Utah Economic and Business Review

Bureau of Economic and Business Research September/October 2005 University of Utah Volume 65 Numbers 9 & 10

Highlights Impacts of Large-Format on • The national debate on large-format retail arose Salt Lake County: A Case Study over concerns that national chain retailers Francis Xavier Lilly, Research Analyst undermine local business, employ people at depressed wages, suppress organized labor, and promote urban sprawl. Several studies make the Introduction case for local businesses on the grounds that their Most sizeable communities in the have faced local economic impact is greater than that of national chain retailers. This study is an attempt controversies in recent years over the continuing encroachment to gauge the impact of large-format retailers on of large-format (or “big box”) retailers into market areas that Salt Lake CountyIt was designed as a case study of a Wal-Mart Supercenter and a Home Depot were once dominated by thriving local merchants. The store recently built in the county. Wasatch Front is no stranger to this phenomenon. Concerted • The study included a pilot survey and a series of battles are being fought around the region between those who focus group sessions to better understand the activities of local businesses in the market areas. want to maintain a vibrant local economy and an historic The response rate from the pilot survey indicates community character and those who argue for continued that as many as half of the locally owned economic development through growth in national chain businesses in the county would need to be surveyed in order to reach a 90 percent retailers. confidence level. The focus groups were met with indifference from the businesses In this context, the Salt Lake County Mayor and Council surrounding the Wal-Mart Supercenter and contracted with the Bureau of Economic and Business Home Depot Store. Research (BEBR) to conduct a study that would examine the • The Wal-Mart market area is transforming from a center of heavy commercial and light industrial impacts of a Wal-Mart Supercenter at 300 West and 1300 activity to a major retail corridor. The Wal-Mart South in Salt Lake City and a Home Depot store at 3300 Supercenter is part of a recent expansion of large- South and Highland Drive in the Millcreek area of Salt Lake format retail along 300 West. • The Home Depot market area is an established County. The first phase of the study consisted of four residential neighborhood, with small-format components: focus groups, a pilot survey, a profile of the commercial activity concentrated along major market areas surrounding the stores, and identification of streets, and large-format retail concentrated in Brickyard Plaza. The Home Depot’s interest in policy considerations for further review. locating in the market area was met with significant opposition, on the grounds that the The project built on the existing debate over the merits of an store would generate traffic and undermine the increasingly homogeneous retail economy centered on large, small-format retail activity on Highland Drive. national brands, unified distribution networks, and global • The Wal-Mart Supercenter and Home Depot store are examples of infill development. The supply chains. Opponents to large-format retailers argue that neighborhood impacts in this case study may not they undermine local business, employ people at depressed be relevant to a suburban or rural context. wages, suppress organized labor, and promote urban sprawl. Impacts of Large-Format Retail on Salt Lake County: A Case Study supercenter and home store formatare recent entriesto continually evolving retail sector, and thatthe existing retail stores intheBozeman area isduetoa Montana. In thisstudy, EPSarguedthattheimpacton released alarge-formatretail impactstudyforBozeman, In May 2005,Economic andPlanning Systems (EPS) national chains. region, comparingtheimpactoflocalretailers and estimate animpactfortheChicagometropolitan and otheronlineresources. Multipliers were appliedto Exchange Commission,theU.S.Economic Census, from annualreports, filingswiththeSecurities and rather, CivicEconomics obtained comparabledata national competitorswere identifiedbutnotsurveyed; Andersonville ChamberofCommerce. Aslateof collaboration withtheclientand local businesseswere chosenby CivicEconomics in against publicly-heldnationalfirmsinthearea. Ten businesses intheAndersonvillearea, comparingthem revenue andexpenditure patternsoflocallyowned of 2004, CivicEconomics conductedadetailedsurvey Development CorporationintheChicagoarea in In afollow-up studyfortheAndersonville chain retailers, whenadjustedforrevenue. three timesasmuchlocaleconomicactivitynational Economics claimedthatlocalretailers generateupto national retailers. a greater economicbenefittothearea economythando employees betterthannational retailers, andtheyyield because locallyowned stores tendtopaytheir ofstrong,preservation locallyowned retail sectors Many otherimpactstudieshave arguedforthe Large-Format RetailImpactsNationwide neighborhoods andtheregion’s economy. large-format retailers ontheirsurrounding nationwide, thisstudyexplored theimpactsoftwo on theimpactofmajorretailers oncommunities ofanextensive andgrowingAs part bodyofscholarship 1 A studyconductedby Civic BUREAU OFECONOMIC ANDBUSINESS RESEARCH 2 Andersonville report. CivicEconomics selectedapanel the methodologyusedby CivicEconomics intheir determined thatitwouldnotbesufficienttoreplicate establishments andnationalchainretailers? BEBR the comparative economicimpactoflocal retail the oneraisedinCivicEconomics reports: whatis This studyendeavors toanswer a