Attachment 16
Evaluation of the Potential for International-Serving Retail in Millbrae DRAFT
July 30, 2014
Prepared for: City of Millbrae Table of Contents Introduction ...... 1 Summary of Findings ...... 1 Sources of Potential Retail Demand ...... 2 Airport-Generated Demand ...... 2 Local and Regional Retail Demand ...... 4 Premium Outlet Center Niche ...... 4 Case Studies – New Airport-Oriented Premium Outlet Centers ...... 8 Fashion Outlets of Chicago ...... 8 McArthurGlen Designer Outlet Centre Vancouver International Airport ...... 9 Implications for Development in the Plan Area ...... 9 Opportunities ...... 9 Constraints ...... 10
Evaluation of the Potential for International-Serving Retail i
INTRODUCTION This study was commissioned to assist the City of Millbrae in assessing the potential to capture additional sales tax revenues through retail development targeting international travelers in the Millbrae Station Area Specific Plan Area (Plan Area). The initial market overview prepared by Strategic Economics for the planning effort found that there is limited demand for traditional regional-serving retail in Millbrae. The City requested further research to assess the potential to attract luxury retail development that would take advantage of Millbrae’s proximity to the San Francisco International Airport and capture spending by international travelers. In order to answer this question, we evaluated the estimated growth in international travelers to SFO, particularly from Asian travelers, and the potential to capture sales by airport visitors. We also investigated potential retail niches that would attract spending by international shoppers, including interviews with local and national retail experts.
This report is organized into the following main sections: Summary of Findings Potential Sources of Retail Demand Premium Outlet Retail Concept Case Studies of Airport-Oriented Premium Outlet Centers Implications for Development in the Plan Area
SUMMARY OF FINDINGS Following are key findings from our analysis of the potential for international-serving retail in the Plan Area: The Plan Area benefits from outstanding access to public and private transportation, and is immediately adjacent to the San Francisco International Airport (SFO). The airport is the seventh largest in the U.S., and attracts large numbers of domestic and international visitors. Chinese travelers make up the largest and growing number of overseas visitors, and compared to other visitors are the highest spenders per trip, by a large margin. While substantial growth in international travel is forecast for SFO, airport passenger spending alone is not likely to be sufficient to support a retail hub large enough to attract the critical mass of stores necessary for a retail hub to be successful. As a result, retail development will need to draw from other sources of regional and local demand. One retail concept was identified that appears to serve both markets. A premium outlet center is likely to be supportable in the market area and would attract local, regional and international retail demand. There is no competition for this use in the inner Bay Area, this segment of retailing is in a growth mode, and international travelers are found to be strong supporters of the luxury- oriented outlet centers. Preliminary discussions with two large premium outlet center developers suggest strong interest in the immediate area near SFO for such a center. In general, premium outlet centers locate on sites of between 30 and 40 acres, and are comprised of one-story buildings and surface parking. A denser, more urban project was opened in the summer of 2013 on a 14-acre site near the O’Hare Airport in Chicago. However, to attract the developer, the City provided a financial incentive package to offset the costs of building a higher density project, including the higher cost of structured parking.
Evaluation of the Potential for International-Serving Retail 1