|Volume 3, Issue 4, 2003||Federal Reserve Bank of Dallas|
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Houston Strikes It Big with DrillDown
Forward-looking cities opting for a "drill down" aren't searching for oil, although they are looking for sources of wealth.
They're utilizing an innovative research method called the Neighborhood Market DrillDown, designed to reveal the hidden economies and true business potential that conventional surveys of inner cities may not find.
The DrillDown was pioneered and developed by Social Compact, a Washington, D.C.-area nonprofit organization. The methodology uses tools to measure the actual—rather than perceived—demographics of inner-city neighborhoods. Now major cities across the nation are successfully using this methodology to develop a more comprehensive approach to attracting retail businesses to urban neighborhoods in need of economic development.
Houston city officials and local business leaders enlisted Social Compact in 2000 to conduct a DrillDown of 58 square miles of inner city, including Gulfgate/Pine Valley, Fifth Ward and Denver Harbor/Port Houston. Washington, D.C., and New York City also have used the DrillDown.
Conventional market studies examine data such as census findings, tax assessor reports, and other measures of wealth and population that have worked well in suburban areas. However, when similar approaches are taken in urban areas, they often fall short in uncovering the true market profile in such fundamental categories as population totals.
For example, multiple families often live in one household in inner cities, and these residents can go uncounted in census reports. Many immigrants are reluctant to respond to government census surveyors, so they become part of an undercounted population.
Additionally, inner-city residents tend to move often and are less likely to have bank accounts, preferring to trade in cash. This leaves the local economy undervalued in traditional studies.
A Neighborhood Market DrillDown penetrates a community's surface, looking for hidden economies and uncounted populations by focusing on three primary market fundamentals:
Researchers pull auto registrations, measure postal activity, examine credit data, and count school enrollment and utility hookups. They uncover economic activity that community leaders see every day but are unable to easily quantify.
"The DrillDown exercise is unique because it blends and overlays many sets of data," says Keith Karem, Social Compact's neighborhood market relationship manager. "Through merging, duplicate and missed data sets are found."
This more accurate reflection of market potential is then presented to large retail companies to demonstrate business opportunities that exist in an area. And the documentation is strong enough to attract household retail names to markets many companies may have had second thoughts about.
Consider the Houston experience: The DrillDown survey found a larger population than census figures had previously indicated (353,882 vs. 282,797), higher home values ($76,300 vs. $54,000), a residential income of $3.4 billion and a $443 million cash economy (see chart).
With these newfound data, Houston developer Ed Wulfe was able to attract large companies like Lowe's, Marshall's, Old Navy and Ross Dress for Less to the redevelopment of 40-year-old Gulfgate Mall.
"I believe that making banking, commercial development and real estate communities aware of the buying power in the areas studied has enlightened investors to the potential existing in these areas," said Robert Litke, Houston's director of planning and development. "For commercial investors, not only is there significant buying power in these neighborhoods, which were once thought to have minimal buying power, but a significant daytime population was also identified."
The mall's occupancy rate is now 96 percent—compared with 40 percent in 1999. Grocery stores, restaurants and other retail outlets continue to move in.
Many would consider breathing life into an urban neighborhood and enriching the lives of its residents far more valuable than hitting a gusher.
For more information, contact Patsy Kallman, City of Houston Planning Department, 713-837-7858, or go to www.houstonplanning.com .
e-Perspectives, Volume 3, Issue 4, 2003