Attachment E: Markey Analysis
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ATTACHMENT E MEMORANDUM ADVISORS IN: Real Estate To: Ken Lee, Vice President, Development Affordable Housing Economic Development Pacific Plaza Premier Development Group BERKELEY A. Jerry Keyser Timothy C. Kelly From: Kevin Engstrom Debbie M. Kern David Doezema Courtney Holt Kevin Feeney LOS ANGELES Date: January 06, 2020 Kathleen H. Head James A. Rabe Gregory D. Soo-Hoo Kevin E. Engstrom Subject: Market and Economic Benefits Analysis for the Pacific Square Project in Julie L. Romey the City of San Gabriel Tim R. Bretz SAN DIEGO Paul C. Marra Pursuant to your request, Keyser Marston Associates, Inc. (KMA) prepared a market and economic benefits analysis for the proposed Pacific Square mixed-use development (Project) located on the 700-800 block in the City of San Gabriel (City). As part of this analysis, KMA first evaluated the key socio-economic and employment characteristics of the 1-mile, 3-mile, and 5- mile radius surrounding the site (Market Area) as compared with the City and County. KMA then analyzed the area’s underlying retail and residential real estate market conditions, including both existing and projected market factors, in order to estimate potential demand for the Project. Utilizing information submitted by the Developer, KMA then estimated the fiscal and economic benefits generated by the Project over a 20 year period. The data and findings from this analysis are presented in the following memorandum. 500 SOUTH GRAND AVENUE, SUITE 1480 LOS ANGELES, CALIFORNIA 90071 PHONE 213.622.8095 WWW.KEYSERMARSTON.COM Market Analysis – San Gabriel Blvd Mixed Use Market Analysis | 1 Keyser Marston Associates, Inc. | October 2019 SUMMARY OF FINDINGS KMA conducted a market analysis for the 1-mile, 3-mile and 5-mile Market Area surrounding the Site, along with an economic benefits analysis of the proposed Project. The key findings of this analysis are summarized below: 1. Overall, market conditions in the City are strong for residential development, including both for- sale and rental product types. In particular, demand for condominiums has grown in recent years with the price per square foot having increased 47% since 2013. Population growth projections indicate 3-mile market support for nearly 6,000 residential units through 2034. 2. Market demand for new retail development is also robust, and a surplus-leakage analysis reveals potential unmet demand for over 200,000 square feet of retail in the 1-mile Market Area, and 1.9 million square feet in the 3-mile Market Area. 3. Retail lease rates along San Gabriel Blvd are relatively high at $2.23 when compared with the rest of the San Gabriel submarket; however, retail conditions on the Boulevard are challenging as nearby retail corridors like Valley Blvd. and E. Las Tunas Drive will continue to capture a large share of patrons and traffic in the City. 4. Based on a review of information provided by the developer and our experience with similar developments, KMA estimates the Project will generate $3.45 million in property tax revenue to the City over 20 years. 5. Based on submitted plans and proposed tenancies, the Project would generate approximately $11.1 million in taxable sales in the first year. Over a 20 year period, the Project is expected to generate $2.99 million in sales tax revenue to the City. 6. As summarized in the table below, over a 20-year period of operations, the Project is projected to generate $6.44 million in general fund revenues in the form of property tax and sales tax revenues. Total City General Fund Revenues Year 1 20 Years Property Tax $143,000 $3,453,500 Sales Tax $111,000 $2,986,300 Total $254,000 $6,439,800 Market Analysis – San Gabriel Blvd Mixed Use Market Analysis | 2 Keyser Marston Associates, Inc. | October 2019 7. In addition, new residents in the Project are projected to generate $43,000 in sales tax within the City annually. 8. Direct, indirect and induced employment generated by the Project will result in 218 permanent jobs, including 144 on-site jobs. 9. During construction, the direct, indirect and induced impact of Project will generate nearly 1,200 temporary jobs throughout the County. I. MARKET CONDITIONS & DEMAND ANALYSIS EXECUTIVE SUMMARY Socio Economic Characteristics The Market Area has a healthy population density and relatively large household sizes; however, the population is projected to grow at a slower pace when compared with Citywide projections. Median household incomes and per capita incomes are generally on par with Citywide levels, but the immediate 1-mile Market Area reveals slightly lower income levels when compared to both the City and County. When compared to the County median age of 36 years, the median age of both Market Area and City residents skews older