Kosmont Retail NOW!®
Presented to Howard Industrial Partners
June 2019
Prepared By:
Kosmont Companies
1230 Rosecrans Avenue, Suite 630
Manhattan Beach
Telephone: (424) 297-1070
www.kosmont.com
Pepper Ave – Retail/Industrial Market
Assessment in the City of Rialto
Kosmont Retail NOW!®
Kosmont Companies is a nationally-recognized real estate & economics advisory firm specializing in public-private transactions for 32+ years.
Note: When assignments involve real estate/property brokerage services, such transaction-based services are typically provided by Kosmont Real Estate Services (“KRES”). When assignments involve public finance services on behalf of a public agency, such municipal advisory services are provided by Kosmont Realty Corporation (“KRC”), doing business as Kosmont Transactions Services (“KTS”).
2 • Offers a full range of economics & real estate advisory services including:
– Market and Feasibility Analyses
– Economic Development Strategies & Implementation
– Identification of Funding Sources & Financing Strategies – Fiscal Impact & Economic Benefit Studies
– Retailer/Developer & Business Recruitment
– Public-Private Transaction Structuring & Negotiation
• Winning track record of initiating and implementing projects for municipalities – In-house team includes registered municipal advisors, financial analysts, lawyers, former bond underwriters, former city managers & department heads
– Extensive network of brokers, investors and market data for real-time information, and retail industry leadership • Kosmont is not just a “study” company – we create strategies & make projects a reality – Over $12 billion in project negotiation and implementation since 1986 – Completed hundreds of public and private financial transactions blending private investment with public funding sources to create win-win public-private financing structures Kosmont Companies Overview
Kosmont Retail NOW!® 3
• Kosmont was retained by Howard Industrial Partners to provide them and the City of Rialto a retail and industrial market analysis and assessment of supportable land uses on the Pepper Avenue Property • Once the Pepper Property have been evaluated, the City has requested Consultant to conduct developer outreach to survey supportable developments
• An overview of the evaluation is presented herein
Project Background & Status
Kosmont Retail NOW!®
Outline
4 1. Analysis
a) Economic & Demographic Profile
b) Market Supply & Demand Analysis
i. Supply, Vacancy, & Lease Rates (Retail & Industrial) ii. Retail Sales Performance
iii. Retail Sales Surplus / Leakage
2. Strategy
a) Land Use/SWOT Analysis
Kosmont Retail NOW!®
Economic &
Demographic Profile
5 1. Analysis
Kosmont Retail NOW!®
Pepper Ave. Site Aerial
~15 Acres
~24 Acres
Pepper Ave
28,000 ADT
Source: ESRI (2019)
~24-acre Site
Owned by Howard
Industrial Partners
Howard Industrial
Partners has the
potential to acquire
the ~15-acre Site
6 Kosmont Retail NOW!® 7
Demographic Highlights
Population & Households
• Population of 103,573 and 26,048 households within the City • Population of 138,833 and 34,761 households within 3 miles • Population of 373,472 and 97,439 households within 5 miles • Population of 830,570 and 223,230 Households within 10 miles Income
• Avg. HH income: $69,101 (City); $59,594 (within 3 miles); $61,873 (within 5 miles); and $72,644 (within 10 miles)
• Annual growth projected for HH income over next 5 years: 2.40% (City);
2.43% (within 3 miles); 2.31% (within 5 miles); and 2.46% (within 10 miles) Other Demographic Characteristics
• Average household size of 3.96 in City (larger than County and State) • Median age of 29.5 in City (younger than County and State) • 11% Bachelor’s Degree or higher (lower than County and State) • Race: 43% White, 33% Some Other Race, 15% Black Alone • Ethnicity: 72% Hispanic in City
Source: ESRI (2019); Notes: Data provided as of 2018. Radii centered at the intersection of I-210 Fwy and Pepper Ave.