questionsimilarto had establishedapresence here. Depot entering themarket afterothernationalchains Montana, withfirmssuchas Wal-Mart andHome similar development patternstothoseinBozeman, national chains.Salt LakeCountyhas experienced market share inthefaceofgrowing competitionfrom vibrant localretail tomaintain sectorthatstruggles Like Andersonville,Salt LakeCounty hasalargeand and are relevant totheSalt LakeCountyexperience. the nationwidecontroversy over large-formatretailers, MIT/USDA reflect thebroad rangeofapproaches to The studiesby CivicEconomics, EPS,and lower prices. minority households,whichmaygainthemostfrom amarket oflow-incomepositioned toserve and Wal-Mart Supercenter inSalt LakeCityisstrategically impacts onlow-income andminorityhouseholds. The items,withthegreatest consumer pricesforgrocery businesshasresulted inlowercompetitor inthegrocery report arguedthatthesupercenter’s emergenceasa of the U.S. Department ofAgricultureof theU.S.Department (UDSA). Technology andtheEconomic Research (MIT) Service draft form,by theMassachusetts Institute of large-format retailers isexemplified inareport, stillin A third lineofreasoning inthenationaldebateover competition, ratherthansmalllocalmerchants. may findotherprominent nationalchainsastheirmain these cases,supercenters andotherlarge-formatretailers caused significantimpactstolocalmerchandisers. In the so-called“category killer” stores the area. Before theirentry, smallernationalretailers – 2 – hadalready 3 This of businesses chosen according to specific Figure 2 criteria to respond to a survey of revenue and Map of the Home Depot Market Area expenditure patterns, and extrapolated data from publicly-held information on major national chain retailers. This methodology may not have offered a complete and accurate picture of economic activity in the Andersonville area, as it did not utilize a random sample of locally owned businesses, and lacked revenue and expenditure data from national chain retailers at the store level. While their conclusions may have been accurate, there is no way to gauge their external validity. Source: University of Utah DIGIT Lab. Methodology of the Salt Lake County Baseline Study 3900 South, to the east by 2300 East, and to the west by 700 East. Our analysis included properties on either BEBR defined market areas surrounding the Wal-Mart side of the boundary streets. The market areas were Supercenter and the Home Depot store as part of the established to include commercial properties near the baseline study. The Wal-Mart market area (Figure 1) is Wal-Mart and the Home Depot. As either market area bounded to the north by 900 South, to the south by is bounded by other major retail centers, the 2100 south, to the east by State Street, and to the west boundaries were identified in order to establish a by I-15. The Home Depot market area (Figure 2) is consistent commercial profile without encroaching on bounded to the north by 2700 South, to the south by other high-profile regional retail centers. These market areas guided BEBR in its analysis of Figure 1 existing conditions and initial changes due Map of the Wal-Mart Market Area to the of two large-format retail stores. The study included a pilot survey of 20 randomly-selected local businesses, to gauge the effectiveness of a broader, statistically valid survey of revenue and expenditure patterns. A comprehensive list of businesses in the market areas was obtained through the Utah State Department of Workforce Services (DWS). To encourage participation, each survey

Source: University of Utah DIGIT Lab.

UNIVERSITY OF UTAH 3 was mailed out with an addressed and stamped return retailers using publicly available information; however, envelope. the accuracy of these estimates is questionable for a The pilot survey attempted to determine (1) whether variety of reasons. First, not all stores that comprise the local retail establishments would be willing to provide large-format network are equally profitable or detailed information about their operations, (2) the contribute equally to the company’s bottom line number of companies that would need to be surveyed relative to some demographic measure such as in order to meet an acceptable confidence level, and (3) population. For example, a large national retailer may whether a large-format retailer such as Wal-Mart would continue to operate a low-producing store in an area be willing to provide local expenditure data. The firms where it wants to maintain a presence. Therefore, were selected from a database maintained by the Vest making formulaic estimates of local spending using Pocket Business Coalition, a local advocacy group aggregated data will not provide an appropriate basis whose mission is to preserve the vitality of for comparing the economic importance of the national neighborhood businesses. Each company received a retailers to that of locally owned retailers. letter explaining the study and requesting the Given the challenges of estimating local activity from company’s participation, and the survey form. aggregated data and the questionable accuracy of the Impacts of Large-Format Retail on Salt Lake County: A Case Study Seven of the 20 companies responded - five completed estimates that are produced, BEBR recommended and returned the survey and two called to refuse, against a comparative analysis of the economic resulting in a 30 percent response rate. The exact importance of locally owned businesses and large- number of local retail establishments cannot be format retailers. ascertained, although DWS data indicate that there To elicit further information from area businesses, were 3,608 retail establishments