at 41 years and 42 years, respectively. Employment and Businesses Employment growth in the City of San Gabriel is not expected to keep pace with employment growth in the rest of the County through 2040; however, the Market Area’s most dominant industries, including Retail and Wholesale Trade, Educational Services, Healthcare, and Accommodation and Food Services, are all projected to experience strong rates of employment growth Countywide through at least 2024. Overall, industry employment concentrations in the Market Area reflect City-wide employment concentration patterns. Market Analysis – San Gabriel Blvd Mixed Use Market Analysis | 3 Keyser Marston Associates, Inc. | October 2019 Retail Market A surplus leakage analysis conducted for the Market Area indicates potential market support for approximately 228,847 square feet of additional retail space in the immediate 1-mile Market Area, and over 1.9 million square feet of demand in the 3-mile Market Area. General Merchandise Stores account for almost half of the unmet demand in the 3-mile Market Area (totaling almost 750,000 square feet). Average asking lease rates in the Market Area of $2.23 per square foot per month exceed average rates in the San Gabriel Valley submarket of $1.80 per square foot, and healthy population densities and household growth trends indicate future support for additional retail. Area brokers cited several potential barriers to retail demand along San Gabriel Blvd., including an overall lack of pedestrian and streetscape amenities, and the dominance of competing retail corridors like Valley Blvd. and E. Las Tunas Drive which continue to attract the bulk of visitors and traffic in the City. Residential Market Market Area vacancy rates are very low at 3.1% and rents have grown steadily at an average of 4.0% year over year; however, asking rental rates remain lower than average rents Countywide. Healthy population growth, combined with low vacancy rates, will likely continue to drive demand for residential development within the Market Area. Ownership housing continues to experience strong price growth in the Market Area, where townhome and condominium prices have risen substantially since 2013. During this time period, the price per square foot grew 47% for condominiums and 23% for townhomes. Population growth projections indicate 3-mile market support for nearly 6,000 residential units through 2034. Market Analysis – San Gabriel Blvd Mixed Use Market Analysis | 4 Keyser Marston Associates, Inc. | October 2019 A. SOCIO-ECONOMIC CHARACTERISTICS KMA evaluated the socio-economic characteristics of the 1-mile, 3-mile, and 5-mile radius surrounding the project site (“Market Area”) and compared this with the characteristics of the City and County.1 A summary of findings is below: o Between 2019 and 2024 the population of the Market Area is expected to grow at a slightly slower pace than the rest of the City; however, household sizes in the Market Area are comparable to household sizes Citywide. o Population densities in the Market Area are relatively healthy. o Households in the 1-mile Market Area are much larger than typical for the County at approximately 3.20 persons per household compared to 3.00 persons in the County. o Per capita income levels in the Market Area (ranging from $25,000 to $32,000) are comparable to income levels in the City ($27,500) and the County ($32,000). o Commensurate with per capita income levels, household income levels are generally on par with income levels in the City. Approximately 30% of both Market Area and Citywide households earn at least $100,000 per year, compared to 33% in County. However, residents within the immediate 1-mile Market Area have slightly lower per capita and household incomes when compared to the greater Market Area, the City, and the County. o Approximately 18% of households in the Market Area have an annual income lower than $25,000, compared to 16% in the City and 19% in the County. o Market Area residents have, on average, a comparable educational attainment level to residents in the City and County; approximately 33% of Market Area, City and County residents have obtained a college degree. o The median age of Market Area residents, 41.1 years, is similar to the City median age of 42 years, but skews older than the County median age of 36 years. Approximately 31% of Market Area residents are 55 years or older (Table) 1 ESRI (2019). ACS Population Summary and Community Profile. Retrieved July 2019 from the Business Analyst Online database. Market Analysis – San Gabriel Blvd Mixed Use Market Analysis | 5 Keyser Marston Associates, Inc. | October 2019 Table 1.1 Population & Households: 2019 - 2024 % Change 2019 2024 2019-2024 1-Mile Ring Population 32,761 33,186 1.30% Households 10,144 10,225 0.80% 3-Mile Ring Population 280,839