APPENDIX B: Market Analysis
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2016 APPENDIX B: Market Analysis 1. INTRODUCTION Overview The purpose of this study is to provide an overview of economic and real estate market conditions in the Bay Fair BART TOD Specific Plan (BFSP) area, the City of San Leandro, and the Market Area (stretching from Oakland to Union City), with the goal of providing insight and recommendations for appropriate future land uses to be included in the BFSP, as well as implementation strategies that are in sync with market conditions. The goal of the BFSP is to outline development potential, opportunity sites, and public investments/actions which will guide the BFSP area’s transition into an interconnected, higher- density, mixed-use transit-oriented development (TOD). This report explores preliminary real estate market demand and financial feasibility considerations for new development, and identifies preliminary strategies for overcoming barriers to transformation of BFSP into a transit-oriented district. In later phases of work Strategic Economics will more fully test the financial feasibility of development prototypes through pro forma analyses. The results will gauge the impacts of development incentives and market conditions on development feasibility. Strategic Economics will also prepare an implementation strategy for the specific plan. This introductory chapter sets the stage for the rest of this report by presenting an overview of key issues for transforming the BFSP area into a future TOD district, a description of the competitive market areas used for this analysis, and a description of report contents. This introduction also examines the planning area’s competitive context, including historical forces that shaped its development. Key Research Questions The analyses in this report are focused on several key questions identified in conjunction with City of San Leandro staff based on previous assessments and insights into the BFSP area: § Based on market and local conditions, what are achievable long-term goals for transformation of the BFSP area? § Based on market trends, location, and local conditions, what land uses and building types are most likely to lead development in the near term versus longer-term? § To what extent does BART access and proximity influence the BFSP area’s development potential? § How will the BFSP area’s large concentration of retail uses need to evolve in response to changing market conditions? § What lessons can be learned from transit-oriented developments at other BART stations within the market area that are also likely to drive demand and development at this study area? § What public improvements are needed and should be prioritized in order to facilitate transformative development in the BFSP area? Historical Context Today’s market context and opportunities for future development in the BFSP area are partly shaped by the area’s history. This section examines the BFSP area’s historical context, including its role relative to other BART station areas along the Fremont/Richmond line, including Downtown San Leandro, South Hayward and Union City. Development of the BFSP area began in earnest in the immediate post-World War II period. Prior to World War II, San Leandro and Hayward were the only cities south of Oakland in a largely agricultural portion of Alameda County; both cities included historic downtowns. By the 1950s, much of the land around the BFSP area was rapidly developing into primarily single family neighborhoods. This development was enabled by easy automobile access, while demand for housing was driven by the burgeoning employment opportunities in San Leandro’s fast-growing industrial base along the I- 880 corridor to the west. This western industrial development took advantage of the City’s rail lines and easy access to the Port of Oakland and Oakland’s airport. Bayfair Center opened in 1957 in an ideal location to serve the large and growing residential base of Oakland, San Leandro, Hayward, and surrounding communities. Built on the site of a former racetrack, Bayfair Center was located along the historic State Route 185 (E. 14th) corridor connecting San Jose and Oakland. Bayfair Center’s location at Highway 185 and Hesperian Ave was a major crossroads of significant local postwar growth, while the nearby existing and planned I-880, I-238, and I-580 freeways created new regional connectors in all directions. Bayfair Center was also positioned along a planned BART corridor intended to serve and provide greater accessibility to fast-growing East Bay communities. Bayfair Center was located along a historic rail corridor linking San Leandro and Hayward’s downtowns; by the late-1950s, this corridor was already targeted for construction of BART’s north-south East Bay service. BART began running this service in 1972, linking the historic downtowns and the new “suburban” commuter stations at Bay Fair, South Hayward, Union City, and Fremont. 