operating in Salt Lake BEBR compiled a comprehensive list of businesses County during the first quarter 2005. Using surrounding the Wal-Mart Supercenter and the Home information collected by the Small Business Depot store, from which a random sample was drawn Administration, BEBR estimated that roughly one-half to participate in focus group sessions. The businesses to three-quarters of these businesses may be locally selected to participate in the focus groups were owned.4 Assuming a 30 percent response rate, BEBR identified by a sample of 1,136 businesses in the Wal- would have to survey about 900 businesses in order to Mart market area and 687 businesses in the Home achieve a 90 percent confidence level with a ± 5 percent Depot market areas, from a list provided by DWS. margin of error in order to accurately estimate the Fifty businesses from each market area were contacted economic importance of locally owned retail in early May 2005 to participate in the focus groups. establishments in Salt Lake County. As many as half of The focus groups were held over two weeks in May and all the locally owned businesses in Salt Lake County June 2005. would need to be surveyed in order to reach the target Few businesses expressed an interest in attending the confidence level. focus groups. In the Wal-Mart market area, four BEBR was not successful in securing cooperation from businesses of the 50 initially contacted agreed to attend a large-format retailer, such as a Wal-Mart, Home the focus group sessions. Twenty-five businesses refused Depot, or Target. There are studies that have attempted to participate, and the balance could not be reached to estimate the local spending patterns of national despite repeated calls. Notably, only one business

4 BUREAU OF ECONOMIC AND BUSINESS RESEARCH identified in the Home Depot market area expressed an and Home Depot as part of the permit process to build interest in attending the focus group. Those individuals their stores. who could not attend listed various reasons, including that they were too busy to attend or that their business Employment, Wages, and Retail Sales in was not sufficiently impacted by the Home Depot or the Market Areas Wal-Mart to warrant much discussion. Several Large-format retailers can significantly impact individuals who declined to participate in the focus employment and wages in a region. Recently, a group nonetheless offered feedback over the telephone. news article claimed that Wal-Mart alone added The focus group sessions were met with indifference 210,000 net jobs to the U.S. economy in 2004, while from most businesses in both market areas, which can simultaneously decreasing nominal wages by 2.2 be explained through a number of factors, including a percent.5 With the growth of large-format retail in Salt lack of interest, a failure to perceive significant impacts, Lake County, and the emergence of new retailers into or a lack of time or available personnel to attend (see the market, understanding the impact of large-format focus group results on p.14). retail on wages in Salt Lake County is a vital step Questions on wage and benefits activity were included toward understanding the broader economic and social in the survey sent out to locally owned businesses. impacts of this type of development. Wage data were also obtained through DWS which Unfortunately, reliable employment and wage data at provided job posting information from August 2004 to the local or store level is not readily available. August 2005 in the two North American Industry Establishing a baseline requires an understanding of the Classification System (NAICS) categories that included wage and employment trends of small businesses and the Wal-Mart Supercenter and the Home Depot and those of large national retailers. The pilot survey are dominated by national chain retailers. indicated that determining a valid measure of small Retail sales were estimated using taxable sales data from business employment will be ascertained only at great the Utah State Tax Commission at the census tract time and expense. BEBR also attempted to obtain wage level. Given the time constraints of this study, data data from members of the Vest Pocket Business were only available for calendar year 2004. Coalition via a telephone and fax survey. The response rate was too low to determine a pattern. Furthermore, Finally, a comprehensive study was undertaken to it is highly unlikely that large national retailers such as develop a profile of the commercial and residential Wal-Mart or Home Depot will release wage and activity in the Wal-Mart and Home Depot market employment data for their stores in Salt Lake County. areas, to serve as a baseline for further study in the future. This profile includes data on assessed valuation In order to better understand how large-format retailers of all real property in the market areas. Ten years of pay their employees, BEBR obtained wage data on job assessed valuation data were obtained by Newreach, openings posted through DWS in two NAICS Inc., a firm that specializes in real property data in the categories that are dominated by national retailers: Salt Lake area. BEBR computed the cumulative percent home centers; and warehouse clubs and supercenters. change in market value of each parcel in the market DWS provided wage data on 389 job postings between areas. Information on traffic patterns was obtained August 1, 2004 and July 31, 2005, accounting for 697 through traffic analysis studies conducted for Wal-Mart job openings. The median wage for all job categories

