When you’re evaluating a location for a potential real estate investment, demographics are often one of the first things you see. Broker’s offering memorandums, or OMs, usually have a page or two about the area’s demographics, and consumer-facing websites do too. They’ll show things like how many people are moving to the area, what the average household income is, what job growth looks like, and a few other surface-level metrics.
That information can definitely be helpful. If you’re looking at income-producing properties, you want to see population growth and a strong job base, and your investment strategy might prioritize a high-income area over a low-income one. But this information is only part of the story.
Demographics provide a general overview of a market. But they leave out the most important part – what’s actually happening in an area.
The Duplicates
We were recently evaluating a retail plasa for a client, and one of the tenants was a pizza shop. According to the broker, the pizza shop had another location about half a mile away – same name and menu. The broker noted that the tenant would likely consolidate the two shops, which could result in a vacancy down the road.
That sounded logical to us, until we actually walked the property and spoke to the tenant. He told us that the other location was actually owned by his cousin. Same name? Yes. Same menu? Yes. Same business? Not at all. The two had a disagreement, and certainly weren’t going to ever consolidate into one business.
You won’t get that from a demographics report.
Local Knowledge Wins
Lets say you’re reviewing the job growth statistics for an area, and the data shows steady, but modest, increases. Nothing flashy, nothing to make you stop in your tracks.
But, you’ve heard through some local sources you know that a private company is investing close to a billion dollars into an infrastructure upgrade at one of their manufacturing facilities in the area. That single project is expected to bring over 200 jobs – which will bring a surge of activity and strength to the local economy.
That kind of information can change everything.
Knowing about projects like that early, or being aware of local dynamics that don’t get captured in regional data, can give you a real edge. Like the saying goes, all real estate is local. If you get to know the area you’re looking at, you’ll see opportunities or risks that others might miss because they’re only looking at reports from behind a desk.
Conclusion
Demographics are a great starting point, but they can’t replace local knowledge. The best investment decisions come from combining data with boots-on-the-ground experience. Real estate brokers can be your secret weapon – especially if you’re not closely familiar with the area you’re looking to invest in. Contact us today to get started with location analysis.
