Understanding supply and demand conditions is a critical step in the commercial real estate market analysis process. However, analyzing supply and demand for commercial real estate can be challenging, as it involves sorting through large amounts of data from various sources. In this article, we will walk through an example supply and demand analysis for retail buildings in Orlando, FL.
Population Trends and Retail Building Demand
Recent data from the U.S. Census Bureau and the Orlando Economic Development Commission lists the total population of the Orlando metro area at 2,387,138 as of 2016. Between 2015 and 2016, the population of the Orlando metro area grew by 2.6%, making Orlando the fastest growing region in the United States.
The Orlando Economic Development Commission estimates that population growth in the region since 2000 equates to a gain of 138 people per day. This significant population growth is fueled primarily by domestic migration. Many Americans are moving to Orlando for retirement in warmer weather or for new career opportunities, accounting for about 40% of the population increase. Additionally, international migration, mainly from Central and South America, contributes 34% to the population growth.
People have been relocating to the Orlando area due to the region’s comparative advantages, such as its pleasant climate, vibrant entertainment and lifestyle options, and ongoing economic growth. Without these factors, it is unlikely that Orlando would remain one of the fastest growing regions in the country.
In addition to the effects of population growth on the retail market, Orlando experiences an enormous influx of tourists each year. These tourists boost retail sales significantly. According to Visit Orlando, the official tourism association for the area, a record 68 million people visited Orlando in 2017, an increase from 66 million in 2016. This translates to an average of almost 200,000 additional people per day visiting retailers in Orlando.
Economic Trends and Retail Building Demand
Employment data from the Bureau of Labor Statistics further confirms that economic growth is driving population growth in the Orlando metro area. Job growth from 2015-2016 in Orlando exceeded the national average by more than double. A robust economy and an upsurge in job opportunities likely indicate that the population will continue to grow over the next few years, barring a significant shift in the national economy or unexpected events.
| Area Industry | Annual Average Employment | Change Employment 2015-2016 | Growth Rate |
|---|---|---|---|
| U.S. TOTAL Total, all industries | 141,870,066 | 2,378,367 | 1.71% |
| Orlando-Kissimmee-Sanford, FL MSA | 1,157,536 | 46,844 | 4.22% |
| 2015 U.S. TOTAL Total, all industries | 139,491,699 | N/A | N/A |
| Orlando-Kissimmee-Sanford, FL MSA | 1,110,692 | N/A | N/A |
Another critical economic indicator of demand for retail property is the growth in retail sales dollars in the region. This growth further reinforces the relationship between the local economy and retail building demand.
Conclusion
In summary, the analysis of retail building supply and demand in Orlando, FL highlights the significant impact of population and economic trends. The rapid population growth fueled by domestic and international migration, combined with the influx of tourists and robust job growth, creates a favorable environment for retail building demand. Understanding these dynamics is essential for stakeholders in the commercial real estate market, offering valuable insights necessary for informed decision-making.
