Despite a weak national economy and slow population growth, some markets within the United States are experiencing healthy growth and offering expansion opportunities for retail businesses. But identifying these locations can be tricky.

In challenging times, pinpointing markets with growth potential calls for more than just calculating new housing stats. Using a statistical technique that evaluates population growth along with historic trends, Nielsen Claritas analysts have isolated seven demographic and economic indicators that strongly correlate to growing markets in both metropolitan and micropolitan communities, or what is known as Core Based Statistical Areas (CBSA). Metropolitan areas have a population of at least 50,000; micropolitan areas have a population between 10,000 and 50,000.

Known collectively as Population Growth Indicators, the seven signs of a fast-growing market are: large land areas; booming suburban rings; widespread affluence; an increasing Hispanic population; diversified employment; long commutes; and the presence of lifestyle shopping centers.

When the Population Growth Indicators are combined with demographic projections, retailers have a robust tool to identify locations with significant potential for market expansion -- markets that may even lead the way to an economic recovery in the coming years. Now more than ever, retail success depends on the ability to identify growing markets.

1. Space to Grow: Larger Land Areas
Bigger is better when it comes to population growth. According to the Nielsen Claritas analysis, markets with larger land areas tended to grow the most over the last eight years. The 25 largest markets rose by an average 10.8 percent, which is 23 percent higher than the national average. Retailers should not underestimate the importance of large markets. Businesses that serve the nation's 10 largest markets reach more than 80 million Americans -- 28 percent of the nation's total population.

2. Booming Suburban Rings: Affluentials and Middleburbs Households
Development in large areas goes hand in hand with the lifestyles that emerge within these fast-growing communities. Nielsen Claritas found two dominant suburban social groups in these expanding areas: the Affluentials (characterized by upscale, outer-ring suburbs filled with white-collar couples and families) and the Middleburbs (midscale couples of diverse ages and educations in inner-ring suburban neighborhoods).

Nationwide, the markets with the most Affluentials and Middleburbs residents tend to be large metros -- cities like Portland, Ore.; Minneapolis, Minn.; and Seattle, Wash. Generally speaking, the growth in many of these areas resembles a doughnut, with the fast-growing suburban areas forming a ring around the metropolitan core. While social commentators like to celebrate the return of the nation's downtowns, the real action is still occurring in America's suburban frontier, propelled by several population torrents: active seniors looking for attractive retirement communities; young singles seeking affordable town houses; and immigrants looking to settle in suburban neighborhoods near good schools and steady employment. Indeed, many fast-growing "cities" of the early 21st century -- Los Angeles, Calif; Atlanta, Ga.; Houston and Dallas, Texas -- are primarily collections of suburbs with only marginal links to an urban core.

3. Widespread Affluence: Following the Money
For most of the last century, wealthy Americans have settled in the upscale suburbs of large metros. In examining the data further, analysts found several factors related to high net worth that correlate with high-growth communities: college educations, upper middle-class incomes and healthy home values.

The full list of affluent, growing markets shows a decidedly Western skew, partly reflecting the migration of knowledge workers from manufacturing centers of the Northeast to the high-tech job centers in the Western states.

4. Increasing Ethnicity: Growing Hispanic Population
Immigration drives the nation's population growth, and no group has provided more of a boost than Hispanics. In 1990, the Hispanic population in the United States was 7.9 percent; today, it is nearly 16 percent and rising. According to a recent Goldman Sachs study, this market is growing three times faster than the U.S. population in general. Demographers at the Pew Research Center predict that by 2050, the United States will be a "minority majority" nation, with Hispanics making up 29 percent of the total population.

