Evidence continues to come in showing that the economy is slowly rebounding to its pre-pandemic state. The most recent case in point is retail, where sales per square foot have surpassed pre-pandemic levels for most categories.
Data compiled by Datex Property Solutions and reported by the International Council of Shopping Centers (ICSC) shows that in-store retail sales per square foot have reached record levels across most categories of retail.
According to the report, during the 12-month period ending March 2022, sales in the following categories have surpassed the levels seen in 2019:
- Apparel
- Beauty supplies
- Fast food
- Home goods
- Pet supplies
- Restaurant
- Salon
- Specialty food
- Shoes
- Specialty restaurant
- Sporting goods
However, there are seven categories where sales are still below their pre-pandemic levels, namely:
- Fitness
- Hair
- Movie theater
- Services
- Department store
- Dollar store
- Craft
What Is Sales per Square Foot?
As the name suggests, the term “sales per square foot” refers to the average revenue (expressed in dollars) generated by a store for every square foot of space.
To calculate the value of sales per square foot, companies divide the total revenue a store generates over a set period of time by the total footage of space available.
For example, if a store with 6,000 feet of sales area sells $2 million over a year, its sales per square foot would be $333.3
It’s worth noting that in calculating sales per square foot you must also include non-selling space such as service rooms and stock rooms.
Sales per square foot is important because it’s considered by many the gold standard when it comes to gauging the performance of a store.
Sales per Square Foot and Commercial Real Estate
While sales per square foot is commonly used by companies to measure the success of a location, this number also has considerable impact on commercial real estate.
For example, as the value of sales per square foot of a store increases, the overall occupancy cost declines. When occupancy cost drops below a certain threshold, this is an indicator that the location is enjoying such success that it can afford a higher rent.
The upward trend in sales per square foot, combined with other factors such as scarcity of space and increased leasing activity in primary shopping corridors across the U.S. is giving retail landlords pricing power for the first time in years.
Disclaimer: This material is for general information and educational purposes only. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
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