I. Project Introduction and Purpose ...... 1 II. Existing Conditions ...... 2 Site Suitability Analysis ...... 2 Site Access ...... 2 Visibility and Frontage ...... 2 View Potential ...... 2 Site Configuration ...... 2 Photo Report ...... 3 Local and Regional Access ...... 4 Regional Access ...... 4 Local Access ...... 5 Proximity to Regional Employment Centers ...... 6 Catalytic Development Opportunities ...... 7 Ilani Casino ...... 7 Exit 16 Interchange and Utilities Project ...... 7 Site Conclusions ...... 8 III. Socioeconomic Trends and Conditions ...... 9 Employment Conditions ...... 9 Employed Level ...... 9 Employment Sectors Driving Growth in the Economy ...... 10 Unemployment Rate ...... 11 Washington Employment Security Economic Outlook ...... 11 Population, Housing, and Income ...... 12 Population Growth ...... 12 Migration ...... 13 Household Growth ...... 14 Household Income ...... 14 Tourism Activity ...... 15 Socioeconomic Trends Conclusion ...... 16 IV. Comparative Assessment—Freeway Interchanges ...... 18 Milepost 14—Ridgefield, Washington ...... 19 Milepost 21—Woodland, Washington ...... 20 Milepost 72—Napevine, Washington ...... 21 Milepost 79—Chehalis, Washington ...... 22 Milepost 118—DuPont, Washington ...... 23 Milepost 206—Smokey Point, Washington ...... 24 Freeway Service Retail (Ridgefield, Woodland, Napavine) ...... 25 Large Format Retail/Power Center Retail (Chehalis, Marysville) ...... 25 Town Center Development (DuPont) ...... 25

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V. Comparative Assessment—Casino Subareas ...... 26 Silver Reef Casino—Ferndale, Washington ...... 27 Skagit Valley Casino—Bow, Washington ...... 28 Tulalip Resort Casino—Marysville, Washington ...... 29 Snoqualmie Casino—Snoqualmie, Washington ...... 30 Hard Rock Casino—Airway Heights, Washington ...... 31 Comparative Assessment Conclusions ...... 32 VI. Commercial Market Analysis ...... 33 Delineation of a Commercial Trade Area ...... 33 Demographic Profile of the Trade Area ...... 34 Potential Retail Sales Support ...... 35 Commercial Retail Needs Analysis ...... 36 Resident Households ...... 37 Freeway Traffic ...... 38 Daytime Employment ...... 38 Dedicated Tourism Driven from Casino Activity ...... 38 VII. Conclusions and Recommendations ...... 40

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I. PROJECT INTRODUCTION AND PURPOSE

The City of La Center is currently developing a subarea plan for the property in adjacency to the new La Center Road interchange on Interstate 5 at Exit 16. The $370+ million project is being constructed concurrent with the development of the Ilani Casino, a 368,000-square-foot gaming and entertainment complex located on the Cowlitz Indian Reservation. The Ilani Casino is anticipated to be a regional tourism anchor. The subarea plan will inform development planning in anticipation of new economic activity associated with a monumental shift in commerce driven by the regional tourism anchor. Development interest in the subarea has already begun to mount, and the city has established a moratorium on development to allow for a thoughtful and prudent planning and land use response to this new economic landscape. As an element of this subarea plan, the City has retained Mackenzie to develop a market analysis of potential market-driven uses opportunities for strategic development sites in the subarea This analysis will be followed by a conceptual development plan and identification of physical and regulatory constraints. The Mackenzie analysis of the La Center Road Subarea (“The Subarea”) builds upon a recently completed study commissioned by the Columbia River Economic Development Council (CREDC). That effort was a comprehensive 10-month-long process to inventory and assess large employment lands in Clark County.

The study area for this analysis includes roughly 109 acres of gross land located east of Interstate 5 (represented by the “North Site” and “South Site” in Figure 1). All the properties in the study have been annexed by the City of La Center. An additional 83 acres is also included in the broader subarea study (noted as “Site 3” in Figure 1). Site 3 was studied at length in the 2016 CREDC analysis.

Figure 1: Project Study Area

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II. EXISTING CONDITIONS

The physical and locational characteristics of the subject subarea (“The Subarea”) are evaluated to determine the attractiveness of the site to accommodate a range of prospective development forms.

Site Suitability Analysis

Site Access

Local and regional accessibility to/from The Subarea appears to be strong. La Center Road is the primary arterial linking Downtown La Center to the site and The Subarea has direct frontage and access on this corridor.

Visibility and Frontage

The site will have over 1,500 linear feet of frontage along NW La Center Road. The majority of The Subarea will have strong visibility from Interstate 5 in both northbound and southbound directions. While the grade of southbound lanes on I-5 are slightly elevated relative to northbound lanes (offering an improved visibility perspective), existing vegetation on the northern edge of the property limits southbound visibility in advance Exit 16.

View Potential

The northern portion of the study area has strong opportunities to capitalize on view corridors. Territorial views to the north and northeast exist and also include a crest view of Mount Saint Helens. Views across Interstate 5 overlooking the Ilani casino will also persist.

Site Configuration

The site is fairly regular in shape and topography does not appear to be a significant challenge to development. There are a range of existing structure on the northern parcels, including an existing truck/service station and agricultural uses. The ultimate development pattern of the site will be determined by the orientation of new alignments.

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Photo Report

Site visit was conducted November 7, 2016. Photos represent on the ground conditions as of this date.

Southwest from service station—location of East from Paradise Park Road—existing barn new roundabout structures

East from Paradise Park Road—existing West from Paradise Park Road—territorial structures view of Ilani Casino

North from Service Station—Northern 10 - West from La Center Road—existing service acre greenfield. station*

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Local and Regional Access

Regional Access

The subject site is located along Exit 16 on Interstate 5. Improvements to the interchange will add capacity and allow for northbound and southbound interstate access. This position is roughly 12 miles north of the Interstate 5/Interstate 205 junction, offering broad regional access to Portland and SW Washington’s west and eastside. Roughly 16 miles north of the state line (Portland), Vancouver’s city center can be achieved in roughly 15 to 20 minutes. Northbound population centers include Kelso/Longview (20 miles), Centralia (65 miles), and Olympia (87 miles).

Figure 2: Regional Extent

Source: ESRI

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Local Access

Locally the site is well served by NW La Center Road, the major collector leading into La Center’s downtown. This connector will also provide direct access to the Ilani Casino via a four-lane Interstate 5 overpass. Paradise Park Road is a frontage road that extends south to Ridgefield at Tri-Mountain Golf Course and north to Paradise Point. The realignment will offer expanded access through the study area connecting the future industrial park to the south.

As the sole arterial to the city center, congestion is common on NW La Center Road during peak traffic. This condition will continue to worsen commensurate with economic growth and residential build-out. Eventually a second Lewis River crossing and access point to downtown will become necessary, and is identified in the 20-year Capital Facilities Plan.

Figure 3: Local Extent

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Proximity to Regional Employment Centers

Parcels in the study area are roughly half way between major employment concentrations in the region. To the north, tenants at the Port of Kalama comprise over 1,000 jobs. Primary industries include grain exporting, wood products, chemicals, and fabricated metals manufacturing. In Kelso/Longview, the economy is centered around health care, paper and wood products manufacturing, and government. To the south, the Salmon Creek employment area is home to major employers including WSU Vancouver and Legacy Hospital. East Clark County in the vicinity of NE 162nd and NE 192nd Avenues is home to professional services, finance, corporate functions, and tech oriented employers. Firms in the vicinity of Columbia Tech Center are among the best paying jobs in the region. Further south, employment densities are highest in the Vancouver and Portland Central Business Districts (CBD). Closer to the study area, upon completion, the Ilani Casino will employ 1,000 full-time workers.