UNIVERSITY OF UTAH 5 Impacts of Large-Format Retail on Salt Lake County: A Case Study ore thDprmn fWrfreSrie.n=389 of Source: UtahDepartment Workforce Services. pulls from other existingnearby retail centers. retailto whichnew development inthemarket areas an expandedstudyarea inorder toidentifytheextent areas forcalendaryear 2004.BEBRcollecteddatafrom data forthecensustractsinandaround the market The Utah State Tax Commission provided retail sales data isincludedin Table 1. ofthewage retailers inthetimeperiod.Asummary represents asmallsampleofthejobsoffered by national because itdoesnotincludedataonbenefits,andlikely picture ofthewagetrends oflargenationalretailers was $8.00anhour. The DWS dataisonlyapartial Wage DataFromJobPostingsThroughDWSForWarehouseClubs,Supercenters,andHomeStores BUREAU OFECONOMIC ANDBUSINESS RESEARCH 6 August 2004ThroughJuly2005 Table 1 generated inthe11census tractssurrounding or A totalof$309.4millionintaxableretail saleswere near themarket area. Wal-Mart andotherfirmsthatwilllikelylocateinor not indirect competitionwith discountretailers suchas responsive toalargelydifferent setofmarkets andis District Salt LakeCity. Retail activityintheCentralBusiness along theI-80,I-15,andSR-201corridorsinSouth district andwest of700East,andtheretail activity sales inSalt LakeCitysouthofthe central business The dataforthe Wal-Mart market area captured retail 6 was notincludedinthisanalysis,asitis included in the Wal-Mart market area, $79.6 million of Characteristics of the Market Areas which was generated in the market area – accounting A major component of the study is an analysis of the for 23 percent of all retail sales. Most of the retail sales baseline characteristics of the Wal-Mart and Home in the area were generated immediately north of the Depot market areas. The market areas are unique, and market area, due to a high concentration of automobile offer two distinct cases of what could happen when a dealers and specialty retail stores. major retailer locates a store in a neighborhood. Taxable retail sales data for the Home Depot market Business Activities area captured retail sales in the Millcreek community of Each of the market areas exhibits a unique mix of uses Salt Lake County, and portions of South Salt Lake, and business activities. With convenient access to I-15 , and Holladay. Fifteen census tracts were and downtown, the Wal-Mart market area is a regional included in the analysis, four of which exist within the center of light industrial operations and wholesale Home Depot market area. A total of $209.5 million in trade. This market area includes business clusters taxable retail sales were generated in the census tracts. serving the construction industry, heavy machinery Roughly three-quarters of all retail sales in the area sales and repair, and automotive sales and repair. Figure during 2004 were distributed among three census tracts 3 illustrates the major business clusters in the Wal-Mart along 3300 South, and in one census tract along 3900 market area. Given its location, the market area is now South near State Street. A total of $39.9 million in sales attractive to large-format commercial retailers. Since – 19 percent of the area total – were generated in the 1995, when Wholesale and Home Depot census tract that includes Brickyard Plaza and Harmons located stores near 2100 South, the transition has . The tract that includes the Home Depot intensified since the completion of the I-15 store generated $12 million in retail sales in 2004, reconstruction project and the addition of light rail. although the addition of the Home Depot store in this Attendant businesses such as fast food restaurants, census tract is sure to increase that number in gasoline stations, and convenience stores have located subsequent years. The retail sales data may not be a fully accurate Figure 3 indicator of the extent of retail activity in the Major Business Clusters in the Wal-Mart Area: May 2005 Home Depot market area and in the neighborhoods surrounding it. Furthermore, reported retail sales data may vary from actual retail sales depending on whether a retailer reports sales data from the point of sale or from another address. Future research will require more reliable retail sales data over time to better understand sales trends in and around the market areas.

Source: Bureau of Economic and Business Research and Utah Department of Workforce Services.

UNIVERSITY OF UTAH 7 Impacts of Large-Format Retail on Salt Lake County: A Case Study Services. Source: Bureau ofEconomic of andBusinessResearch andUtahDepartment Workforce Most ofthe large nationalretailers intheHome surrounds St. Mark’s Hospital on3900 South. substantial clusterofhealthcare providers scattered throughout themarket area. A clusters ofneighborhoodretail establishments streets,along themajorarterial withsmaller retail tradeinthemarket area isconcentrated stations withconvenience stores. Much ofthe area. There are 53restaurants and12gasoline comprise thebulkofretail tradeinthismarket stores, specialtyretail, andapparel shops market area. Furniture andhomefurnishing There are 144retail tradebusinessesinthe percent ofallthebusinessesinmarket area. indicated by Figure 4. These businessesaccountfor44 andreal estate,as professional andtechnicalservices, business clustersare financeandinsurance,healthcare, is typicallyfoundinanoldersuburb. The primary residential population,hasabusinesscompositionthat The Home Depot market area, owing toalarge convenience stores inthemarket area. restaurants, eightgasolinestations,andnine 2100 South. There are currently 24fastfood in theemergingretail corridorsalong300 West and Major BusinessClustersintheHomeDepotArea:May2005 Figure 4 BUREAU OFECONOMIC ANDBUSINESS RESEARCH 