Retail CRE Debate: Dwell Time vs Foot Traffic

The debate between dwell time and foot traffic in retail CRE is a fascinating one, and both metrics have their merits depending on the strategy and goals of the development. Based on the most helpful WSO content, here are some insights:

1. Dwell Time's Growing Importance:

   • Retail is increasingly shifting towards an experiential model. Shoppers now demand more than just a transactional experience—they want inspiring environments with thoughtful landscaping, design, and amenities. This aligns with the idea that longer dwell times, supported by restaurants, entertainment, and "3rd places," can lead to increased sales as customers explore more stores and make unplanned purchases.
   • Experiential retail is thriving because it differentiates itself from online shopping. People visit these spaces not just to shop but to socialize, dine, and enjoy the ambiance, which encourages them to stay longer and spend more.

2. Foot Traffic's Traditional Value:

   • Foot traffic has historically been a key metric for retail success, as it directly correlates with the number of potential customers entering stores. High foot traffic is particularly critical for tenants like big-box retailers or grocery stores, where volume is essential.
   • However, foot traffic alone doesn't guarantee sales. If visitors aren't engaged or don't find the environment appealing, they may leave without making purchases.

3. Balancing Both Metrics:

   • The most successful retail developments often strike a balance. For example, creating a destination with a mix of anchor tenants, boutique shops, and chef-driven dining experiences can drive both foot traffic and dwell time. Lower initial rents for startups or unique tenants can also help establish a vibrant community feel, encouraging repeat visits and longer stays.
   • Placemaking is key. As noted in WSO threads, retail spaces that foster a sense of place—through design, art, and landscaping—can attract both high foot traffic and longer dwell times, ultimately boosting sales and tenant satisfaction.

4. Capital Allocation Considerations:

   • The argument against investing in dwell time (e.g., creating spaces where people sit without buying) is valid in certain contexts. However, the broader trend suggests that these investments often pay off indirectly by enhancing the overall appeal of the center, increasing tenant sales, and driving higher rents over time.

In conclusion, while foot traffic remains a critical metric, the shift towards experiential retail and placemaking highlights the growing importance of dwell time. The best approach depends on the specific goals of the development, tenant mix, and target demographic.

Sources: Hump Day Pause | The Daily Peel | 10/6/22, Retail Tea Leaves Reveal a Mixed Bag | The Daily Peel | 11/17/22, Retail IS/Acquisitions: What should you know?, Basic Overview of the Consumer Sector, Value creation in different RE property types