Figure 4: Regional Employment Centers1

Kelso/Longview

Port of Kalama

Salmon Creek

Vancouver CBD

Columbia Tech

Portland CBD

1 Source: U.S. Census Bureau “OnTheMap” http://onthemap.ces.census.gov/ \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

Catalytic Development Opportunities

The combination of infrastructure investment and the development of a first-class gaming and entertainment facility will permanently alter the development landscape of The Subarea and the broader North Clark County economy. Transportation and utility infrastructure upgrades will add capacity and overcome previous development barriers. Further, the creation of over 1,000 permanent jobs and 4.5 million visitors annually will serve as an economic catalyst that will extend well beyond gaming. Non- resident visits will draw opportunities to capitalize on retail, services, and lodging activity for the broader community.

Ilani Casino

The Ilani Casino will be a 368,000-square-foot casino resort offering a 100,000-square-foot gaming floor with 2,500 slot machines, 75 table games, and over 15 restaurants. Retail shops, convention space, and a 2,500-seat entertainment venue will also be included. A hotel is being proposed in a later phase of development. The $500 million project is expected to draw over 4.5 million visitors annually and spend over $40 million in annual vendor expenditures.

Figure 5: Rendering of the Ilani Casino

Source: www.Ilaniresort.com

Exit 16 Interchange and Utilities Project

The Exit 16 project is a $32 million privately funded transportation investment that will serve the City of La Center, the Ilani Casino, and The Subarea. The project will add roundabouts at both on-ramps and a controlled intersection at NW La Center Road and Paradise Park Road. A new four-lane overpass with bicycle and pedestrian lanes will be accompanied by widening of NW La Center Road, a widening and realignment of NW Paradise Park Road, and widening of NW 31st Avenue and NW 319th Streets. Water main extensions and a water reclamation plant are also being developed to serve the area.

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Figure 6: Planned Overpass Replacement and Road Network Realignment2

Site Conclusions

From a physical perspective, strong access, visibility, view potential, and site orientation combine to represent highly marketable sites for commercial uses. Easy on/off access allow for a broad trade area delineation and geographic market breadth. Relatively flat sites with high freeway visibility and potential for views have upside pressure on value and potential. From a locational perspective, despite the potential for a geographically large trade area, this area is sparsely populated and proximity to market depth is the site’s primary limitation. Northwest Clark County and southwest Cowlitz County are not densely populated areas and the number of domestic rooftops to support commercial development is limited. Another locational factor is orientation to competitive commercial developments in Woodland and Salmon Creek. Taken together, development success will be predicated on The Subarea’s ability to capitalize on both net-new household growth in the region as well has potential economic activity generated from catalytic investments and increased non-resident support.

2 Analytical Environmental Services. I-5/La Center Road Interchange Improvements Environmental Reevaluation Report. February 2016. \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

III. SOCIOECONOMIC TRENDS AND CONDITIONS

Macroeconomic factors in the county and region that will influence demand for commercial real estate in the foreseeable future.

Employment Conditions

Employment levels are indicative of the health of the local and regional economy. A growing and robust economy translates into marginally higher demand for goods and services from both local businesses and an increase in purchasing power from local residents. Concentrations of employment in specific industry sectors are also indicative of the competitive advantage of the local economy and opportunities for real estate products to accommodate new and growing industries.

Employed Level

Northwest Clark County and Southwest Cowlitz County3 represents about 6.2% of the Clark County economy. Since the trough of the recession the area has exhibited sound economic growth, adding nearly 1,650 jobs in five years. This amounts to an annual growth rate of 4.1%. Growth at the county level has averaged 2.7%, clearly indicating the local economy is outperforming structural trends. Given the availability of land in Northwest Clark County, current and planned infrastructure improvements, and forecasted residential growth, we expect accelerated local growth to continue in the near to intermediate term.

Figure 7: Recent Employment Growth Trend: Northwest Clark County

3 Defined as the 98629 and 98642 zip codes. This area collectively includes the City of La Center and City of Ridgefield. \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

Employment Sectors Driving Growth in the Economy

Wholesale Trade clearly led all sectors in growth over the last five years, accounting for a third of all job creation. This can be attributed to healthy growth among distribution facilities in Ridgefield. Transportation, Warehousing, and Utilities (T.W.U) employment grew for similar reasons. Collectively these sectors accounted for over half of local job growth (~894 jobs). Professional and Business Services growth is the second largest sector in Northwest Clark County. This sector includes business support services, accounting, legal services, and advertising services, among other uses. This is a predominately office space utilizing sector that added 368 jobs since 2010. Financial activities (banking, insurance, real estate) also added over 300 jobs. Gambling remains a considerable share of the local economy, accounting for 10% of all jobs. Collectively, Leisure & Hospitality is Northwest Clark County’s largest sector, although growth has been flat.

Figure 8: Composition of the Local Economy

8% Natural Resources 9% 14% Construction 4% Manufacturing

12% Trade 12% T.W.U. Professional Services 10% Leisure & Hospitality* 17% 14% Government All Other Sctors Source: IMPLAN * Gambling = 10%

Top Growth Sectors (2010-2015): ▪ Wholesale Trade (+ 532 jobs) ▪ Professional & Business Services (368 jobs) ▪ Transportation, Warehousing, & Utilities (+363 jobs) ▪ Financial Activities (+314 jobs)

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Unemployment Rate

Roughly 6% of residents seeking work in Clark County are unemployed compared to 5.1% at the State level. The unemployment rate in Clark County remains characteristically higher than the statewide average, albeit by a narrower differential than has been common in recent years. The local rate is up year- over-year from 5.7% in October 2015. This uptick is primarily driven by an increase in the labor force over the last year, a testament to the region’s strong in-migration rate coupled with rising wages drawing more people into the labor force. As measured by unemployment, the economy is very healthy. However, the local economy is now in its sixth consecutive year of positive employment growth and falling unemployment rates. While business cycle expansions do not die of old age, tight labor markets will put upward pressure on wages and downward pressure on productivity growth. In the near term, residents will see an increase in purchasing power while businesses will see a more difficult time finding qualified workers.

Figure 9: Unemployment Rate Trend, Clark County and Washington State

16%

14%

12%

10%

6% UnemploymentRate 4%

2% Clark County Washington State 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Washington State Employment Security, Local Area Unemployment Statistics (LAUS)

Washington Employment Security Economic Outlook 4

Clark County’s labor market had another solid year of improvement in 2015. Employment was up four percent for the second year in a row. Most sectors were adding jobs. This kind of broad-based growth will likely characterize 2016 and perhaps beyond that year as well. The exception may be manufacturing, which has been impacted by weak overseas markets and a strong dollar.

4 Economic Outlook for each county is developed annually by state economists at the Washington State Employment Security in January of every year. This section will be updated in the final report with the January 2017 outlook. \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

The county will gain over 600 high-wage jobs when Banfield Pet Hospitals moves its headquarters from Portland to Vancouver in spring 2016. In addition, developers broke ground on an extensive planned redevelopment of the waterfront along the Columbia River west of Interstate 5. Apartments, condos, hotels, restaurants, and retail are all part of the plan, with more possibilities underway on adjacent land owned by the Port of Vancouver. Finally, planning for a casino owned by the Cowlitz Tribe near La Center will likely proceed now that most legal challenges have been overcome.

Population, Housing, and Income

Population, households, and purchasing power (income) are the primary determinants of support for commercial retail demand and support for personal and household services. We evaluate structural trends and anticipated changes in these dynamics to inform our expectations about future support for these sectors.

Population Growth

The population growth rate in Clark County has held at a steady pace in the current decade, growing at an average annual rate of 1.4% and becoming home to over 35,600 new residents. This represents a bit of a drop off from growth in the last decade where the population grew at a 2.1% clip. While the majority of growth is occurring in incorporated areas, a surprising 43% of all residential growth since 2010 has not been in cities. Among cities, outlying areas have exhibited the greatest pace of growth, led by Ridgefield (6.3% AAGR), La Center (1.9%), and Battle Ground (1.9%).