8 Source: Bureau ofEconomic andBusinessResearch. *Announced toenterthe market areain2006. I-15. Most are oftheseproperties zoned general to thecentralbusinessdistrictandenhancedaccess in therest ofthemarket area, owing totheirproximity and 1300South have appreciated more thanproperties westdecade, properties of300 West between 900South shown somevolatility inrecent years. In thepast area have appreciated consistentlysince1995,buthave Market values ofreal inthe property Wal-Mart market trends inthemarket areas. Major NationalRetailersinTheMarketArea Plaza retail development. Table 2liststhe Depot market area existneartheBrickyard Depot market are higherthanthoseinthe value. Generally, values property intheHome value ofeachproperty, ratherthantheassessed Newreach, Inc. The datareflect themarket established from parcel dataobtainedby Property values inthemarket areas were Property Values either market area. major nationalretailers withapresence in ten years. Table 3summarizes value property dramatically inbothmarket areas inthepast value ofreal hasincreased property Wal-Mart market area, althoughthemedian Table 2 Table 3 Home Depot market area have Summary of Property Value Trends in 2004 decreased in value in the past ten years. Future research into the market areas should examine how the Wal-Mart Supercenter and Home Depot stores may impact the market value of surrounding parcels. Commercial properties along 300 West in the Wal-Mart market area may have the greatest potential for appreciation, as commercial retailers continue to expand into the area. Commercial activity in the Home Depot market area is stable, as there is not a Source: Bureau of Economic and Business Research and Newreach, Inc. concerted effort to change the patterns of development in the area. commercial. Parcels along 900 South, 1300 South, Residential Characteristics 2100 South, State Street, and 300 West have also The Wal-Mart and Home Depot market areas have appreciated significantly in the past ten years. Market very different residential characteristics. Table 4 offers a value losses since 1995 are isolated to specific parcels. side-by-side comparison of key demographics in each The Home Depot market area has a much larger market area, compared to the county as a whole. The residential population, with thousands of single-family Wal-Mart market area is much less affluent than the homes and planned-unit developments.7 Appreciation of real Table 4 property in the Home Depot Market Demographic Characteristics: 2000 area has been fairly consistent over the last ten years. Among properties in the Home Depot market area, commercial parcels near the convergence of Highland Drive, 1300 East, and 3300 South have gained the greatest value, ranging from 50 percent to over 500 percent. Some residential properties in the southwest quadrant of the market area have declined in value since 1998, but have nonetheless appreciated in the Source: U.S. Census Bureau, 2000 Summary File 1 and Summary File 3. last year. Very few properties in the

DAVID ECCLES SCHOOL OF BUSINESS 9 Impacts of Large-Format Retail on Salt Lake County: A Case Study Source: Bureau ofEconomic andBusinessResearch andNewreach, Inc. market area were below thepoverty level, 20.5 percent ofthefamilieslivingin median householdincomewas$24,375and the populationwas25years andolder. The median agewas29.9,and63.4percent of residents lived inthemarket area. The According tothe2000census,3,283 ten years. risen 43percent onaverage over thepast value ofthesingle-familyhousingstockhas $82,950, or$48.76persquare foot. The single-family housinginthemarket area is commercial landuses. The medianvalue of major roadways, arailline,andadjacent circulation inthemarket area islimitedby to roads andarea transit,althoughpedestrian light raillinewest of200 West. It isreadily accessible the housingislocatedbetween Main Street andthe housing stockinthe Wal-Mart market area. Most of Single-family homescomprise82percent ofthe housing typesinthemarket areas. different. Figures 5and6show thedistributionof population. The housingmixisalsoconsiderably Home Depot market area, andhasamuchsmaller 8 Housing intheWal-MartMarketArea:May2005 Figure 5 0BUREAU OFECONOMIC ANDBUSINESS RESEARCH 10 Source: Bureau ofEconomic andBusiness Research andNewreach, Inc. Housing intheHomeDepotMarketArea:May2005 value ofPUDswas$240,600,or$88.64persquare $169,900, or$86.01persquare foot,whilethemedian In 2004,themedian value ofsingle-familyhousingwas major arterials. condominiums, tendstobeconcentratednearthe duplexes,housing, includingapartments, and Home Depot market area isresidential. Higher density andonsomestreetmajor arterials corners,theentire condominiums. Asidefrom commercial areas alongthe area isrenter-occupied. and 59.8percent ofthehousinginmarket In theHome Depot market area, single- ethnicity characteristicsofthemarket areas. county-wide. Table 5illustratesraceand higher thanHispanic orLatino representation Latino inthe2000Census,afigure much area identifiedthemselves asHispanic or 32.3 percent oftheresidents inthemarket diverse thanthecountyasawhole.Notably, The Wal-Mart market area ismore ethnically remaining and stockconsistsofapartments percent ofthehousingstock.Much ofthe family housingandPUDscomprise71 Figure 6 foot, figures significantly higher than those for the Wal- Changes and Impacts in the Mart market area. PUD housing is newer than most of Wal-Mart Market Area the single-family housing stock in the market area, and In the past ten years, the Wal-Mart market area has is valued higher than single-family homes. The market faced major change, propelled by an expanded retail value of single-family