In the world of commercial real estate, understanding the lay of the land goes beyond the bricks and mortar of a potential investment property. Savvy brokers and investors need to assess a multitude of factors, one of which is the level of vehicular traffic that passes by a chosen location.
Known as car traffic counts, these figures can significantly impact the viability and potential profitability of a commercial property.
What are Car Traffic Counts?
Car traffic counts represent the number of vehicles that pass a specific location during a set time period.
They could be counted in hourly, daily, weekly, or even annual increments. Traffic counts provide useful information about the volume and flow of traffic at a location, including peak and off-peak periods, directional flows, and the potential number of passers-by who could become customers for a business situated there.
While straightforward in principle, the interpretation and analysis of this data requires careful consideration, especially within the complex context of commercial real estate investment.
Why are Traffic Counts Important for CRE Investors and Brokers?
Car traffic counts are an essential benchmark for CRE investors and brokers as they assist with assessing the accessibility and profitability of a commercial location.
Locations with high traffic counts typically translate to high customer volume and increased foot traffic, which is particularly important for retail and service-based businesses.
For this reason, properties with impressive traffic counts are generally more marketable, serving as a persuasive selling point for brokers when negotiating with potential tenants or buyers.
Car traffic data is also integral to trade area analysis. A ‘drive time’ trade area is usually defined as part of a trade area analysis which indicates how far (and how long in terms of time) customers are willing to travel to get to and from a specific location. These datasets all help to inform varying CRE decisions.
Measuring Car Traffic Counts
Understanding car traffic counts begins with knowing the key metrics and methods of data collection.
Key Traffic Count Metrics for CRE
Primary traffic count metrics relevant to CRE include:
Vehicle Miles Travelled (VMT) or Vehicle Kilometers Travelled (VKT)
The total distance travelled by vehicles over a specific period. This metric provides a sense of the overall traffic volume in a certain area.
Average Annual Daily Traffic (AADT)
The total volume of traffic on a road over the course of a year divided by 365 days. AADT provides an average daily traffic estimate, helping identify roads with high and low traffic flow.
The K Factor
The proportion of daily car traffic occurring during the peak hour. The K Factor is calculated by dividing the maximum number of vehicles on the road over the peak hour by the AADT. It is expressed as a percentage. The K Factor helps to understand how well a location can handle traffic volumes at specific times.
Data Collection Methods
The chosen method of data collection will depend on the resources available, the level of precision required, and the specific needs of the CRE professional. Some methods include:
Manual Traffic Counting
A traditional method that involves manually counting the number of vehicles passing a point during a specific time period.
Automatic Traffic Counting
Devices like sensors and cameras are used to automatically count vehicles. These systems offer more continuous and precise data collection than manual methods.
Third-Party Data Providers and Connected Vehicles
As technology advances, the methods for collecting traffic count data have also evolved. Several companies now specialize in collecting and providing traffic count data. One of the key advancements in this field is the rise of connected vehicles—cars equipped with internet connectivity and usually also with a form of GPS. By analyzing data from connected vehicles, it's possible to build a detailed picture of traffic patterns across different areas and times.
Data collected from mobile devices can also be used to estimate traffic counts. This method uses location data from smartphones and other devices to determine the movement of people and their modes of transport. Mobile data provides a huge data sample which means much more accurate traffic count statistics than traditional collection methods.
CRE GIS Analytics Platforms for Making Sense of Traffic Count Data
As the quantity and complexity of traffic count data grows, Geographic Information System (GIS) analytics platforms are becoming increasingly vital tools for making sense of it all.
A GIS platform’s advantage comes from its ability to integrate various data types into a unified, visual interface.
In the case of car traffic count data, these platforms can merge it with other spatial information, such as land use data, property data, demographic data, and more. This approach allows for a holistic understanding of a location, beyond just the number of cars that pass by each day.
CRE professionals can easily access this information through online commercial real estate location insights platforms, like AlphaMap. These platforms harness the power of GIS technology to reveal patterns, trends and insights, which might otherwise be missed. As a result, CRE brokers and investors can make strategic decisions rooted in comprehensive, data-driven analyses.
Leveraging Car Traffic Count Data in CRE Decision-Making
Car traffic count data provides valuable insights that enhance the understanding of a location’s potential. Here's how CRE professional can leverage this valuable data resource in their strategies:
Site Selection and Analysis
Choosing the right location for a retail property is a crucial business decision that can have direct impacts on profitability.
Since retail properties rely on good volumes of footfall and walk-ins, car traffic count could be a potential indicator of how many customers a specific location will receive.
Depending on your retail business model, it may be important to consider how far your customers are willing to drive to your store.
Comparing traffic patterns across different locations might also give an indication of possible traffic congestion which might negatively influence your customer’s shopping experience with you.
Understanding Customer Behavior
Car traffic counts can serve as a valuable indicator of consumer behavior, especially when analyzed alongside other CRE benchmarks. For instance, a big commercial development might reduce road access to your location, which could correlate to reduced foot traffic.
You can prepare for the fact that less customers will be able to get to your physical store by adjusting your marketing strategy accordingly. This could also involve measures like securing dedicated parking spaces for your customers, enhancing their access to your physical store.
Tenant Attraction and Retention
CRE property owners can use promising car traffic levels to attract and retain high-quality retail tenants. Since car traffic generally directly correlates with footfall, areas with high vehicle traffic usually suggest good trade potential.
Brokers can leverage these traffic metrics to highlight the value of a specific location to potential tenants or investors. In lease negotiations, data reflecting high car traffic counts can even serve as a persuasive bargaining tool.
Infrastructure Planning and Development
Car traffic is not just about understanding potential customer reach, but also about strategic planning of infrastructure development. City planners can use traffic data to assess the need for road improvements and better traffic management around congested properties.
Property developers might use existing car traffic to predict the impact a new shopping mall will have on surrounding traffic patterns and trade areas. Making sure car traffic levels are optimal is an important part of ensuring sustainable urban development.
Challenges and Limitations of Car Traffic Count Data in CRE
While car traffic counts can offer powerful insights for CRE professionals, they are not without their limitations.
Accuracy and reliability of data can vary, with potential errors cropping up from various sources, whether it's the method of data collection or external factors like road closures.
Traffic patterns are also subject to seasonal and time-of-day variations, which must be accounted for.
Traffic data is also only one piece of the CRE puzzle when it comes to decision making. It is essential to consider additional trade area factors beyond car traffic counts, like customer proximity and actual trade (footfall counts) statistics. The broader market context is very important.
Final Thoughts on Car Traffic Counts for CRE Brokers and Investors
While high car traffic counts generally indicate higher levels of customers in store, this is not always the case. It’s important to view car traffic within the context of the other CRE metrics.
As you get to know the different facets of commercial real estate and how each piece of data contributes to building solid strategic decision-making, you’ll gain confidence in your ability to see the bigger picture.
Using a comprehensive GIS analytics tool, like AlphaMap, does a lot of the heavy lifting for you by simplifying the data collection process and helping you to visualize the patterns and trends with ease.