Agenda Report
Fullerton City Council
MEETING DATE: JUNE 20, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: SUNAYANA THOMAS, DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT PREPARED BY: SUNAYANA THOMAS, DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT
TAYLOR SAMUELSON, SENIOR ADMINISTRATIVE ANALYST
SUBJECT: CITYWIDE RETAIL Market Study
SUMMARY
The City retained Kosmont Companies in February 2023 to prepare a Citywide Retail Market Study for current and future retail needs. Staff requests City Council provide direction on the recommended menu of retail market action items developed from the Study.
RECOMMENDATION
Provide direction to Community and Economic Development regarding implementation of the recommended action items outlined in the study.
CITY MANAGER REMARKS
The City Council has had a goal for establishing an economic development strategy. This represents the first step in creating that strategy. This study focuses on the retail element of economic development.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statements:
Fiscal and Organizational Stability
Infrastructure and City Assets.
FISCAL IMPACT
No immediate fiscal impact from direction provided by City Council. Based on City Council direction, staff will bring forth next steps for each item City Council directs staff to further evaluate and include fiscal impact of these item(s) at such time.
The Retail Market Study provides an important step in strengthening the City retail sales tax base to address national and regional retail trends resulting from growth in e-commerce and Covid-19 impacts. The City should develop a robust Retail Market Study to attract and retain major sales tax contributors Economic development activities such as façade improvement programs, re-use of City owned parking lots and parking garages, signage enhancement efforts, wayfinding, public art, open space, etc. would assist the City in producing long-term value to the sales tax base and can provide an augmenting market-driven force rather than tax induced. These efforts, if implemented to their fullest extent, would improve the City’s overall underlying revenue streams.
The Housing Element requirements to meet 13,000 units and the Housing Incentive Overlay approach to achieve that goal includes adding a residential layer to existing commercial properties. City staff has requested Kosmont Companies to analyze the Housing Incentive Overlay properties to ensure the City retains the appropriate balance between commercial and residential use and recognizes the importance of existing and thriving industrial and commercial properties.
DISCUSSION
The City engaged Kosmont Companies in February 2023 to prepare a Citywide Retail Market Study to provide insights into current and future retail needs and provide relevant data to guide City marketing efforts with retail brokers and developers. The firm connected with our local brokers, developers and retail operators, analyzed economic trends and market potential, local permitting processes, retail district health and more. The results of this study included specific action items and recommendations to improve the local Fullerton retail industry economy. The study analyzed data, strategized on current conditions and provided an implementation framework.
Fullerton is a diverse, highly-educated community of over 142,000 people with major retail. It has a vibrant downtown and industrial, medical and higher educational institutions. The City is demographically diverse with over 20% Asian descent and over 30% Hispanic. Kosmont analyzed Fullerton’s retail health by leveraging artificial intelligence data provided through Placer.Ai which considers real time location data to understand trade area patterns, demographics, visitation, foot traffic and more. Kosmont also assessed how Fullerton and its major chains perform relative to Covid-19 and the City position relative to neighboring cities.
Key considerations in the analysis work used real-world market trends including the shift to digital retail, housing as a growth driver, logistics and distribution as critical economic pillars and telework reshapes where people spend their money. The study analyzed 14 retail cores and determined data such as median weekly visits, frequency, average household incomes and median visit lengths.
The City has an overall healthy economy, with a low unemployment rate and relies on retail sales taxes for the material portion of General Fund operations, generating an estimated $30 million per year. Fullerton has several significant major anchored shopping centers that draw millions of visitors each year in addition to the historic Downtown area with smaller shops and restaurants that draws 6.1 million people from a broad trade area. Major takeaways from the Retail Market Study include the following:
Retail sales declined only 15% during first year of Covid and rebounded strongly growing by almost 50% in past five years - demonstrating Fullerton’s strength in the regional marketplace.
Fullerton has a large retail market at 6.7 million square feet with a healthy 3.8% vacancy rate and most retail located on strong arterial thoroughfares.
Downtown area experienced dramatic customer decline in 2020 due to Covid and visits remain 20% below 2019 levels.
The City’s taxable sales range from under $100 per square foot to a high of $270 per square foot with an average of $170 per square foot, with exception of the Costco and Sam’s Club anchored centers.