2 | CITY OF SAN LEANDRO BAY FAIR BART TOD APPENDIX B: MARKET ANALYSIS The Bay Fair, South Hayward, and Union City stations were initially intended to serve as park-and-ride facilities, with little surrounding development. Fremont planned for a future downtown around its station, but the physical and functional character of its station was similar. Today, these four cities are all attempting to convert these stations from park-and-ride formats to transit-oriented communities, while San Leandro and Hayward are attempting to better-integrate stations into their existing downtowns and/or nearby commercial corridors. Today, the BFSP area continues to enjoy strong regional access from arterial roads, nearby freeways, and BART, but its role as a regional retail cluster is confronting limited growth in demand due to slower growth in surrounding communities, declining per capita spending power, and broader trends favoring luxury and discount retail instead of middle-market stores. The Bay Fair BART TOD Specific Plan presents an opportunity to tie together, modernize, and enliven the district such that it leverages BART access and allows it to function as more than the sum of its parts. Study and Market Area Boundaries This study examines the BFSP area’s conditions and trends relative to surrounding communities and the larger “Market Area” – defined below – within which the BFSP area competes for residents, office tenants, and retail customers. A variety of geographies are referenced throughout this report based on the most-relevant comparisons and availability of data: § BFSP area: The BFSP area is the actual Bay Fair BART TOD Specific Plan area, located southeast of Downtown San Leandro, between Interstate 880 and Interstate 580. Its boundaries are shown in Figure 1, and encompass primarily Bayfair Center, nearby Fashion Faire Place, Fairmont Square, and a stretch of Hesperian Blvd between East 14th Street and the City’s southern border. § BFSP Census Tracts: Figure 1 also shows the census tracts used for all census-based analyses in this report. In order to allow historical comparisons, these tracts were selected based on those which intersected a half-mile radius of Bay Fair BART station as of 1990 (some tracts were subdivided in subsequent years). The half-mile radius was selected since it represents an approximate ten minute walk to the station. § Market Area: This is the competitive market area examined for housing, office, and regional retail. This area stretches from Oakland to Union City and includes all areas in-between, as shown in Figure 2. This is the primary area within which San Leandro competes for residents, office-based businesses, and against other regional centers for retail customers. It was established based on broker and developer input and locations of competing housing, office, and retail uses. Since Bay Fair BART station is likely to be the strongest driver of new demand for future development in the BFSP area, the Market Area also represents the extent of other BART stations which primarily compete for transit-oriented development in this region. The Market Area should not be confused with a retail trade area; while the Market Area is intended to describe the broader area within which regional EXISTING CONDITIONS ANALYSIS| 3 retailers compete against one another, a trade area more narrowly defines the area from which a given center primarily draws its current customers. § Surrounding communities and Alameda County: The BFSP area and BFSP Census Tracts are also frequently compared to San Leandro, nearby incorporated and unincorporated communities, and Alameda County as appropriate or dictated by data limitations. Contents Following this introduction, Chapter 2 provides a summary of key findings from the study and implications for future TOD development in the BFSP area. Chapter 3 provides detailed analysis of demographics and employment conditions and trends, in order to better understand how the BFSP area’s evolving population will impact its future and its competitive position in the City and Market Area. Chapters 3 through 6 contain evaluations of the conditions and trends in housing, retail, and office uses, in order to understand market conditions and future market demand. 4 | CITY OF SAN LEANDRO BAY FAIR BART TOD Figure 1: Plan Area Census Tracts EXISTING CONDITIONS ANALYSIS| 5 Figure 2: Market Area 6 | CITY OF SAN LEANDRO BAY FAIR BART TOD 2. KEY FINDINGS Demographic and Employment Trends Households in the Bay Fair BART TOD Specific Plan (BFSP) area and surrounding neighborhoods are growing in size, becoming more family-oriented, and have modest incomes that are declining over time. Households in this area are large and contain a high share of families compared to the City and County. Incomes are approximately 25 percent lower than the City overall and have dropped by over 17 percent between 2000 and the 2009-2013 period (when adjusted for inflation). Household incomes in the City declined nine percent in the same time period. The Plan Area contains a significant concentration of retail and service jobs, though Bay Fair BART station currently serves primarily as a park-and-ride origin for workers in the region’s major employment centers.