FEATURES Other markets such as Washington D.C., Atlanta,


Dallas/Fort Worth and Denver are on or very close to the national pace. Minneapolis and Detroit are the two markets that underperformed the national sales productivity pace between 1997 and 2012. Over the last three years, all of the 10 metro markets


had solid sales growth. In particular, Miami’s historical growth has been boosted by its strong recent performance. With a geometric mean of +13.2% from 2010 to 2012, Miami’s productivity pace has grown more than four times its 1997-2012 trend. One explanation for this strong growth could be tourism. Miami ranked fifth on a list of the nation’s top 20 metro markets in terms of most-visited cities.8 With an inviting warm climate and a large number of visitors, particularly from Latin America, the potential influx of shoppers could be one source for the strong sustained annual growth in Miami. The Denver and Atlanta markets also had strong


growth over the past three years, with average increases per year of 9.5% and 8.3%, respectively. However, while still strong, both markets have lost sales momentum each year since 2010. In comparison, Dallas/Fort Worth—which mirrored the average national sales productivity pace—is the only MSA, other than Miami, with a sales pace that has accelerated in each of the past three years.


Correlated Metro Markets Factors such as market composition or reactions to


broader economic trends impact certain MSAs more than others. To identify which markets move in tandem with each other based on sales-productivity growth, correlations were calculated for all 10 metro markets. As shown in Table 1-3, the coastal cities of Los Angeles


and New York were more highly correlated to each other than any of the other listed metros, with a coefficient of 0.905.9 In addition, Chicago and Minneapolis (0.903) are also highly correlated and sun belt cities such as Dallas and Atlanta (0.889), Miami and Atlanta (0.880) and Dallas and Miami (0.875) have strong correlations. On the other hand, Detroit and Washington D.C. are


least correlated to each other (0.500). Detroit appears multiple times on a list of the 10 least correlated markets as well as Denver (Also shown in Table 1-3.) These markets appear to be affected the least by geographic


proximity and they also have a weak correlation to each other (0.680). Further investigation is needed to determine specific market drivers that may explain this observation.


Table 1-3 Most


Metro Market Pairwise Sales Productivity Least


Correlated Markets


Los Angeles and New York


Chicago and Minneapolis


Dallas and Atlanta


Atlanta and Minneapolis


Miami and Atlanta


Dallas and Minneapolis


Dallas and Miami


Atlanta and New York


Minneapolis and New York


Los Angeles and Chicago


Source: ICSC Research


Conclusion These metro data provide additional insight into U.S.


mall performance, but they also raise questions. Why do some of these markets perform so similarly or differently? Do common drivers exist that can help predict the performance of one highly correlated market based on the performance of another? Do economic impacts of changes in housing or the unemployment rate ripple through all markets evenly or are some markets more sensitive to those changes? How much does tourism drive a specific economy? Although further research and analysis is required, these metro data provide the fodder to answer more questions.


Correlation 0.905 0.903 0.889 0.881 0.880 0.878 0.875 0.872 0.834 0.825


Correlated Markets


Detroit and Washington D.C.


Detroit and Los Angeles


Washington and New York


Detroit and Miami


Denver and Washington D.C.


Detroit and Denver


Dallas and Los Angeles


Denver and Los Angeles


Denver and Minneapolis


Detroit and Chicago


Correlation 0.500 0.620 0.669 0.675 0.678 0.680 0.704 0.709 0.717 0.726


Note: 1.00 represents perfect positive correlation and 0.00 represents no correlation.


8 Valaer Murray, “America’s Most Visited Cities,” Forbes.com, April 28, 2010, retrieved March 28, 2013. 9 The correlation coefficient is a measure of the strength of a linear relationship between two sales productivity growth rates. A value of 1.0 indicates a perfect positive correlation; a value of –1.0, a perfect negative correlation.


John Connolly is Senior Research Analyst at ICSC. He can be reached at 1 646-728-3681 or jconnolly@icsc.org.


INTERNATIONAL COUNCIL OF SHOPPING CENTERS


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RETAIL PROPERTY INSIGHTS VOL. 20, NO. 1, 2013


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