Significant number of large box retailers (42 over 20,000 square foot).
Over-dependence on big box retailers can pose a threat in the long-run as tenant turnover can create outsized impacts to the sales-tax base. The study analyzed retail leakage at ten major locations where residents shop outside of Fullerton. The study collected data from March 1, 2022 through February 28, 2023. The top five retail leakage plazas where shoppers would rather shop outside of Fullerton include:
The Brea Mall
Brea Union Plaza
Brea Marketplace
La Habra Marketplace
Imperial East Shopping Center.
ICSC Conference Overview
Kosmont coordinated meetings at the recent national ICSC Conference in Las Vegas May 21 – 23, 2023 with approximate attendance of nearly 25,000, as part of recommendations and initial strategy implementation. Kosmont and City staff met with top retail and hotel brokers engaged in the Fullerton market. General feedback noted a strong retail market with low vacancies and the few larger vacancies in Fullerton have solid interest from regional and/or national retailers.
Recommendations
The plan identified specific tasks for Fullerton to consider implementing to improve its retail vibrancy and restore its downtown attraction. Detailed recommendations include:
Action Item 1: Create a Business Expansion, Attraction and Retention (BEAR) program.
Action Item 2: Sponsor technical assistance programs to support emerging businesses and entrepreneurs in the City.
Action Item 3: Maintain enhanced business and development data analytics to track economic and market trends. The study recommended the following metrics to measure each calendar year and compare to prior year results:
Sales Tax Revenues by Geographic District
Assessed Value of Commercial Property
Number and Type of Business Licenses
Employment by Industry
Survey of Business Owners.
Action Item 4: Consider programs that help existing businesses thrive (such as façade improvement programs, outdoor retail) and help existing properties utilize their space (such as expanding allowable uses in storefront spaces, sales tax in-lieu payment for non-retail uses).
Action Item 5: Explore creation of a Property Based Improvement District (“PBID”) to support enhanced cleaning, security, marketing and physical improvements in Downtown.
Action Item 6: Evaluate publicly-owned opportunity sites for potential reuse strategies that create gathering places, activities and other amenities.
Action Item 7: Invest in physical improvements that can create sense of place and further activate the Downtown area.
Action Item 8: Invest in other enhancements such as gateway signage and wayfinding, public art, thematic street and sidewalk enhancements and public open space.
Action Item 9: Evaluate success of existing centers, parking sufficiency, identify and analyze key privately-owned commercial sites well-positioned for reuse or redevelopment.
Action Item 10: Conduct outreach and collaborate and build relationships with property owners (e.g., Fullerton Crossroads, Amerige Heights) and brokers to explore development opportunities, pursue businesses and address challenges that can keep key uses at properties (retention) and bring new uses to privately-owned sites (attraction).
Staff recommends City Council consider these as practical and tangible investments, for which the City could take action to support existing local businesses and also to attract and expand businesses in the City.
The City is also evaluating the Housing Incentive Overlay Zone (HIOZ) and other deliverable options to satisfy the requirements of HCD (Housing and Community Development). The HIOZ provides a policy tool to address housing shortfall but it is important to critically examine the impact on jobs and tax revenue associated with key parcels having the option for a residential overlay. Staff anticipates finalizing the HIOZ parcels based on Kosmont’s review of the selected parcels and to consider potential unintended impacts by prioritizing housing without consideration of the ancillary impacts based on the preliminary analysis. Avoiding food deserts or impacting thousands in the workforce replaced by housing may not have overall positive implication. Economic development should go hand-in-hand with identification and consideration of new housing developments.
This study and analysis satisfies one of the many steps necessary to enhance economic development efforts. The retail plan will serve as a guiding document to enhance existing programs and to create new and sustainable programs and resources for various commercial owners and retail business operators that will improve the overall economic health of the community. The retail market study will also serve as a guiding document for the creation of a citywide economic development plan for a comprehensive overview of the local economy, business growth and development, business attraction and retention, fiscal strength and stability and more that identifies strategies, programs, and projects for implementation.
Attachments:
Attachment 1 – Retail Market Study May 2023
Attachment 2 – Retail Market Study Appendix
cc: City Manager, Eric J. Levitt
Citywide Retail Market Study
June 20, 2023 - Page 2