Big decisions are never easy to make. Especially when the stakes are high, the investment is significant, and the competition is fierce. This is particularly the case in the dynamic realm of retail in commercial real estate (CRE). One strategic tool CRE brokers can use to navigate the unique challenges and capitalize on the opportunities within the retail sector, is a SWOT risk analysis.
In this guide, we’ll take you through six steps to perform your own SWOT risk analysis for those all-important retail decisions. We’ll cover how you can harness the power of geographic information systems (GIS) to get access to more in-depth data and analysis. Let’s dig in.
A SWOT risk analysis is a visual method for identifying positive and negative influencing factors related to a particular retail property, portfolio, market, or business venture.
Typically, you’d create four quadrants on a piece of paper. In the two left quadrants, you would identify the internal factors – the strengths and weaknesses. Internal factors are the influences within your realm of control.
In the two right quadrants, you would identify the external factors – the opportunities and threats. These are factors from the outside world that impact your venture.
A SWOT analysis is a useful tool for any kind of decision-making, but particularly useful when dealing with multi-faceted problems, where there may be many different influencing factors.
CRE professionals can use this planning tool to gain clarity on an issue, and to guide strategy going forward. There are several key moments when a SWOT analysis is particularly valuable in retail:
Ultimately, a SWOT risk analysis helps CRE professionals to not only react to the current market conditions but also proactively anticipate and adapt to future trends and challenges. This forward-thinking approach can uncover opportunities for growth and risk mitigation before they become apparent to competitors, offering a strategic edge.
GIS location insights platforms, like AlphaMap, help you dig a little deeper when performing your SWOT analysis. For retail properties, GIS gives you access to a treasure trove of valuable information on both the macro and micro aspects of the retail market.
You can also identify locations with your ideal customer base, high foot traffic, or proximity to complementary businesses.
GIS data can reveal these competitive advantages, allowing CRE brokers and investors to leverage these strengths in strategic planning. We’ll discuss the uses of GIS in more detail in the next section.
A SWOT risk analysis will be more effective if you define a clear objective. For our analysis, we’ll use a fictional existing retail shopping mall as our base example.
The objective for the SWOT analysis will be to address the limited parking availability that has been affecting the business of the mall, thereby improving foot traffic, tenant satisfaction, and overall mall attractiveness.
Strengths focuses on ‘internal’ influencing factors which are within the property’s local area. Some ways you might use GIS to identify the mall’s strengths include:
Strengths should also include business aspects related to the mall such as the design of the property, and the property’s operations and management. Perhaps there is a large communal outside area which could be reduced to add parking.
Maybe a parking basement could be built underneath one of the levels. How efficient is the property’s cost management and operations and how might they cope with the extra responsibility of managing the parking? What is the tenant turnover and why?
Keep asking questions until you can’t think of anymore.
Weaknesses also focus on ‘internal’ influencing factors. Similarly to the processes for identifying the strengths using GIS, you may uncover some weaknesses related to the points discussed:
Next, you’ll move on to analyze ‘external’ strengths which we will call opportunities. These are the macro advantages presented by the shopping mall’s location, and the greater retail context.
GIS uncovers several opportunities:
Lastly, you’ll study the negative external influencing factors, called threats. These tend to be linked to the greater macro-economic environment of the city, state, and country, as well as current trends in the retail sector. Some examples of threats might include:
Now that you have a list under each heading, it’s important to decide which factors are critical and which are less so.
Translate the SWOT analysis findings into strategies which address the objective outlined at the start.
With a strategy developed, the next crucial step involves presenting this plan to stakeholders, utilizing GIS-generated visuals and projections to clearly articulate the proposed path forward.
The aim is to secure buy-in by demonstrating the data-driven rationale behind the strategy, emphasizing the expected outcomes and potential ROI.
Break down the strategy into an actionable roadmap with timelines, responsible parties, and key performance indicators (KPIs) clearly defined. This roadmap serves as the blueprint for turning the strategic vision into reality, guiding the CRE team through the execution phase with clarity and purpose.
Recognizing that the retail CRE market is ever evolving, an integral part of this step involves the commitment to regularly review strategy performance, using GIS analytics to monitor progress and make necessary adjustments.
This iterative process ensures that the strategy remains relevant and effective, driving towards the ultimate goal of maximizing retail property value and success.
In our shopping mall example, the SWOT analysis revealed that the mall’s strengths are its prime location near a public transport hub and high foot traffic potential. Weaknesses were identified in the current inadequate parking facilities.
Opportunities emerged from the proximity to affluent suburbs whose residents are willing to travel if parking is accessible. Threats included the possibility of increased traffic congestion and local zoning limitations.
GIS analysis showed an adjacent parcel of land suitable for parking development, easing potential congestion concerns. It also supported demographic data indicating shopping mall visitors are highly likely to come from car-dependent households.
Possible strategies could include:
A SWOT analysis, powered by the precision and depth of GIS, provides CRE professionals with an unparalleled toolset for navigating the complexities of the retail real estate sector. By transforming raw data into strategic insights, CRE brokers can stay agile in a market defined by rapid changes and high competition.
Start integrating GIS into your SWOT evaluations and witness how it revolutionizes your approach to investment and strategy development. Book a demo with the AlphaMap team today.