LOYOLA CORNERS RETAIL ANALYSISC I T Y C O U N C I L P R E S E N TAT I O N

M A R C H 2 8 , 2 0 1 7

Los Altos, California

bae urban economics

Purpose of study

Recap: 1990 Loyola Corners Specific Plan goals

Demographic profile

Macro retail trends

Retail potential in Loyola Corners

Loyola Corner SWOT analysis

Retail concepts to consider

Financial feasibility

Recommendations

AGENDA

STUDY PURPOSEThe study will provide data and analysis to answer the following questions:

Retail sectors and types of retailers that are or would be viable at Loyola Corners?

What level of additional development (2 vs 3 stories) is needed to repurpose underperforming properties?

What would be the financial impact to redevelopment feasibility of not requiring parking for first floor retail?

RECAP: 1990 LOYOLA CORNER SPECIFIC PLAN GOALS

Create attractive and functional shopping and commercial use facilities

Maintain the existing small, pedestrian scale of the area

Preserve and protect adjacent residential neighborhoods from traffic, noise, and visual impact

Provide a safe and effective multi-modal circulation and parking system

Encourage a mix of desirable neighborhood-serving commercial uses

DEMOGRAPHIC PROFILE

LOYOLA CORNER MARKET

AREA

Pal·o Alto

,~ E ~ ,~

Los Altos

..

- Woodland Plaza

* Loyola Corners

Competitive Retail Centers

Market Area (3-Minute Drive Time)

D Downtown Los Altos

Sunnyvale ~ I Remington -g

~ 0 I

tevens Creek

POPULATION – MARKET AREA

+1,900 residents+800 households

2010 to 2016RecentGrowth

+1,700 residents+660 households

By 2021Forecast

29,300 residents11,000 households

2016 Today

+2,700 residents+1,400 households

2000-2016Growth

0 t '

0

tr

KEY DEMOGRAPHIC DATALoyola Corners serves a community of families:

78% 71%

Loyola Corners Santa Clara County

% Family Households

39% 38%

% Households with Children under the age of 18

Loyola Corners Santa Clara County

INCOME2016 estimated household income in Loyola Corner’s market area is significantly higher than the County average:

Loyola Corners $178,000

Santa Clara County

$99,200Loyola Corners has strong demographics to support retail

LOYOLA CORNER’S RETAIL SECTOR

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Dublin

MARKET AREA COMPETITION

Livermore

Pleasanton

San Ramon

Walnut Creek

Pal'o Alto

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• Rancho

Shopping Center I~

Los Altos

* Loyola Corners

Competitive Retail Centers

Market Area (3-M inute Drive Time)

Downtown Los Altos

- Woodland Plaza

,....

Sunnyvale ~ 1 Remington -§

_g, 0 :r:

tevens Crekk

MACRO RETAIL TRENDSUrbane suburbs

Commodity versus specialty retail

Lifestyle and hybrid centers

Omnichannel retail

Ground floor retail challenges

These trends influence the degree to which Loyola Corners can ultimately enhance its retail sector

Neighborhood centers in the market area are commodity centers

RETAIL SALES – CITY LAGS COUNTY

$39.4 million in lost retail sales and $394,000 in retail sales tax revenue lost since 2009 Note: 2016 dollars

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

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Los Altos Santa Clara County- .......

RETAIL SALES BY DISTRICT

Downtown has seen an overall increase in nominal taxable retail sales while El Camino Real has been declining-to-flat

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

Taxa

ble

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es in

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0s

Downtown LosAltos

El Camino &Nearby

--

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RETAIL SALES BY DISTRICT

Loyola Corners has seen a decrease in nominal taxable sales overall in contrast to some other districts in Los Altos

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$5,000

$10,000

$15,000

$20,000

$25,000

Taxa

ble

Sal

es in

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Loyola Corners

RanchoShopping Center

Foothill Plaza

Woodland Plaza

Village Court

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RETAIL POTENTIAL

SMALL PARCELS AND

FRACTURED OWNERSHIP

PARCEL AND BUILDING INVENTORY

• 26 commercial buildings in Loyola Corners

• Primarily one-story structures built between 1940s and 1960s (70% of total)

• Undistinguished and eclectic architectural mix

• ‘Sea of asphalt’ feeling

• No landscaping

• Average building/shop size only 3,000 square feet

• Many buildings too small for regional or national credit retailers

WEAKNESS• Older building stock w/unremarkable

architecture• Fragmented parcels and ownership• No landscaping and ‘sea of asphalt’

parking

STRENGTH• Strong market support for

neighborhood retail• High household incomes • Unique history• Good location w/access to

residential neighborhoods

Opportunities• Older, functionally obsolete existing

buildings = low cost basis for redevelopment

• High residential values can support mixed use development

• Encourage parcel consolidation and new public amenities w/bonus density

Threats• Retail sector quickly evolving• Long term retail consolidation

a constraint on space demand• Risk of further economic

decline w/out redevelopment

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RETAIL CONCEPTS TO CONSIDER• Loyola Corners as a ‘Neighborhood Village,’ ‘Commons,’ or

‘Third Place’

• Loyola Corners is presently one of several ‘commodity’ neighborhood-serving retail centers in Los Altos

• Consider re-positioning Loyola Corners to differentiate it from other traditional neighborhood centers –and downtown– by offering unique setting and public amenities

• BAE has identified a number of ideas and concepts that Los Altos could consider

CONCEPTS FOR LOYOLA CORNERS

Park Valencia @Santana Row, San Jose CA

Mojo Bicycle Café, San Francisco CA Westbrae Biergarten, Berkeley CA

Rockridge Market Hall, Oakland CA

Farmer’s Market @Marin County Mart,Larkspur CA

Planting Beds @The Willows ShoppingCenter, Concord CA

FINANCIAL FEASIBILITY

ECONOMICS OF REPURPOSING LOYOLA CORNERS

• A project ‘pencils out’

• Revenues exceed expenses

• A market rate of return on investment

What is development feasibility?

• Permitted use

• Land cost

• Hard and soft costs

• Interest rates

Key factors

• Sales price per sq. ft.

• Rental rates

• Capitalization rates

THREE SCENARIOS TESTED

Prototypical Project• 979, 987 & 991 Fremont

• .67 acre

• 10,700 sq. ft. existing improvements

Scenario #1

10,000 SF replacement retail

14 residential condominiums

2 stories

Scenario #2

5,000 SF Reduced retail

14 residential condominiums

2 stories

Scenario #3

10,000 SF Replacement retail

24 residential condominiums

3 stories

FINANCIAL RESULTS

Scenario #1

Revenue does not cover

development costs

Feasibility gap: -$3.4 million

Scenario #2

No developer return

Feasibility gap: -$2.0 million

Not feasible

Scenario #3

Revenues cover development costs

Residual value:+1.1 milion

Feasible

PRO FORMA OBSERVATIONS

Adding a 3rd story results in financial feasibility

In all three scenarios, the retail component of the project does not pencil out –rents are too low to justify replacement

Reducing parking requirements, helps, but does not solve this problem

RECOMMENDATIONS

RECOMMENDATIONS

#1: Explore methods to incentivize parcel aggregation w/density bonus

#2: Adopt specific and prescriptive Loyola Corners Design Standards

#3: Identify and amend zoning and development standards to allow for non-traditional retail concepts

#4: Expand the amount of residential permitted within the plan area

#5: Consider vacating B Street to encourage development of a public space or amenity

#6: Revise allocation of service retail for second floor location

#7: Provide flexibility to height limits to encourage improvements

BAE formulated a number of recommendations for consideration:

THANK YOU

QUESTIONS?