housing has risen 33 percent over presence, the addition of Franklin Covey Field, the past ten years, while the market value of housing in installation of light rail, and highway improvements, PUDs has risen by 26 percent. including the addition of a second highway According to the 2000 census, 27,177 residents lived in interchange. As the market area became more accessible the market area. The median age was 30.5 and 65 to regional transportation, it became more attractive for percent of the population was 25 years old or older. regional retail development. Costco and Home Depot The median household income was $41,721 and 7.1 were the first retailers to establish there, and others percent of the families living in the market area were followed in subsequent years. After the reconstruction below the poverty level. Of the housing units in the of the highway interchange at 1300 South, Wal-Mart market area, 60 percent were owner-occupied. The and Lowe’s Home Improvement elected to locate stores racial and ethnic composition in the Home Depot in the market area near the interchange. market area is slightly more homogeneous than that of Wal-Mart first proposed locating a 210,000 square foot Salt Lake County. Supercenter store on the corner of 1300 South and 300 West in 2001. Fourteen parcels were assembled to accommodate the store, and a Table 5 number of businesses, including a Race and Ethnicity truck dealer, were displaced. The application required the vacation of Albermarle Avenue between 300 and 400 West. Site constraints prompted Wal-Mart to include a parking structure in its Supercenter development, one of the first in the country. The Wal-Mart Supercenter was built in a commercial zone, and did not require a conditional use permit. Per the recommendation of a traffic impact analysis conducted by CLC Associates, Wal-Mart paid for a traffic signal, and gave Salt *Note: Hispanics may be of any race. The above data represent the Hispanic/Latino communities as a distinct category and are not included in the other racial components. Lake City a gift of $50,000 for Source: Calculated by BEBR using U.S. Census Bureau data, Census 2000 Summary File 1. landscaping and improvements at a new community center. Salt Lake

UNIVERSITY OF UTAH 11 Impacts of Large-Format Retail on Salt Lake County: A Case Study shop andseveral dilapidatedresidences. the Home Depot store, thesiteconsistedofaflower neighborhood’s character. Before of theconstruction would cripplearea streets, andwouldunderminethe locally owned smallbusiness,generatetrafficlevels that arose from concernsthatitwould adversely impact The controversy surrounding theHome Depot store Home DepotMarket Area Changes andImpactsinthe incompatibleactivitiesofexistingbusinesses. disrupting The market area’s transitionwilllikelycontinue firm along300 West andisrelocating. solditsproperty for saleorleaseinthefirsthalfof2005.One major restaurant. At along300 least19properties West were renovated intoasmallstripmallwithfast-food street from the Wal-Mart Supercenter wasrecently are locatinginthemarket area. Abuildingacross the Sam’s ClubandLowe’s Home Improvement Warehouse The Wal-Mart market area iscontinuingtochange. Saturdays. would beduringtheevening peaktravel periodandon market area, andthatthoseimpactswouldoccur would have aminimalimpactontrafficlevels inthe Associates projected thatthe Wal-Mart Supercenter The trafficimpactanalysisconductedby CLC highway reconstruction project. have stabilized ordeclinedsincethecompletionof road segments AADT countsalongtheotherarterial 300 West andtheinterchange sinceitwasconstructed. counts,increased along1300South(AADT) between volumes, measured inaverage annualdailytraffic influenced by theI-15reconstruction project. Traffic Traffic inthe Wal-Mart market area hasbeenheavily opened inAugust 2004. Thestore other businessesorresidents inthearea. planning process. There waslittleoppositionfrom City madenoconcessionsto Wal-Mart duringthesite- 2BUREAU OFECONOMIC ANDBUSINESS RESEARCH 12 10 Home Depot’s construction of thestore.construction slightly higherthanthedelaysthatexistedbefore evening peak,and23.4secondsonSaturdays, only 3300 South are projected tobe24.6secondsduringthe delaysattheintersectionofHighland Driveservice and increase by 405vehicles per houronaverage. Level of hour onaverage, andweekend peak hourtripswould hour tripswouldincrease by about216 vehicles per relatively dailytripsonaverage. few Weekday peak projected thattheHome Depot sitewouldgenerate A trafficimpactanalysisconductedby Sear-Brown require addedcapacity. either road ishighandfuture retail expansionwould has remained roughly constantsince1998. Traffic along along 3300South attheHighland Drive intersection and rose from 2001to2003back1998levels. Traffic South and3900South declinedfrom 1998to2001, Traffic volumes along Highland Drive between 3300 Home Depot store site. a dedicatedturninglaneandimproved accessintothe in themarket area. The reconstruction project provided anyofthebusinesses no dedicatedleft-turnlaneserving concern. Before amajorupgrade,Highland Drive had Opponents totheHome Depot citedtrafficasamajor of thelargestretailers inthemarket area. though smallerthanmostotherHome Depots, isone over 110,000square feet,theHome Depot store, site designthatblendsinwiththeneighborhood.At accommodate parking, alandscapedparking lot,anda signalized intersection,areduced buildingfootprintto storein buildinganew inthemarket area, includinga Home Depot compliedwithaboutadozen conditions Home Depot wasunderconstruction. years, culminatinginalegaldispute,settledasthe proposals. The zoning process wasappealedover four of Salt LakeCounty’s