The City of La Center has seen its population almost double since 2000. Most of this growth came between 2000 and 2010, but the community has seen 340 new residents since 2010. The City of La Center’s Comprehensive Plan5 Estimates the City population will more than double again over the next 20-years, reaching 7,642 residents by 2036.

Figure 10: Population Growth Trend, North Clark County Cities

2000-2010 2010-2016 Jurisdiction 2000 2010 2016 # AAGR # AAGR Clark County 345,238 425,363 461,010 80,125 2.1% 35,647 1.4% La Center 1,654 2,800 3,140 1,146 5.4% 340 1.9% Ridgefield 2,147 4,763 6,870 2,616 8.3% 2,107 6.3% Battle Ground 9,322 17,571 19,640 8,249 6.5% 2,069 1.9%

5 E2 Land Use Planning. 2016-2036 City of La Center Comprehensive Plan (March 2016) \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

Migration

Migration data is collected at the county level by the U.S. Census Bureau and the Washington Office of Financial Management. Because trends in population growth from natural increase (births over deaths) do not change quickly, population growth attributed to migration is a sound barometer of the regional attractiveness of a community and indicator of future growth. In Clark County, changes in the migration rate have tended to move in unison with changes in economic conditions, indicating people move to Clark County for work, not retirement, lifestyle, etc.

Over the last three years, the migration rate in Clark County has averaged 15.1 persons per 1,000 residents. This is the highest rate of any county in the Portland Metropolitan area. This is an expected finding that should continue into the foreseeable future. Migration rates have been accelerated everywhere in the region. One structural aspect about regional migration flows is that Multnomah County, anchored by Portland, tends to serve as the regional “Ellis island.” Most transplants land in Portland initially before eventually transitioning into other areas. Clark County is the greatest recipient of this, netting 10.4% of all outflowing residents from Multnomah County6. Further, Clark County currently accounts for nearly 50% of all available single-family lot inventory for housing development in the Portland Metropolitan Area7. Over the remainder of the decade, we expect growth pressure from Oregon to accelerate into the SW Washington market.

6 Internal Revenue Service, SOI Tax Stats 2014-2015 7 According to New Home Trends \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

Figure 11: Clark County Migration Rate, 2000-2016

Household Growth 8

In the current decade, the majority of housing growth in North Clark County has landed in Ridgefield (+705 units) and Battle Ground (+433 units). La Center has added 103 rooftops over the same interval. Some multi-family development has occurred in Battle Ground but all of the growth in La Center and Ridgefield has been single family homes. Over half of Clark County’s housing stock has been developed in unincorporated areas, but data does not exist within the County on the location of unincorporated housing growth. Looking forward, the entire region is facing mounting housing affordability constraints, driven in large part by historically limited supply. This condition will continue to push development pressure into tertiary markets. Since 2013 over 70% of housing construction has taken place in Battle Ground, Ridgefield, La Center, and unincorporated areas. This rate is up markedly from 62% between 2010 and 2013.

Household Income

When determining support for commercial goods and services, demand is a function of both the number of rooftops/residents and the purchasing power of those households. The measurement of structural growth in income within the region is indicative of changes in purchasing power among residents. In 2015, per capita personal income in Clark County was $45,070, roughly 87% of the statewide average ($51,898). Such a large portion of the state is comprised of the Seattle market that most areas outside of the Seattle Metropolitan Area have lower income rates than the state average. Over the last five years, incomes have grown by roughly 21%. Again, this growth trails the statewide average slightly (23%). However, local incomes are growing at a healthy pace at roughly twice the rate of inflation.

8 Washington State Office of Financial Management \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

The majority of income for Clark County residents (63%) comes from earnings, which has represented over half of income growth over the last decade. A large share of income coming from earnings has both positive and negative effects. On the positive front, a high ratio affords greater opportunity for growth in an expanding economy. Conversely, this increase in volatility and purchasing power will be more sensitive to business cycle fluctuation.

Figure 12: Growth in Per Capita Personal Income

$60,000

$50,000

$40,000

$30,000

Per Capita Income Capita Income Per $20,000

Washington $10,000 Clark County

$0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Tourism Activity

In addition to households and businesses, support for local commercial space is also a product of non- resident consumption, or tourism. Clark County is not generally characterized as a tourist destination, but the impact of non-resident spending for leisure and business is a significant input into the local economy. In 2014 (the most recent year available) non-residents spent over $480 million locally. Structural growth in tourism spending has been strong over the last five years, averaging 5.7% annual growth. However, growth has been decelerating steadily. The largest growth segment of spending growth has been in accommodation spending, which is indicative of true tourism growth. Annual spending in this segment has grown by 90% to nearly $72 million. The largest component of tourism spending is Food Services (restaurants) which accounts for nearly 30% of all captured tourism spending.

While data is not available at the City Level for La Center, it is highly likely that La Center captures far more than its fair share of tourism activity. Existing card room and gaming activities have long drawn non- resident spenders to the local community

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Figure 13: Structural Tourism Spending Trend, Clark County (2001-2014)

$500 15%

$450 10% $400

$350 h t

5% w

o r

$300 G

)

c i

l $250 0%

n a

i $200

(

u n

-5% n $150 A

$100 Tourism Spending -10% $50 Annual Change $0 -15% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Dean Runyan Associates, Travel Impacts & Visitor Volume, 1991-2014P

2010-2014 Growth Spending Category 2014 $ %

Accommodations $56,700,000 $26,800,000 1%

Food Service (Restaurants) $121,500,000 $22,900,000 77%

Food Stores $51,800,000 $8,800,000 9%

Gas $58,300,000 $7,500,000 17%

Arts, Entertainment, & Rec. $60,100,000 $6,800,000 13%

Retail Sales $71,900,000 $7,500,000 14%

Socioeconomic Trends Conclusion

Overall, the economic landscape in Clark County is functionally healthy. The market is in the midst of an expansionary cycle that has lasted over six years. Employment in northwest Clark County is expanding at a pace above and beyond the regional trend, with growth in higher wage sectors like professional and financial services leading to improving sectoral diversity.

A tight labor market is beginning to create acceleration in personal income, consistent with statewide trends. All else equal, this translates into expectations of increased per-capita purchasing power locally.

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The outlook for continued population and household growth in northwest Clark County remains strong. Migration rates at the county level as well as population growth trends in Ridgefield, La Center, Battle Ground, and Woodland are also robust. Expectations are that population and household growth in these communities should outpace the rest of the county over the next 10 years. By extension, this further supports growth in local purchasing power and demand for household services.

While non-resident spending in Clark County is at an all-time high, the pace of growth is deteriorating. Clark County is not historically a strong tourism destination; per-capita tourism spending is the third lowest in the state. The opening of the Ilani Casino will undoubtedly improve tourism spending in the community, and by extension support for commercial services in The Subarea. The extent to which casino patrons will support additional services will be a function of the share of visitors originating from outside the region and the extent of “off-site” spending capacity.

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IV. COMPARATIVE ASSESSMENT—FREEWAY INTERCHANGES

To inform an understanding of the typical character of freeway interchange development, this comparative assessment evaluated a range of precedent examples. A select sample of freeway subareas along the Interstate 5 corridor were inventoried and assessed across a range of development characteristics. This analysis inventoried the development profile, traffic volumes, and demographic characteristics of six subareas. Comparative examples were selected based on a range of factors, including:

▪ Proximity to a major metropolitan or employment center. This assessment targeted areas that were in proximity to major areas but not located in the heart of a major city. For example, subareas within metropolitan Seattle, Tacoma, and Olympia were not selected.

▪ Similarity to the subject in access and orientation (i.e. visibility, existing development scale, ease of on/off access, north and southbound access, etc.).

