Admittedly, population metrics aren’t the most fascinating topics of conversation. But they are important. Understanding an area’s population size is key when it comes to everything from public policy to real estate value. How you define geographies is also crucial, two very different areas could actually be the same, that’s because the way we usually calculate population is wrong. It’s crucial for the real estate industry to understand this, because a large part of the value of a property depends on how many people are close enough to use it.
Many of us understand population density as the average number of people in a given square mile. It’s an easy concept to understand and even easier to calculate. Take the total population of a municipality and divide that number by the total land area, and boom, you have the magic number. But this oversimplified approach paints a terribly inaccurate picture.
Population as a flat number only tells you how many people there are, it doesn’t look at those people in relation to the area they live in, and doesn’t provide any data about the area itself. To understand whether or not you are looking at the population of a compact city and a scattered city, the actual metric you should be looking at is the population densitywhich can be determined with the formula Dp=N/AWhere [Density of Population] equals [the total number of people] divided by [the land area covered by that number of people].
Yet understanding population density doesn’t give the full scope either. Often, population density only examines residential or “night” areas. population density, where people have their permanent residences (thus where they sleep at night). But residential populations are not and should not be used as the sole indicator of a shopping area’s consumer base and business potential. The real number that city planners are looking at, and commercial real estate professionals should be looking at, is daytime population density.
suburban science
Daytime population, also known as “travel-adjusted population,” indicates the number of people present in a given area during normal business hours. City planners frequently use daytime population to assess urban vitality because cities fill with people during the working day. Real estate investors can follow suit to examine an area’s true market to draw better conclusions about the area’s potential.
Daytime population “tells us a lot about where jobs are located and about communities that do little more than give people a place to sleep,” said Bloomberg City Lab writer Emily Badger. But the daytime population tells us more than about people’s place of work, it also concerns people in hospitals or other medical institutions, children and university students in their respective schools, people visiting hotels and customers. Retail. Tracking human mobility throughout the day not only illustrates where people are going, but when people go to certain places.
Before the pandemic, during a typical workday, suburbs emptied out and cities grew bigger. Some cities where residents would usually work in their same zip code, such as Manhattan or Houston, see their populations almost double population size, as crowds of commuters would come for their day’s work. Now, we can’t apply the same paradigm to what’s happening to people in our cities today, where many still don’t get to work.
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Economic development analyst Chris Worley, during a recent webinar sponsored by the US Census Bureau, explained the impact of remote work on employment centers. He cited downtown Pittsburgh which has many workers but few residents. According to Worley, remote work was responsible for 90% of the change in daytime population in May 2021 from pre-pandemic levels. If workers continue to stay away from the city center, that could mean a loss of 17,000 people, he said.
So if hybrid and remote working is here to stay, what will it take to bring people back to places like Manhattan, Houston or Pittsburgh? Will events, conventions and travel help attract people to city centers? And how will commercial real estate be impacted? A change in the demand for urban office space would affect commercial real estate values for years to come. This scenario presents a challenge, and an opportunity for some investors, in converting office space to other uses.
Practical applications
Data regarding the expansion and contraction of the daytime (commuter) population relative to the nighttime (residential) population is “important for many planning purposes, including those dealing with transportation, land use, disaster and relief planning and operations,” according to the U.S. Census. . The same reasons why daytime population is useful to city planners also apply to the real estate industry.
Commercial real estate is the most obvious beneficiary of a more accurate understanding of population, the more people there are in an area, the more potential they have to purchase products sold in any location. But not all consumption takes place at the same time of the day. Some retailers, like big box stores, do a lot of their business during working hours, but others, like restaurants, see most of their sales coming in later in the day. It doesn’t make sense for both types of commercial tenants to view population in the same way.
The office and multi-family sectors also have to learn from a more nuanced understanding of population. Knowing where people live in relation to their place of work is crucial to deciphering the changes that the pandemic has brought about in the way we work.
Daytime population can also provide meaningful context to raw crime data. Risk Terrain Modeling (RTM) is a data analysis tool that is used to study how the built environment influences criminal behavior. Risk terrain modeling focuses on the spatial and situational contexts of crime to help inform investors of potentially dangerous areas of the city.
Diurnal population is so important to consider in the site selection process that ignoring it can be a painful blunder, ultimately a waste of time and money. Locations are dynamic, so not looking at an area’s demographic trends will paint an incomplete picture or, worse, an incomplete labor market analysis. The market for a property in a given location is affected by several factors, and demographics can provide a valuable clue. Knowing how and where people move throughout the day, even if it’s not the most exciting topic of conversation, is crucial to understanding a property’s potential value.