mostcontroversial retail application forrezoning andabuildingpermitwasone Few changes are occurring in the Home Depot market established residential neighborhood with clusters of area. A drug store has located on the corner opposite retail activity. The Wal-Mart Supercenter is part of a the Home Depot and a new strip retail development redevelopment strategy, while the Home Depot store is has been built on 1300 East opposite the Brickyard an isolated incident of retail expansion into an existing, development. A local retailer is renovating the Villa stable neighborhood. Theatre for commercial use. A new retail development was constructed on 2700 South and 2300 East, and Policy Considerations and Conclusion most of the tenants are high-end specialty retailers. Policy discussions on large-format retail concern Where market forces and planning efforts have inefficient land-uses, excessive traffic generation, and collaborated to transform the Wal-Mart market area, urban sprawl. Initially, none of these factors seems the Home Depot market area is experiencing market applicable to either market area. The economic impacts transformation on a much slower and smaller scale. and neighborhood changes that will occur in the Aside from the Home Depot, the retail upgrades are market areas identified in this study may be largely in character with existing land use patterns. Salt dramatically different than the impacts that would Lake County planning officials do not seek to occur if either the Home Depot or the Wal-Mart were dramatically transform the Highland Drive retail built at the periphery of the Salt Lake urban area. corridor, and indicated that they would recommend Policy and planning implications should be established against any further rezoning along Highland Drive. from this context. The Wal-Mart Supercenter and the Home Depot store Both the Wal-Mart Supercenter and the Home Depot are two examples of a continued expansion of large- store have been built among existing business, many of format retail in Salt Lake County, but the stores in which have been present in the market areas for years. question in this study are more accurately characterized Much of the direct competition these stores face is with as infill projects in established urban areas. Infill other national chain retailers. The most immediate projects utilize and enhance existing infrastructure and concern with these retailers is their capacity to disrupt are often built into areas with compatible uses, and existing, unrelated business activity. This is particularly behave differently than similar developments at the evident in the Wal-Mart market area, where some edge of an urban area. Both projects were built on businesses are facing pressure to leave the neighborhood small sites and required significant investments in due to added traffic generated by the new retail infrastructure and site upgrades. Infrastructure and site development. costs vary substantially depending on where a large- This case study has included an extensive analysis of the format retail store is built. Furthermore, both the Wal- impacts of two retail projects on existing Mart Supercenter and the Home Depot located in neighborhoods, and prompts a number of policy markets that have already faced the onslaught of large- considerations: format retailers. Neither the Wal-Mart Supercenter nor • A retailer determined to enter or expand its presence in the Home Depot can be considered urban sprawl. a market will make significant concessions to construct The market areas are starkly different. While the Wal- a store. Both Wal-Mart and Home Depot spent Mart market area is in the midst of a major millions in locating in constrained areas. The Home transformation, the Home Depot market area is an Depot faced down significant neighborhood opposition

UNIVERSITY OF UTAH 13 Impacts of Large-Format Retail on Salt Lake County: A Case Study • • • • • • related tothe Wal-Mart Supercenter: offeredgroup sessions, participants thefollowing insights inthefocus attendance. Despite limitedparticipation focus group sessions were cancelledduetoalackof which were from the Wal-Mart market area. Allbuttwo inthefocusgroups,Only allof sixbusinesses participated with similaroffers. the Wal-Mart market area have notbeenapproached financial assistancetofacilitaterelocation, yet firmsin in otherneighborhoodsSalt LakeCityhave received market area. One firmquestionedwhysmallbusinesses enterprises soughtapproval tolocatetheirstores in the process as participation Wal-Mart andotherlargeretail concern thattheywere notincludedinthepublic Lack ofPublic Participation. their operations. raised thisissueare contemplatingmoving orceasing values.changes inproperty The three that participants now experiencingpressure from trafficcongestionand light industrialfirmsthathadflourishedforyears are continues topenetratethemarket area, manyofthe compatible withamajorretailer nearby. Asretail statedthattheiroperationswereparticipants not Incompatibility ofBusiness Activities. of vehicles andproperty, andpublicnuisancecrimes. Supercenter, includingbreak-ins, thefts,andvandalism increase incrimesurrounding the Wal-Mart Crime. corridor. the region are recognizing 300 West asaviableretail investments are takingplaceasconsumersthroughout Accordingly, are properties changinghandsandother market area by bringingretail customersintothearea. that the Wal-Mart Supercenter raisedtheprofile ofthe Increased Neighborhood Profile. market area. could domore toinvest ininfrastructure throughout the navigate. agreedThe participants thatSalt LakeCity 1300 South and400 West wasespeciallydifficultto to