▪ Proximity and Influence of adjacent interchange locations

In total, we evaluated six comparative examples. Each development form is discussed briefly here followed by a summary of each precedent example. A more detailed profile of each example is included in Appendix A.

Figure 14: Map of Comparative Freeway Interchange Subareas

Mile 206

Mile 118

Mile 79 Mile 72

Mile 21 Mile 16

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Milepost 14—Ridgefield, Washington

The Interstate 5 highway interchange at milepost 14 lies at the junction of State Route 501. The interchange is located within the boundary of the City of Ridgefield, Washington, approximately 3 miles east of downtown Ridgefield. There are roughly 9,500 residents living within a 3-mile radius of The Subarea. With a median income of $89,361, incomes considerably above average.

The land use surrounding the highway exit is predominantly warehouse industrial and employment. The southwest corner of the interchange contains an industrially zoned area with a cluster of auto service businesses, as well as large warehouse and distribution centers and manufacturing buildings. The east side of I-5 is represented by freeway service commercial including dining and retail services, a veterinarian, and physical therapy and dentist clinics. To the northeast of the intersection, there is a fuel station, dining, and a vacant building. To the northwest of the intersection is agricultural land. The area beyond the highway exits is predominately agricultural.

Interstate 5 at milepost 14 sees an average of 75,000 vehicle trips per day, with around 20,000 total vehicles exiting or entering the highway via exit 14 daily.

Figure 15: Milepost 14 Subarea

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Milepost 21—Woodland, Washington

The Interstate 5 highway interchange at milepost 21 lies at the junction with Lewis River Road/ State Route 503. The interchange is located within the boundary of Woodland, Washington, approximately ¼ mile north of Horseshoe Lake and the southern city boundary.

The land use to the west of the highway exit is predominantly residential, though the streets immediately adjacent to the west of the highway contain some retail and commercial uses. To the northwest of the interchange are several auto-oriented commercial uses and lodging. There are a number of retail uses and a tourist information center to the southwest along Goerig Street. A waste water treatment facility is located to the southeast of the interchange. Along Lewis River Road to the east of the highway, the development form is largely freeway service commercial, including limited service restaurants, fueling, and convenience retail. The commercial center roughly 0.5 miles north of the subarea includes a Safeway and supporting strip retail. Traffic patterns suggest this center supports a large population basis extending from Ridgefield to Kalama. There are roughly 8,756 residents within a three-mile radius and over 23,500 within five miles. Taken together, commercial activity in the subarea derives support from a combination of local residents in a broad trade area as well as pass through freeway traffic. Interstate 5 at milepost 21 sees an average of 57,000 vehicle trips per day.

Figure 16: Milepost 21 Subarea

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Milepost 72—Napevine, Washington

Milepost 72 is a sparsely occupied highway exit along the I-5 corridor. The interchange is located within the city boundaries of Napavine, Washington, though the interchange is approximately 2 miles north of the center of town and is separated by over a mile of agricultural and forested areas. The area has limited resident support; only 6,723 residents and 2,541 households live within a three-mile radius. The median household income of $56,121 is below the state average, limiting purchasing power further.

The subarea is a true freeway commercial interchange including almost exclusively food service and fueling station uses. There are several fuel stations and a coffee shop to the west of the highway, and a truck weigh station to the southwest. To the east of I-5 are three drive-through fast food restaurants and one sit-down restaurant, as well as an RV sales location and a church. To the northeast of the interchange, just outside of the Napavine city boundary, is a small development of single family homes (not pictured).

Interstate 5 at milepost 72 sees an average of 49,000 trips per day, with around 18,000 total vehicles exiting or entering the highway via exit 72 daily. This capture rate is exceptionally high.

Figure 17: Milepost 72 Subarea

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Milepost 79—Chehalis, Washington

The Chehalis I-5 interchange at Milepost 79 is located ¼ mile to the east of the Chehalis-Centralia Airport, and approximately ¾ mile northwest of Chehalis’s historic downtown district. This interchange area marks the northern portion of the developed area in Chehalis. The location near the city center and the airport allows for a variety of commercial and industrial uses to be supported along this interchange. This subarea serves as the primary commercial hub for an exceptionally large trade area, drawing resident support from as far away as the Washington Coast to the west and halfway to Olympia to the north and Kelso to the south. Over 15,000 and 31,600 residents live within a three- and five-mile radius, respectively.

To the west of I-5, along Louisiana Avenue, there are a several big box retail stores, including Walmart, Kmart, and Home Depot, as well as a strip mall and a number of stand-alone retail businesses. The airport can be accessed from the southbound I-5 exit by heading south on Louisiana Avenue. On the eastern side of the Chehalis I-5 interchange there is an assortment of commercial uses, though auto sales and services uses are most prevalent. A railroad line runs approximately ¼ quarter mile to the east of the highway. Beyond the railroad line, and to the northeast of the interchange, is a cluster of industrial uses.

I-5 in this area averages over 61,000 trips daily with approximately 22,000 vehicles exiting or entering the Exit 79 interchange system.

Figure 18: Milepost 79 Subarea

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Milepost 118—DuPont, Washington

The city of DuPont lies to the north of I-5, with the southern boundary of the city bordering the highway. The I-5 highway exits at mileposts 118 and 119 are the primary access points for the city and associated commercial town center. This subarea relies on a dense mix of adjacent housing and employment uses. Nearly 16,000 residents live within a three-mile radius with nearly 35,000 residing within five miles. Median income of $66,736 represents average per household purchasing power.

The State Farm Insurance Corporate Campus is a clear anchor and extends across over a ¼ mile of the area in between mileposts 118 and 119. Surrounding the State Farm Campus is a relatively dense variety of retail, mixed-use, and residential developments. To the north of the milepost 118 exit, the core of the town center includes a concentration of small scale retailers surrounding an open space pedestrian plaza. To the northeast of this retail area is a development of mixed-use centers and medium density townhome- style housing developments. At Milepost 119 there is a small concentration of retail uses and low-rise office. A new nationally branded hotel is under construction. There is a single family residential area northwest of this exit, interspersed with some neighborhood uses such as parks, a community center, a church, and a museum. The Joint Base Lewis-McChord facility occupies the entire area to the south of I-5 between mileposts 118 and 119.

Figure 19: Milepost 118-119 Subarea

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Milepost 206—Smokey Point, Washington

The I-5 exit at Milepost 206 is commonly referred to as Smokey Point; however, the western portion of the subarea lies within the jurisdictional boundary of Marysville with the west side falling in Arlington. The area surrounding the exit is developed on all four sides. Development encompasses the subarea in all quadrants. The State Route 503/NE 172nd Street interchange was replaced and expanded in 2007-08 commensurate with the development of the Lakewood Crossing Center (SW corner of the subarea). In general, the entire west portion of the subarea has developed over the last ten years with the eastern portion of the district having a more seasoned vintage. This district is supported by a very large demographic trade area. Over 57,000 residents live within a five-mile radius.

To the northwest of the interchange lie a medical clinic and a new shopping center (2015) that includes a strip of big box retailers and several miscellaneous retail and dining buildings. Lakewood Crossing, a 500,000-square-foot retail power center, is anchored by Costco, Target, and Best Buy. The southeast corner is a seasoned neighborhood center formally anchored by Food Pavilion. The space remains vacant. I-5 in this vicinity sees an average of 74,000 trips daily.

Figure 20: Milepost 206 Subarea

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This exercise identified three precedent development forms from which we can draw inference. Each is unique to the physical, locational, and demographic characteristic of the subarea.

Freeway Service Retail (Ridgefield, Woodland, Napavine)

Freeway service commercial is the most common development profile. Subareas in this category offer limited service commercial opportunities that cater to travelers moving through, but not to the subarea as a destination. These areas do not have the demographic scale to support a more dynamic retail environment. They generally have fewer than 3,000 households within a three-mile radius. Because access is strong but supportable retail scale is limited, lands in these subareas are often partially occupied by non-commercial employment uses either at or in adjacency to the freeway interchange.

