Big data has become a preeminent player in competitive commercial real estate markets. Affinity analysis, a data mining technique, is rising in popularity among CRE operators and investors to better understand how the location of their retail properties influences consumer behavior.
In its recent report “how big data is transforming real estate,” McKinsey suggested that real estate investors and developers need to identify “hyperlocal” patterns and granular trends to inform their decision-making. Data that zeroes in on the city block level (versus its general vicinity) has the potential to surface additive relationships between high-density populations and their proximity to community amenities. These real-world insights into consumer behavior impact one of the most important elements in a REIT portfolio: location.
Location, Location, Location
Omnichannel strategies are militant about meeting your customers where they are. It doesn’t take an algorithm to know that location is the “north star” for operators, developers and retail tenants. And although the site selection process can be hit or miss, sometimes with adverse effects on foot traffic, sales and revenue, with the right intel, it doesn’t have to be.
Imagine if the industry could triangulate consumer behavior patterns with foot traffic data to identify the best locations for a retail brand to open shop. Well, you’re in luck, because that’s precisely what property affinity scoring hopes to do. A Retail Space, Ubermedia and Thasos are just a few of the vendors that cross-reference geolocation data with a brand’s predefined data set to uncover property pathing insights for operators, developers and REITs.
Retailers Seeking Cultural Connections
Benchmarks for these property affinity behaviors vary by brand. Loyalty, frequency, conversions and even brand engagement are some examples of what providers offer. How does that translate into a real-life scenario? Consider the recently-opened American Dream mall in New Jersey, which is the first-ever mega community complex to pair food, fashion and luxury retail with a full-scale entertainment-amusement offering. Did they use the property affinity scoring to identify and quantify the how much entertainment is needed based on the surrounding population of consumers and tourists?
Contextualizing qualitative relationships has become more complex as brands vie for likes (or dislikes) amid the varied range of consumer attitudes and interests. When brands create a cultural connection with users through storytelling and an ongoing dialogue on social media, they are more likely to develop impactful engagement touchpoints with target audiences, unlocking a powerful asset and their brand positioning.
The Adoption Rate
With a nod to the future, research and leasing teams are duly excited by the impact property affinity scoring will have on use case scenarios. Despite this enthusiasm and the continuous introduction of automation, AI and new technologies into the CRE space, the industry as a whole has been slow to adapt. One thing is for certain: As the scoring becomes more widely used, investors will need to pay closer attention to how their projects are being discussed and scored against their competitors and many will need to pivot quickly to stay relevant with consumers.
About the author:
Anjee continues to be an insatiable enthusiast of all things retail. She’s a student of culture with a pulse on future shoppers and the fleeting trends constantly changing the retail landscape … driving retailers, landlords and developers crazy!