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In the current economic climate, both the
private and public sector are facing difficult challenges of meeting service
demands on increasingly limited resources.
It is essential for
municipalities and private developers to fully understand the relationships
between economic conditions and existing and future development potential. Ultimately, a market study should illuminate
these relationships and be used as a tool to ensure that resources are utilized
efficiently over the short- and long-term.
One Size Does Not Fit All
The data and recommendations contained within a market study
should vary depending on the scope of the planning effort to which they apply. For example, a comprehensive plan covers a
large geographic area and has a long planning horizon of 15 years or more. Conversely, a redevelopment concept for an underutilized
industrial park would involve recommendations targeted at a much smaller area
intended to be implemented as soon as the study and plan have been adopted. Given the very different nature of these two
planning exercises, the approach to the market study must also be just that, very
With regard to long-term planning efforts, the goal of the
market study is not to gaze into the proverbial crystal ball and predict exactly
how many people, houses, jobs and retailers will come to, or leave, a
community. Rather, in a long-term planning
environment, the market study is a tool used to understand the forces that will
likely influence long-range policy and decision-making. These policies are what will, in turn, shape
the community’s future in the long-term.
A comprehensive plan should have a comprehensive market
study that examines long term changes in a variety of topics such as
population, household income, employment patterns, and the competitive retail
environment. These market observations
can provide the information needed to formulate polices tailored specifically to
address local needs. For example,
policies can be modified to combat undesirable trends such as increasing
vacancies in local housing or new policies can be recommended to build upon a
community’s unique economic strengths.
It’s in the Details
The focus of a market study should narrow as planning
efforts become more site specific and the planning horizon shortens. A detailed market study is more
action-oriented, informing the user of near term trends that will directly
impact viable uses and development potential.
The client should have more detailed questions they wish to
be answered by the detailed market study.
What type and size of retail use is viable in this location? Would a sit-down restaurant consider locating
to one of these parcels? How many new
residential units could be built and
occupied within the downtown over the next five years? The market data
should be queried with these particular questions and uses in mind. Moreover, a single study area from which to
pull market data should be avoided in favor of several unique market areas that
have been defined for each use.
Market studies should be updated regularly, but the exact
timing depends on a variety of factors such as the pace of change within the
study area and the shelf life of the plan itself. A comprehensive plan within a built out
community with limited opportunity for expansion will not likely warrant an
update more than every five to ten years.
Most comprehensive plan’s have a shelf life of 10 to 20 years, so the
plan may need to be updated based on the results of an interim market study
update. On the other hand, a community
on the edge of a significant metro area may need to revise its understanding of
market conditions every few years to ensure that local policy is dealing
sufficiently with changes within the competitive landscape.
A detailed market study relies on detailed analysis of near
term trends and should not be relied upon beyond the life of the projections
upon which they are based. Often times a
detailed market analysis is performed at the outset of a development program
and is not utilized after the project has broken ground. Detailed market studies for slightly larger
study areas, such as a downtown business district, should be revised
periodically based on local needs. For
example, a local chamber or economic development corporation that relies on an
understanding of current market conditions to formulate marketing strategies
should consider updating an existing market analysis every two to three years.
Do-It-Yourself Market Study
Now that you have a decent understanding of how and why a
market study should be used, we can discuss the basic components of a market
study. Not everyone needs to develop a
‘full-blown’ market analysis to answer relatively simple questions they may
have about their community or project, so check back soon to find out how to
perform a basic Do-It-Yourself Market