Large Format Retail/Power Center Retail (Chehalis, Marysville)

Large format retailers prefer freeway locations that capitalize on visibility but more importantly, offer the regional accessibility to deliver a large trade area. In non-metropolitan areas, a freeway power center can serve an exceptionally broad market area that is greater than a 45-minute drive time. Centers are commonly anchored by one or more national general merchandising retailers along with strip retail, and in some cases, freeway-serving commercial. These centers commonly require a market area of 30,000 to 100,000 residents.

Town Center Development (DuPont)

A master planned commercial town center similar to what has been developed in DuPont over the last ten to fifteen years includes a mix of commercial retail and office uses in a more urban setting. The program may also include low-rise (1-3 stories) and mid-rise (4-7 stories) development. It is not common to see structured parking outside of urban cores. In many cases hotel and/or multi-family housing are included elements. Development of this scale requires strong freeway access in addition to proximity to one or more major employers/employment centers and access to dense housing centers. This is the case in DuPont which is adjacent to Fort Lewis Army Base, State Farm’s Corporate Center, and over 35,000 residents within a five-mile radius.

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V. COMPARATIVE ASSESSMENT—CASINO SUBAREAS

This component of the market assessment evaluates the nature of development around similarly configured tribal gaming casinos in Washington State. The purpose of this analysis is to understand the extent to which the emergence of a destination gaming/entertainment complex has encouraged market support for adjacent commercial development in precedent markets. For this assessment we emphasized peer subareas with similar characteristics to the subject, mainly: ▪ Location on or in close proximity to a major Interstate; ▪ Casinos that have been completed or have seen expansion in the last ten years and have a similar scale to development at the Ilani Casino; and ▪ Casinos that are within a reasonable distance from a major population center.

Figure 21: Map of Comparable Washington Peer Casino Subareas

Silver Reef Casino

Skagit Valley Casino

Tulalip Casino

Hard Rock Casino Snoqualmie Casino

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Silver Reef Casino—Ferndale, Washington

The Silver Reef Casino in Ferndale, Washington, is located roughly 3.5 miles west of Interstate 5 at Exit 260. The casino is roughly nine miles north of Bellingham, Washington, and 20 miles south of the Canadian Border. The casino was built in 2002 with a significant expansion in 2013. The casino has an 80,000 square foot gaming floor, 1,000 slot machines, event space, a music/theatre venue, and a 105-room hotel spa.

Statistic Data Year Built: 2002; renovated and expanded in 2013 Gaming Space: 80,000 square feet Slot Machines/Table Games: 1,000/20 Restaurants and Retail Space: Yes Hotel (Y/N): Yes; 105 rooms Adjacent Zoning: Rural Residential/Agriculture

Despite being in operation for nearly 15 years, there has not been any ancillary development activity in proximity to the casino, although the Lummi Tribe operates a convenience and service station on-site. The Exit 260 interchange bears strong resemblance to construction underway at Exit 16 (alignments have been in place historically but new roundabouts were constructed in 2015). Exit 260 has not seen much development in this vicinity; an existing AM/PM service station anchors the area. Small industrial development has built out slowly since the late 1990s 0.5 miles to the west on Slater Road and 1.0 miles to the north on Pacific Highway. Uses are generally light industrial steel buildings with locally serving storage, wholesaling, and distribution tenants.

Figure 22: Casino Location Imagery

Silver Reef Casino I-5 @ Exit 260

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Skagit Valley Casino—Bow, Washington

The Skagit Valley Casino in Bow, Washington, is located along Interstate 5 at Exit 236. The casino has both northbound and southbound access. The casino is located roughly halfway between the cities of Bellingham (18 miles north) and Mt. Vernon (11 miles south). The casino was originally constructed in 1995 and includes a 67,000-square-foot gaming floor with 1,000 slot machines, music venue, and 103- room hotel.

Statistic Data Year Built: 1995 Gaming Space: 67,000 square feet Slot Machines/Table Games: 1,000/28 Restaurants and Retail Space: Yes Hotel (Y/N): Yes; 103 rooms, 46-room hotel off-site (2006) Adjacent Zoning: Rural Reserve, Rural Freeway Service

The Skagit Valley Casino has been in operation for over 20 years. It was initially strategically positioned to capture local patronage from both the Bellingham and Mt. Vernon markets as well as visitors from Canada. The Bow Hill Road interchange at Exit 236 offers both northbound and southbound access. Adjacent lands on the east side of Interstate 5 have seen only modest development activity. In 2006, the Skagit Tribe developed a second 46-room boutique hotel and service/fueling station.

Figure 23: Casino Location Imagery

Skagit Casino at I-5 Exit 242

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Tulalip Resort Casino—Marysville, Washington

The Tulalip Casino is among the largest Indian gaming casinos in the Pacific Northwest. The casino is located roughly nine miles north of Everett, Washington, and 33 miles north of Downtown Seattle. The casino is accessed from the south via Exit 200 and from the north at Exit 202. Initially constructed in 2004 with nearly 200,000 square feet of gaming space, a 2008 addition included a 12-story, 370-room hotel. The development is a true destination entertainment complex with seven restaurants, event and music venue space, and an 18,000-square-foot spa.

Statistic Data Year Built: 2004, Expanded 2008 Gaming Space: 200,000 square feet Slot Machines/Table Games: 2,200+/35 Restaurants and Retail Space: Yes Hotel (Y/N): Yes; 370-room luxury hotel resort (2008) Adjacent Zoning: Medium Density Residential, Community Business, Rural Resource Transition

The Tulalip Tribe has methodically developed the 495-acre Quil Ceda Village development over the last fifteen years, including the catalytic Tulalip Casino. Initial development in 2001 included big box retail at the southern portion of the village (Home Depot, Wal-Mart). Following development of the casino, a 500,000-square-foot outlet mall was completed in 2005, followed by Cabela’s. This development’s proximity to the Canadian and Seattle Markets, in addition to location in high growth Snohomish County, has resulted in a true destination power center with an ex-regional draw.

Figure 24: Casino Location Imagery

Tulalip Village at Quil Ceda Village

Casino Seattle Premium Big Box Retail Outlets

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Snoqualmie Casino—Snoqualmie, Washington

The Snoqualmie Casino is the newest and closest destination casino to the Seattle Market. The complex is located along Interstate 90 roughly 26 miles east of Seattle. The casino has direct off-ramp access from I-90 eastbound via Seattle, where the majority of patronage originates. From the west, access is less direct and accessed via Exit 31 at the North Bend Premium Outlets. The casino was constructed in 2008 with a 52,000-square-foot gaming floor and over 1,700 slot machines. Other assets include seven restaurant/bar spaces, a 2,000-seat music venue, and an 11,000-square-foot event facility.

Statistic Data Year Built: 2008 Gaming Space: 52,000 Slot Machines/Table Games: 1,700/50 Restaurants and Retail Space: Yes Hotel (Y/N): No Adjacent Zoning: Not in Urban Growth Boundary, Rural City Urban Growth Area (King County Comp Plan)

While the Snoqualmie Casino captures some destination tourism based patronage, the majority of market support comes from the Seattle market. Over 475,000 residents live within 30 miles of the casino location, including the high income bedroom communities of Bellevue, Issaquah, Redmond, and North Bend. There has not been any ancillary or support development in adjacency to the casino; however, land availability is a key constraint. Anecdotally, the North Bend premium outlets located two miles to the east have benefited from increased commercial activity.