handleadditionaltraffic,andthattheintersectionof and streets inthe Wal-Mart market area are ill-equipped Poor Infrastructure. firm torelocate outofthemarket area impacts theirbusinessactivities,prompting atleaseone generated from the Wal-Mart Supercenter adversely expressedof theparticipants concernthattraffic automobile trafficcomingintotheneighborhood.Most Traffic. Three participants claim to have observed an Three claimtohave observed participants Participants more pedestrianand observed Focus Group Results Participants claimedthatsidewalks Three firmsexpressed Participants noted 4BUREAU OFECONOMIC ANDBUSINESS RESEARCH 14 Three • Small businessesare asignificantinvestment inour • A large-formatretail store builtattheedgeofa small • The adverse impactsofalarge-formatretail • When assessingtheimpactoflarge-formatretail on • The Wal-Mart Supercenter toarea hasbeendisruptive • Traffic impactscannotbemeasured strictlyin strategic importance ofsmallbusinessesshouldbe strategic importance employment andconsumerchoices,the opportunities While nationalchainretailers provide notable community andare vitaltoour economicwelfare. economy. may have anentirely different impactonthearea’s town suburbandevelopment ofavast new oraspart market. neighborhoods, oranunderserved development thattiesintopublictransit,established establishment canbemitigatedifitisaninfill businesses thatdonotcompetewithHome Depot. area boastsavibrantcollectionofsmall,locallyowned Depot store isagoodexampleofthis,as themarket exist inharmonywithsmallbusinesses. The Home business sectors;itispossiblethatalargeretailer can small businessactivitiesencompassavariety of tounderstandthat small business,itisimportant andsiteapprovals.efforts activities shouldbeconsidered inmasterplanning other areas. The potentialforincompatiblebusiness Businesses are eithershuttingdown orrelocating to whose activitiesare incompatiblewithretail activity. businesses andhasdisplacedsomeexisting existing businessesmustbeconsidered. numbers; thepotentialofretail traffictocompromise avoided inacompetitive retail market. concessions tomajorretail development shouldbe made nosignificantconcessionstotheretailers. Public change fortheHome Depot store, planningauthorities Drive store. Conversely, withtheexception ofthezone and repeatedly modifieditsdesignfortheHighland considered as national chain retailers continue to 4According to the Small Business Administration, 44 percent of the expand their presence. establishments operating in the Salt Lake City-Ogden MSA in 2002 had fewer than 10 employees. It is likely that a large percentage of The baseline study concluded that Wal-Mart these small businesses comprise the base of locally owned businesses. Supercenter and Home Depot store do not conform to This information can be accessed at: patterns commonly attributed to large-format retailers. www.sba.gov/advo/research/data.html 5 First, the stores in the BEBR study were infill projects, “Is Wal-Mart good or bad? It’s still a mystery” Reuters article dated November 4, 2005, posted on MSNBC.com. and do not fit the characteristics of suburban 6The geographic boundaries of the Central Business District are: 300 expansion. Consequently, their impacts are in many East, North Temple, 400 South and 500 West. Retail activity in the respects unique to the neighborhoods they were placed CBD includes the downtown malls and the Gateway. in. Secondly, national retailers have dominated the 7A planned unit development is a form of residential construction region’s market for home improvement centers and whereby some traditional zoning or land use regulations are waived, in discount retail stores for some time now, so initial order to give the developer greater flexibility in building and site design issues in accordance with a general plan. Traditionally, PUDs are built impacts on local businesses are a result of at slightly higher densities than most single-family residences, and can incompatibility, not direct competition. In this regard, include a mix of land uses within the development. the damage was done long ago, when national retailers 8Newreach, Inc. and the Bureau of Economic and Business Research. began to undermine local merchants in the grocery, 9Conversation with Doug Wheelright, Deputy Director, Salt Lake City general retail, and specialty goods market. Nonetheless, Planning Department, 28 June 2005 local businesses are impacted. 10Conversation with Curtis Woodward, Staff Planner, Salt Lake County Planning Department, 27 June 2005 This article is an illustration of two developments that 11Tables 6 and 7, East Salt Lake Home Depot Traffic Impact Study, are relevant to the larger debate on large-format retail. Sear-Brown, 2003. Despite the limitations of using a survey of business revenue and employment in arriving at a valid and reliable comparison of economic impact, the baseline study included a detailed analysis of the areas surrounding each retailer, providing the basis of future study. Determining the extent of the impact will require a second look at the market areas in the near future.

References 1“The Andersonville Study of Retail Economics” and “Economic Impact Analysis: A Case Study (Austin)” by Civic Economics and “The Economic Impact of Locally Owned Businesses vs. Chains: A Case Study in Midcoast Maine” by the Institute for Local Self-Reliance are three prominent studies that advance this argument. 2Stores such as Barnes and Noble Booksellers, Office Depot, and Petsmart fit this category. 3“Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart” by Jerry Hausman and Ephraim Leibtag, Revised Draft dated October 2005.

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