DSN 2018 DataBook: Top 20 retail markets
A look at what’s fueling growth in the country’s biggest metro areas
Retailers always want to stay ahead of the curve when it comes to expansion. And there may not be a better barometer than the U.S. Census Bureau, which produces an official census every 10 years and annual estimates every year.
The results from the 2016 estimates offer few surprises. Most of the major metropolitan areas along both coasts and in Texas are growing at strong rates — either in percentage increases or in the sheer number of people moving there. It is in the heartland, specifically the upper Midwest, where growth is much slower as more people seek either better work opportunities or a better climate to live in.
Percentage-wise, Texas and California, as well as Arizona, showed very large increases in population, with such metropolitan areas as Dallas, Houston and Phoenix registering double-digit gains in population since 2010, and the San Francisco and San Diego markets growing by more than 7%.
The New York metropolitan area, while only growing at a 3% clip since the start of the decade, nonetheless added nearly 600,000 people to the region and is the only area with more than 20 million people. Second is the Los Angeles market with about 13.3 million residents.
One interesting trend, analysts noted, is that in several major regions, specifically along the East Coast, people are moving closer to the cities themselves, reversing a decades-long trend of suburban growth. That is particularly true with the New York, Philadelphia, Boston and Washington markets where many millennials and baby boomers are moving back into the cities or nearby.
In order to help retailers gain a better understanding of the largest metropolitan areas in the country, DSN is offering a capsule summary of the top 20 regions and what is driving each economy there. Plus, a look at the major retailers operating within each of those markets. Click a city below to read each profile.
- New York City
- Los Angeles/Long Beach
- Chicago/Naperville, Ill.
- Dallas/Fort Worth, Texas
- Washington/Arlington, Va.
- Philadelphia/Camden, N.J.
- Miami/Fort Lauderdale, Fla.
- Atlanta/Roswell, Ga.
- Boston/Cambridge, Mass.
- San Francisco/Oakland, Calif.
- Phoenix/Mesa, Ariz.
- Riverside/San Bernardino, Calif.
- Detroit/Warren, Mich.
- Seattle/Tacoma, Wash.
- Minneapolis/St. Paul, Minn.
- San Diego/Carlsbad, Calif.
- Tampa/St. Petersburg, Fla.
- Denver/Aurora, Colo.
- St. Louis/East St. Louis, Ill.
Los Angeles: Steady Growth in retail employment, GDP
The script for the Los Angeles economy in 2018 might best be described as an uplifting tale suitable for a Hollywood blockbuster.
The Los Angeles metropolitan area is the second largest in the United States with a population of 13.3 million, and the second-largest nominal gross domestic product of any metropolitan area in the country — which totaled $978.2 billion in 2017, according to the U.S. Commerce Department’s Bureau of Economic Analysis.
According to the Institute of Applied Economics at the Los Angeles County Economic Development Corp., the real GDP for Los Angeles County grew at 3.2% in 2017, up from 2.1% growth in 2016. The LAEDC projects real GDP growth is expected to be 2.4% for 2018 and 2.2% for 2019.
The economy is dominated by the entertainment industry, but also is home to the nation’s busiest seaport area with the Port of Los Angeles and Port of Long Beach combined. Other major industries include aerospace, technology, petroleum, tourism and fashion and apparel.
The strongest job growth in the next two years is predicted to be in health care and social assistance; administrative and support; construction; leisure and hospitality; retail trade; and government, according to the LAEDC. Although the group noted a slight slowdown in retail employment from 2016 to 2017, with a decline of 1,300 jobs, it predicted modest growth in the next two years, with 4,500 jobs added.
All three major drug store chains have a significant presence in the Los Angeles metro area, led by CVS Pharmacy, according to a 2015 research report from Barclays Capital. In 2016 CVS Health began opening its Hispanic-focused CVS Pharmacy y Más banner in the market with nine locations. Rite Aid entered the market through its 1996 acquisition of Thrifty Payless, but many of its stores in the Western United States are expected to be acquired via the pending merger with Albertsons.
Among the biggest changes in consumables retailing during the last two years has been the entry of Batavia, Ill.-based discounter Aldi to the market. The German-owned chain opened its first Southern California stores in 2016 in the Inland Empire and Coachella Valley areas, but has ramped up aggressively in the past two years with stores throughout the region. It closed out 2017 with about 55 locations, with another 20 to 25 planned for 2018. The stores are generating higher volumes than typical Aldi locations in the United States, according to local reports.