Figure 25: Casino Location Imagery

Snoqualmie Casino at I-90 Exit 27

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Hard Rock Casino—Airway Heights, Washington

The Spokane Tribes recently broke ground on the first phase of a new destination resort casino in Airway Heights. The casino will be located along Highway 2 roughly six miles west of Interstate 90 and ten miles west of Spokane’s city center. This development will compete directly with the Kalispell Tribe’s Northern Quest Casino and Resort (built in 2000), also in Airway Heights. The first phase of the project will bring a $40 million casino with 100,000 square feet of gaming space.

Statistic Data Year Built: 2017 Gaming Space: 100,000 Slot Machines/Table Games: 450/12 Restaurants and Retail Space: Yes Hotel (Y/N): No Adjacent Zoning: General Commercial, Single-family Residential, Light Commercial, Regional Commercial, Heavy Industrial

Airway Heights is a small outlying community of Spokane in proximity to Spokane International Airport, Fairchild Air Force Base, and the Airway Heights Correctional Facility. The Northern Quest Casino has operated in Airway Heights since 2000 on a site 2.5 miles north of Highway 2 at S Hayford Road. The Highway 2/Hayford interchange began developing in 2004-05. The earliest phase brought big box retail (Walmart) and restaurant pad space. Subsequent development has added a range of garden apartment and single-family housing. Over the next ten years the Spokane Tribes’ development will grow into a $400 million Hard Rock Hotel branded entertainment complex with over one million square feet of retail, entertainment, and gaming space and a 300-room hotel.

Figure 26: Casino Location Imagery

Future Hard Rock Casino Site Commercial Development at Hwy-2 and Hayford Road

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Comparative Assessment Conclusions

Casino gaming in Washington State is a growth industry. While visitor data is unknown, tribal gaming revenue has grown considerably over the last decade. Between 2004 and 2014 tribal gaming revenues grew by over 250% from $888 million to $2.2 billion. The casino share of total gaming activity has growth from 58% to 80%.

Figure 27: Gaming Receipts in Tribal Gaming Casinos, Washington State

$2,500

$2,000

$1,500

$1,000 (InThousands)

$500

$0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Washington State Gambling Commission

Despite substantial growth in the gaming market, there is little precedent to suggest that the emergence of a gaming facility in a community directly translates into a significant increase in support for commercial development in the adjacency. In the examples we surveyed, only the Quil Ceda Village development exhibited a clear connection to commercial activity. In this instance, the development was a component of the casino/tribe’s master plan. More importantly, Quil Ceda Village has a unique locational position. The development is only 5 miles removed from the Seattle Metropolitan area and has 223,000 residents within a 10-mile radius. More importantly, the village is only a 110-mile drive from Vancouver, British Columbia. Gambling institutions are not common in British Columbia, but the demographics in the Vancouver Metropolis strongly support gaming demand. Canadian visitors comprise a large share of commercial support for all casinos north of Seattle. At Quil Ceda Village, dozens of charter busses make daily trips between Vancouver and the Casino/Seattle Premium Outlets.

Development at Quil Ceda Village aside, the most commonly observed ancillary uses in adjacency to Casino’s in Washington include fuel/convenience stations and support lodging.

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VI. COMMERCIAL MARKET ANALYSIS

Delineation of a Commercial Trade Area

In real estate market analysis, a trade area refers to the geographic region from which the majority of market support is expected to originate. The delineation of a trade area is influenced by a range of interrelated factors influencing a site or subarea’s access to customers and its position relative to the competitive base. For example, strong transportation linkages expand a trade area’s potential geographic coverage. Conversely, physical and manmade barriers such as topography, rivers, and freeways may constrain a trade area’s breadth. Further, the presence and location of competitors may also truncate a trade area. All else equal, potential patrons chose the most convenient physical location.

For this analysis, we delineated a trade area that represents a broad swath of the north Clark County and southwest Cowlitz County. This area represents the trade area for resident based market support for The Subarea. Potential market support from freeway and tourism activity is addressed elsewhere in the study. Our trade area is roughly delineated by the City of Kalama/Lewis River to the north, SR-503/NE 72nd Avenue/NE 82nd Avenue to the east, NE 199th Street to the south, and the Columbia River to the west.

Figure 28: Commercial Trade Area

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Demographic Profile of the Trade Area

In 2016 there are an estimated 36,600 residents in the trade area. The area has added over 2,300 residents since the 2010 Census, an increase of 6.7%. The growth outlook over the next five years is expected to be slightly more tempered as 1,861 new residents move to the area. Net population growth over the next five years will be concentrated in two demographic segments, namely residents between 25 and 34 years old and residents 65 to 84 years old.

Households are expected to grow at roughly the same rate as population. The southern portion of the trade area around Ridgefield is expected to account for the lion’s share of residential growth. This is a disadvantage to the subject as there are more competitive commercial opportunities southbound in the vicinity of the I-5/I-205 interchange at Felida/Salmon Creek.

The trade area is a decidedly family-oriented community, where over 78% of households are family households and the average household size is 2.84. This too is expected to remain constant in the near- term.

The racial composition of the trade area is predominately white, who comprise nearly 91% of all residents. This composition is not expected to change significantly over the next five to ten years. Slightly more than 6% of the residential base identifies as Hispanic.

Figure 29: Population and Household Profile, Commercial Trade Area 2010-2016 2016-2021 2010 2016 # AAGR 2021 # AAGR Population 34,342 36,660 2,318 1.1% 38,521 1,861 1.0% Households 12,168 12,885 717 1.0% 13,498 613 0.9% Families 9,465 9,988 523 0.9% 10,452 464 0.9% Average HH Size 2.81 2.84 0.03 N/A 2.85 0.01 N/A Homeownership Rate 79.4% 78.5% -0.9% N/A 78.5% 0.0% N/A Median Age 39.4 40.5 1.1 N/A 41.0 0.5 N/A SOURCE: ESRI

Households in the trade area boast higher than average incomes for SW Washington. In 2016 the median household income was $66,983 compared to $60,494 in Clark County. Roughly 45% of all households earn greater than $75,000 annually. Over the next five years, this share is expected to reach 52% as the median income rises to $77,754.

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Figure 30: Household Income Distribution, Commercial Trade Area

25% 2016 2021 20%

15%

10% HouseholdDistribution 5%

0% < $15k $15 - $25k $25k - $35k $35k - $50k $50k - $75k $75k - $100k $100k - $150k $150k - $200k > $200k

Median Household Income (2016): $66,983 Source: ESRI

Potential Retail Sales Support

Demand for retail goods and services is a function two primary inputs: 1) Residential market support, and 2) Non-resident spending (tourism, daytime employment, pass-through visitors). To estimate the existing retail balance, Mackenzie utilized consumer spending data from ESRI to evaluate retail market opportunities by retail segment. This analysis compares locally supported retail demand based on household spending patterns with estimates of retail sales within the trade area. When combined, these metrics determine the level of retail leakage (or surplus) of the trade area. Leakage/surplus is represented by a single metric (Leakage Factor). Positive factors (between 0 and 100) indicate retail leakage. In this instance, on-net local households are making retail expenditures elsewhere. Conversely, negative values (between -100 and 0) indicate retail surplus. In this instance the trade area is attracting more than its fair share of retail activity.

