foot traffic, and connectivity to core business districts.
Shifting Consumer Preferences Post-Pandemic
This analysis provides a lens into how consumer behavior is reshaping urban retail environments:
- City Living Demand: There is sustained interest in urban living, driven by the appeal of walkable communities with diverse amenities.
- Retailers’ Focus: Businesses are prioritizing locations with a proven track record of foot traffic and vibrant surroundings, ensuring long-term viability.
By using advanced algorithms and micro market mapping, we gain a deeper understanding of the evolving dynamics that drive success in urban retail spaces.
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