The shift has already occurred in traditional gateway cities like Los Angeles, border towns and booming coastal metros with exploding population growth. While New York and Chicago served as magnets for newcomers at the turn of the 20th century, today, immigrants from Latin America and Asia typically head to Los Angeles, San Francisco and Miami. They settle in these places for the same reasons earlier waves of Europeans came to the United States -- friends and family members had already settled there and formed self-sustaining ethnic communities. This is particularly true of less-skilled immigrants who rely on kinship and informal networks to land jobs. They're also attracted to areas with climates conducive to varied recreational activities and low costs of living. Not surprisingly, those markets with the highest proportion of Hispanics tend to be along or near the Mexican border.

5. Diversified Employment: Construction, Retail and Business Services
One of the tried-and-true economic axioms is that "people follow jobs and retailers follow people." However, Nielsen Claritas research shows that people don't follow all jobs equally. In fact, over the last eight years, the places most likely to experience population growth had an abundance of jobs in two industries -- construction and retail -- as well as diversified employment opportunities in businesses ranging from finance and credit to engineering and recreation. Many resort and retirement cities attracted construction and retail workers as aging boomers and young families alike streamed into these areas looking for affordable housing and a relaxed lifestyle. Retailers followed the increased population, providing products and services for the expanding consumer market.

The fastest-growing markets also have something else in common: solidly diversified economies. Analysts found a strong correlation between growing communities and a white collar workforce involved in business services, finance, engineering and management services, as well as amusements and recreation. Viable opportunities in business services, management and engineering create vibrant economies nourished by an educated, well-paid workforce. Successful economies also seem to promote a leisure-intensive lifestyle, as many fast-growing communities feature a significant number of jobs involved in gambling, recreation, hotels, theme parks and cultural venues. Among the hot spots experiencing strong construction starts, a growing retail environment and a diversified employment base are resort communities such as Jackson, Wyo.; Key West, Fla., and Hilton Head Island, S.C.

But an over-reliance on construction and finance jobs can have a downside risk. Both industries have been hurt by the housing crisis and credit crunch. As construction jobs grow scarce during a protracted downturn in the housing industry, workers leave town. In markets that relied too heavily on construction -- such as Las Vegas, Nev.; Phoenix, Ariz., and Naples, Fla. -- analysts expect to see a marked slowdown in population growth and a rise in housing foreclosures.

6. Long Commutes: A Price of Growth
Infrastructure is also important in growing communities. Fast growth correlates with significant numbers of air transport jobs, workers with home offices and, unfortunately, long commutes. Obviously, thriving communities need good airport connections to accommodate business and vacation travelers, as well as high-speed Internet access so workers can connect to employers from home offices. Fast-growing communities also tend to saddle workers with long commute times, typically much longer than the national average of 25 minutes. The long commute likely reflects many workers living in the more affordable suburban fringes of metro areas.

7. High-End Shopping Centers: Lifestyle Centers
One unexpected result of the boom in affluent commuter suburbs is the emergence of high-end, outdoor shopping centers known as "lifestyle centers." Unlike the massive, windowless suburban malls anchored by a department store, these centers resemble quaint villages filled with high-end retailers like Talbots, Coach, Chico's, Banana Republic and Starbucks. And they're designed for upscale suburban professionals who want the convenience of driving up to the shops' front doors.

At a time when mall expansion is declining, lifestyle centers are growing at a rate of several dozen annually. Today, there are more than 400 of these tabernacles of consumerism, with their narrow pedestrian streets and little plazas. And they're sprouting up in growing mid-sized metros and college towns like Yakima, Wash.; Ann Arbor, Mich.; and Bend, Ore. Because lifestyle centers require a relatively large population base to thrive, developers have yet to build any in Micro Towns ("C" Markets). However, their presence in larger markets reflects the need to create new shopping experiences for consumers bored with traditional malls. Growing markets provide residents with new retail experiences at places like lifestyle shopping centers.


Download a copy of the full Nielsen Claritas report Finding Growth in Challenging Times
By: Terry Muñoz, VP & Industry Practice Leader, Retail, Restaurant and Real Estate Group, Nielsen Claritas, and Mike Mancini, VP Data Product Management, Nielsen Claritas.

Published in part from Nielsen Consumer Insight, December 2008