Figure 31: Retail Sales Support, Commercial Trade Area Retail Category Businesses Supply Demand Gap/Surplus Leakage Factor Furniture & Home Furnishings Stores 9 $3,626,542 $15,921,902 $12,295,360 62.9 Electronics & Appliance Stores 2 $1,764,692 $29,117,593 $27,352,901 88.6 Bldg Materials, Garden Equip. & Supply Stores 24 $12,578,944 $31,643,258 $19,064,314 43.1 Food & Beverage Stores 25 $34,572,859 $92,033,684 $57,460,825 45.4 Health & Personal Care Stores 8 $15,257,862 $33,712,835 $18,454,973 37.7 Gasoline Stations 14 $41,651,766 $26,597,677 -$15,054,089 -22.1 Clothing & Clothing Accessories Stores 10 $4,139,392 $25,387,441 $21,248,049 72.0 Sporting Goods, Hobby, Book & Music Stores 16 $4,515,662 $16,832,345 $12,316,683 57.7 General Merchandise Stores 7 $85,687,465 $103,804,536 $18,117,071 9.6 Miscellaneous Store Retailers 32 $7,983,509 $26,296,910 $18,313,401 53.4 Nonstore Retailers 6 $11,144,494 $8,970,368 -$2,174,126 -10.8 Food Services & Drinking Places 73 $45,892,370 $53,237,801 $7,345,431 7.4 Source: ESRI

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Figure 31 demonstrates that the trade area exhibits considerable retail sales leakage across every retail category with the exception of gasoline stations and nonstore retailers. This is an expected outcome given that the trade area was delineated to consider the orientation of competitive retail centers. What Figure 31 suggests is that excluding motor vehicle sales9, nearly $195 million in locally originating retail support is being captured outside the trade area. A natural rate of leakage is common in some geographic areas. This is specifically the case in retail segments where large format retailers more commonly meet consumer demand (general merchandising, electronics, building materials) and the number of households are not sufficient to support brick and mortar retail development.

Commercial Retail Needs Analysis

Estimates of supportable retail space demand are predicated on the relationship between retail sales and physical space. On average, a brick and mortar retail development can stock and inventory a fixed amount of physical product value. In commercial market analysis, these “sales support factors” represent the amount of sales a square foot of retail space can accommodate in a given market. These factors vary across retail sectors and can be used to convert estimates of household spending into supportable retail space.

Figure 32: Commercial Retail Sales Support Factors10 Sales Support Retail Category Factor* Furniture & Home Furnishings Stores $262 Electronics & Appliance Stores $367 Bldg Materials, Garden Equip. & Supply Stores $259 Food & Beverage Stores $380 Health & Personal Care Stores $368 Clothing & Clothing Accessories Stores $238 Sporting Goods, Hobby, Book & Music Stores $213 General Merchandise Stores $260 Miscellaneous Store Retailers $230 Food Services & Drinking Places $380 * Retail Sales per square foot of retail space

9 We exclude automobile sales in this analysis because they comprise a significant share of retail expenditures and exhibit exceptionally large trade areas. Automobile dealerships tend to aggregate in co-located power centers and do not represent demand for neighborhood and community retail. 10 Urban Land Institute. \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

Total supportable commercial retail space will be a product of four key market drivers. Figure 33 summarizes the impact on each with respect to retail industry segment.

Figure 33: Sources of Commercial Demand

Source of Demand Potential Commercial Segment Supported All Retail Categories, Restaurants, Insurance, Banking, Personal Care Resident Households Services Freeway Traffic Gasoline, Limited Service Restaurants Full Service Restaurants, Miscellaneous Store Retailers, Apparel & Casino Driven Tourism Accessories Limited Service Restaurants, Full Service Restaurants, Personal Care Daytime Employment Services, Retail Banking

Resident Households

Commercial support from residential households is a product of both growth in the demographic base and the potential recapture of existing retail leakage. Combined, these sources represent total resident- driven retail support. For this assessment, the household growth rate is assumed to equal the rate projected by ESRI demographics11 through 2021, extrapolated to 2026. Given the geographic position of existing and growth population centers, we assume a 20% recapture of existing retail leakage, acknowledging that a percentage of household spending in the trade area will continue to gravitate to commercial centers in Woodland, Salmon Creek, Battle Ground, Kelso, and Padden Parkway, as well as the structural growth in market capture nonstore retailers and online shopping. Taken together, over the next 10 years the trade area could exhibit market support for nearly 283,000 square feet of commercial retail development.

Figure 34: Net New Commercial Demand from Household Growth, Commercial Trade Area

HH Spending (in millions) Sales Net-New Average HH Support Space Retail Category Spending 2016 2021 2026 16-'26 Factor Demand Furniture & Home Furnishings Stores $1,236 $15.9 $16.7 $17.5 $1.6 $262 5,920 Electronics & Appliance Stores $2,260 $29.1 $30.5 $32.0 $2.8 $367 7,729 Bldg Materials, Garden Equip. & Supply Stores $2,456 $31.6 $33.1 $34.7 $3.1 $259 11,901 Food & Beverage Stores $7,143 $92.0 $96.4 $101.0 $9.0 $380 23,593 Health & Personal Care Stores $2,616 $33.7 $35.3 $37.0 $3.3 $368 8,924 Clothing & Clothing Accessories Stores $1,970 $25.4 $26.6 $27.9 $2.5 $238 10,391 Sporting Goods, Hobby, Book & Music Stores $1,306 $16.8 $17.6 $18.5 $1.6 $213 7,698 General Merchandise Stores $8,056 $103.8 $108.7 $113.9 $10.1 $260 38,892 Miscellaneous Store Retailers $2,041 $26.3 $27.5 $28.9 $2.6 $230 11,138 Food Services & Drinking Places $4,132 $53.2 $55.8 $58.4 $5.2 $380 13,647 TOTAL: $33,216 $428.0 $448.3 $469.7 $41.7 N/A 139,833

11 ESRI is a global leader in mapping and data analytics. ESRI Demographics is a division of ESRI that produces local area demographic forecasts, among other information. More information on ESRI and its forecast Methodology can be obtained at www.esri.com/data/esri_data \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

Figure 35: Potential Commercial Demand Recapture from Leakage and Total Potential Space Demand, Commercial Trade Area (2016-2026)

Leakage Net-New Space Recapture Recaptured Total Space Retail Category Demand (@20%) Support Demand Furniture & Home Furnishings Stores 5,920 $2.5 9,386 15,306 Electronics & Appliance Stores 7,729 $5.5 14,906 22,635 Bldg Materials, Garden Equip. & Supply Stores 11,901 $3.8 14,721 26,623 Food & Beverage Stores 23,593 $11.5 30,243 53,835 Health & Personal Care Stores 8,924 $3.7 10,030 18,954 Clothing & Clothing Accessories Stores 10,391 $4.2 17,856 28,247 Sporting Goods, Hobby, Book & Music Stores 7,698 $2.5 11,565 19,263 General Merchandise Stores 38,892 $3.6 13,936 52,828 Miscellaneous Store Retailers 11,138 $3.7 15,925 27,062 Food Services & Drinking Places 13,647 $1.5 3,866 17,513 TOTAL: 139,833 $42.4 142,433 282,266

On the surface, 283,000 square feet is a considerable level of support. However, this assessment needs to be considered in the context of the typical commercial retail tenant module. Fractions of stores are not developed in reality. For example, a typical Fred Meyer center will comprise over 125,000 square feet, and retailers do not penetrate a market until a certain threshold of support is met. Considering retail thresholds, it is unlikely that resident-driven market support would justify a large format building materials, general merchandising, or wholesaling anchored (Fred Meyer, Costco, Home Depot, Wal-Mart) community center development. An agglomeration of small and medium scaled retailers in segments that are not accommodated in competing locations will see the greatest support.

Freeway Traffic

Market support from non-dedicated pass-through freeway traffic would be generally limited to quick-stop and convenience segments, namely gasoline service stations with convenience goods and limited service restaurants. This use currently exists at the subject site and we would not expect a market for any additional development of this form to materialize.

Daytime Employment

Concentrations of daytime employment generally provide market support for small format retail segments. Limited and full service restaurants will certainly draw lunch hour patrons. Other personal care services (hair salon, nail care, laundry, etc.) and to some extent retail banking and miscellaneous store retailers would also benefit. However, the marginal impact of daytime employment is negligible in comparison to other market segments. For example, every 1,000 employees spending on average $40 to $50 per week at local retailers translates into 5,000 to 7,000 square feet of supportable retail space.