Overall Southern California is the largest grocery market in the country with annual sales of about $45 billion, according to a recent report in the Los Angeles Times. Major players include Kroger’s Ralphs banner and Albertsons and its Vons and Pavilions banners. With Albertsons’ planned acquisition of Camp Hill, Pa.-based Rite Aid, in-store pharmacies will eventually carry the Rite Aid name. Also in play are big-box operators Walmart, Target
Los Angeles has been a major testing area for Target, which in 2015 launched an initiative called LA25 in the region — a remodeling of 25 stores where the company tested various initiatives that are now being incorporated in new stores and remodels around the country.
Overall, the Los Angeles metropolitan area’s retail market is in flux as e-commerce gains traction and consumers increasingly seek something more from retailers.
“There’s definitely a shift toward smaller businesses that offer experiences,” Jodie Poirier, managing director of real estate firm CBRE’s South Bay office recently told the Long Beach Business Journal. “The big-box stores [and] the larger format type stores that are doing well are the ones that are able to incorporate the e-commerce aspect to fit the way that we buy and live.”
Chicago: A diverse economy blows through the Windy City
The Chicago metro area has seen its share of ups and downs, but it always seems to bounce back stronger than before.
The area includes about 9.5 million people and has the third-largest metropolitan area nominal gross domestic product at $670.5 billion in 2017, an increase of about 3% over 2016. It is considered a highly-diverse economy, and is home to the headquarters of 57 Fortune 1,000 companies, including Deerfield, Ill.-based Walgreens.
In addition to its status as a transportation and distribution hub, the Chicago area is home to major food processing, manufacturing, printing, publishing, finance and insurance businesses. In fact, Chicago’s economy reflects, to a large degree, the U.S. economy overall, with no single industry making up more than 12% of employment, according to local business leaders.
Chicago also has seen an influx of digital innovation, with an average of more than 300 new digital start-ups launched per year between 2011 and 2016, according to public-private nonprofit World Business Chicago.
The Chicago area has seen a fair number of retail closures in recent years, even amid new store openings. The exit of grocer Dominick’s contributed to an overall decline in square footage in the city and its close-in suburbs.
“The combination of nearly 1 million sq. ft. of Dominick’s space being absorbed by the market leaders over the past 24 months, combined with short-term bankruptcies and the ever-present threat of Amazon’s launch into grocery, has created a stall and step backwards in urban Chicago,” said Dan Tausk, principal and director of urban tenant brokerage at Mid-America Real Estate, who authored a recent study of
the market along with intern Dan Maentz.
The bankruptcy of the Central Grocery cooperative last year also added some turmoil, forcing its 400 independent members left to find new supply sources. That also led to the closure of three Ultra stores and one Strack & Van Til store Central had operated. Other recent closures included two of Meijer’s small-format locations, though it maintains a strong presence in the Chicago suburbs. Walmart also recently closed two Neighborhood Market stores and all of its Walmart Express locations.
Chicago has long been a leading market and a testing ground for Walgreens, and in 2012 the chain built a new flagship location on the corner of State and Randolph where a Walgreens store had stood from 1926 to 2005. Walgreens has debuted several initiatives in the market, including its first click-and-collect service in 2011 and what is believed to be the first net-zero energy store in the U.S., in Evanston, Ill.
Among the other drug chains, CVS Pharmacy has less than half the presence of Walgreens, according to reports, while Camp Hill, Pa.-based Rite Aid has no stores in the market, though its pending acquisition by Albertsons could bring its presence to the Boise, Idaho-based grocer’s Jewel-Osco chain — one of the longtime leading food retailers in the market, with 51 stores in the city and the close-in suburbs, according to the Mid-America report. Aldi, based in nearby Batavia, Ill., had 49 stores.
The market also is home to Kroger banner Mariano’s Fresh Market, which is expanding with large, experiential stores throughout the market. In the past year, new stores from both Mariano’s and Whole Foods have opened in the region.
“Gourmet grocery will continue to drive shopping center growth and provide an anchor for higher-end, junior-box tenants in the Chicagoland area,” said Andy Bulson, a principal in Mid-America, in a report on the Chicago shopping center growth outlook.
In addition, Target has been one of the more aggressive retailers in the Chicago area, with eight of its smaller-format stores already open and at least one more planned for 2018.