Dedicated Tourism Driven from Casino Activity

An assessment of market support from true tourism activity has the greatest degree of uncertainty, as it is a function of information that is less complete. For example, the number of annual visitors, the number of visitors originating from outside the region, the rate of non-gambling spending per visitor, and the propensity of visitors to spend money off location (outside the casino) all factor into the equation. Without specific knowledge of these inputs, we can only attempt an anecdotal evaluation of this market potential. Factors informing this assessment include:

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▪ Total non-gaming expenditures both inside and outside of a casino are correlated to distance traveled to the destination. In other words, the farther away patrons originate, the more they will spend on food, beverages, souvenirs, retail goods, and gasoline12. As such, out-of-region visitors will have a much higher likelihood of spending dollars outside the casino than resident visitors. For example, a retired couple from Arizona on a dedicated trip will spend more on non-gambling activities than a group of friends from Vancouver or Portland.

▪ The share market support originating from the Portland Metropolitan Area will be very high. However, official estimates of total trips and out-of-region trips are unknown. Unofficial estimates of total visitors range up to 4.5 million13. Based on our knowledge of other casino locations in Washington, we’d expect out-of-region support to fall between 10% and 20% of visitor volume. This volume may increase as hotel development offers more opportunities for overnight stays.

▪ Casino gamblers do not typically exhibit preferences for off-site spending unless there is a unique or destination opportunity. Even in established casino destinations (Las Vegas, Atlantic City, etc.) a national survey of visiting gamblers revealed that only 65% of visitors “Always, usually, or sometimes” shopped or ate outside of the casino14. Outside of a destination spending opportunity (i.e. factory outlet mall, regional mall, entertainment district), non-resident spending is generally limited to off-site lodging, fuel, and food service.

Considering these inputs, Mackenzie developed a simple calculator of potential retail support for the City of La Center to use in estimating potential commercial retail support as information becomes better known. This tool has been provided as a supplemental deliverable to this report. As a static iteration in this report, Mackenzie ran the tool across a series of scenarios to estimate a baseline range of support. These estimates exist to illustrate a base case example under a narrow range of unknown outcomes and should not be utilized to inform critical business decisions.

These scenarios assume 4.5 million visitors annually where 10% to 20% are out-of-region visitors. Assuming these visitors spend $20 to $40 per person that is captured in The Subarea, there is capacity to support between 31,000 and 123,000 square feet of commercial space.

Figure 36: Base Case Scenario Casino Patron Support

Assumptions Low Medium High Annual Visitors 4,500,000 4,500,000 4,500,000 Share of Visitors from out-of-region 10% 15% 20% Non-resident Visitor Spending per Trip $20.00 $30.00 $40.00 Estimated Annual Commercial Support $9,000,000 $20,250,000 $36,000,000 Average Sales Support Factor $293 $293 $293 Supportable Square Feet 31,000 69,000 123,000

12 Sheila A. Scott-Halsell, Radesh Palakurthi, Greg Dunn, and Wanlanai Saiprasert, "Trip Characteristics of Casino and Racino Visitors in Oklahoma" (July 29, 2009). International CHRIE Conference-Refereed Track. Paper 3. 13 http://www.clarkcountytoday.com/2016/11/10/cowlitz-casino-supreme-court/ 14 American Gaming Association. State of the States (2013) \\fl1\Projects\Projects\216045900\6_Final\RPT-E2 Land Use Planning-Market Analysis-161222.docx

VII. CONCLUSIONS AND RECOMMENDATIONS

▪ From a physical perspective the subject site has many positive characteristics, ranging from accessibility to visibility and view potential. We anticipate the lion’s share of market support to originate from south of The Subarea. In this context, the subarea’s position on the eastern portion of the La Center Road interchange will benefit from direct traffic exposure, with most trips entering The Subarea from the northbound ramps, fronting The Subarea. Access to resident market support is the principal limitation of the site.

▪ Current macroeconomic conditions are favorable. Employment rates are high, the economy is diversifying, and incomes are beginning to rise. Northwest Clark County should exhibit growth in real purchasing power over the coming decade.

▪ The Subarea’s primary trade area exhibits good demographics. There are nearly 13,000 households in the trade area with above average median incomes. Household growth across this entire base is expected to be moderate, averaging 0.9% per year. However, some communities within The Subarea are expected to exhibit robust growth, namely the City of Ridgefield.

▪ Freeway interchange subareas similar to the La Center Road Subarea generally take on one of three development profiles: freeway commercial, large-format/power center, and town center development. The determinant of each profile is largely correlated to traffic volumes and more importantly local demographics.

▪ If regional planning and growth management forecasts are assumed to be reliable, resident driven commercial support could potentially account for a maximum of 140,000 square feet of new market support in the trade area over the next 10 years.

▪ We did not find strong evidence to support that the existence of a casino resort translates into market support for off-site adjacent commercial activity. The extent to which support is created will be highly correlated to the share of visitors that originate from out-of-region and/or the market’s ability to support destination scaled development.

▪ Out-of-region casino visitors are not be expected to support a significant amount of commercial activity in La Center. The extent to which support is realized will be contingent on The Subarea’s ability to draw visitors away from the casino and into The Subarea. However, destination shopping will face headwinds resulting from geographic proximity to the Oregon market which enjoys a sales tax advantage to Washington (and share of market originating from Oregon). This condition is furthered by the narrow failure of I-1464 which would have repealed the out-of-state sales tax exemption.

▪ Potential commercial development in The Subarea will also compete directly with the Ilani Casino for commercial retail spending. Extensive dining and shopping opportunities are expected to be a component of the Ilani development program. These functions will capture a considerable share of casino visitor market share. Casino patron preferences spending patterns do not suggest strong off-site market potential.

▪ Additional potential commercial support for employment uses could be derived out of the indirect impacts of the casino itself. It is unclear the extent to which the casino will utilize local vendors, but the casino will require upwards of $40 million annually on vendor services.

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At stabilized operations, the Ilani Casino will become a regional destination drawing as many as 4.5 million visitors annually. This presents a unique shift in dynamics for the City of La Center and the properties located within the interchange subarea. While this increase in local trips is not likely to adversely harm economic opportunities, the upside potential is less clear. Our evaluation of freeway interchange and casino locations in Washington State did not produce strong evidence of non-resident activity alone supporting significant commercial development. Based on the conclusions noted here, we would expect commercial development potential to be influenced by, but not driven by tourism based support. In other words, a critical mass of commercial development needs to stand on its own from local market support.

In the context of precedent examples, the development profile for The Subarea will certainly support a scale of development above and beyond what is typically seen at freeway serving commercial interchanges. Conversely, we do not see the demographic or market support necessary to justify large format development (community center scale anchored by a large-format general merchandiser). Similarly, a destination power center similar to the Seattle Premium Outlets or the Woodburn Outlets would not share the same locational and tax advantages, and is also less likely.

Alternatively, our assessment would indicate that the most viable development form would resemble a town center scale of development resembling something in the mold of what has developed in DuPont. This “town center” format is consistent with on-going visioning for The Subarea and lends itself well to incrementally scaled development to respond to market influences over time. It shares similar orientation to a significant employment anchor and proximity to but outside of a major metropolitan area. As it exists today, the trade area does not share the same critical mass of existing households. This will contribute to tempered build-out and absorption.

The town center format further offers the greatest potential to capture non-retail commercial and office uses. When a critical mass of commercial services and amenities are established, low-rise employment uses will be increasingly likely. Modules of 7,500 to 10,000 square feet would be consistent with our expected rate of absorption and scale demanded by likely tenant profiles. Developed spaces should support full service-restaurants, personal and household care services, financial services, and eventually speculative office.

Over the intermediate term, we also see a market opportunity for hospitality/hotel development in The Subarea. This use would be complimentary to supporting commercial services, could serve an alternative/discount option to on-site casino hotel (planned), and also serve the freeway commercial market.

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