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City of Rialto Limits and Radii
Source: ESRI (2019); Radii centered at the intersection of I-210 Fwy and Pepper Ave. 1 mile
5 Miles
3 Miles
Rialto
City Limits
8 10 Miles
Kosmont Retail NOW!® 9
Population and Income
City, County and State
Source: ESRI (2019)
2018 City of Rialto County of
San Bernardino
State of
California
Population 103,573 2,173,190 39,806,791
Households 26,048 648,132 13,336,104
Average HH Size 3.96 3.29 2.92
Median Age 29.5 32.9 36.2
% Hispanic Origin 72.2% 54.1% 39.6%
Per Capita Income $17,597 $24,813 $34,254
Median HH Income $54,087 $59,893 $69,051
Average HH Income $69,101 $81,663 $100,620
2018-2023
Annual Growth Rate
Population 0.64% 0.83% 0.82%
Median HH Income 2.40% 3.25% 3.47%
Kosmont Retail NOW!® 10
Radii
2018 1 Miles 3 Miles 5 Miles 10 Miles
Population 10,099 138,833 373,472 830,570
Households 2,388 34,761 97,439 223,230
Average HH Size 4.21 3.96 3.78 3.67
Median Age 30.2 28.9 29.3 30.3
% Hispanic Origin 68.3% 74.3% 72.8%
Per Capita Income $16,375 $15,253 $16,728 $19,967
Median HH Income $52,612 $46,380 $47,598 $53,959
Average HH Income $67,826 $59,594 $61,873 $72,644
2018-2023 Annual Growth Rate
Population 0.58% 0.61% 0.67% 0.80%
Median HH Income 2.73% 2.43% 2.31% 2.46%
Population and Income
Radii
Source: ESRI (2019); Radii centered at the intersection of I-210 Fwy and Pepper Ave.
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Age Profile
11 Rialto Population by Age Bracket in 2018
Millennials
(18-34), 29%
Gen. X (35-54), 23%
Gen. Z (5-17), 21%
Baby Boomers
(55-74), 15%
Gen. Alpha
(0-4), 9%
Silent Gen. (75+),
3%
Region Median Age
City 29.5
County 32.9
State 36.2
Generation Population (2018)
Millennials
(18-34 years old) 30,243
Gen. X
(35-54 years old) 23,925
Gen. Z
(5-17 years old) 21,647
Baby Boomers
(55-74 years old) 15,536
Gen. Alpha
(0-4 years old) 9,011
Silent Gen.
(75+ years old) 3,211
TOTAL
POPULATION 103,573
Source: ESRI (2019)
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Worker Inflow / Outflow
“Are jobs coming or going?”
12 *Employment Ratio = People employed within City (living and working in City + those who come into the City for work) / Employed population of City (living and working in City + workers who live in the City, but work outside of the City) Source: U.S. Census Bureau Center for Economic Studies (2015) Workers living & employed
in the City
Workers employed in the City
but living outside
Workers living in the City but
employed outside
Workers Living and Working 2,485
Workers Coming (Inflow) 19,033
Workers Going (Outflow) 34,935
Net Inflow/Outflow (15,902)
Employment Ratio* 0.58
Reference: San Bernardino County
Workers Living and
Working 372,298
Workers Coming (Inflow) 313,344
Workers Going (Outflow) 413,544
Net Inflow/Outflow (100,200)
Employment Ratio* 0.87
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Jobs / Housing Balance
13 2018 City of Rialto County of San
Bernardino
State of
California
Employment 21,751 666,275 16,100,156
Households 26,048 648,132 13,336,104
Jobs / Housing Ratio 0.84 1.03 1.21
Source: ESRI (2019)
Kosmont Retail NOW!®
Traffic Map
1 mile radius from CA-210 & N. Pepper Ave.
14 Source: ESRI (2019);
Radius centered at the
intersection of CA-210 and N.
Pepper Ave.
~29,241 AADT
at CA-210 & N.
Pepper Ave.
ADT = 123
Kosmont Retail NOW!® 15
• Younger population - median age of 29.5 in Rialto (younger than San Bernardino County and State median ages); Majority of Rialto’s population is Hispanic (72%)
• Average household size of 3.96 is larger than both County and State average household sizes; Average household income for the City is lower than the County and State average household incomes • A majority of employees who live in the City work in other areas including San Bernardino, Ontario, Rancho Cucamonga, Fontana, and Riverside, yielding a net outflow of jobs; The net outflow of jobs indicates a lower daytime population in the City
• Rialto’s jobs/housing ratio is lower than the County and State ratios, indicating a possible need for more jobs in the City
Summary: Economic and Demographic Profile
Kosmont Retail NOW!® 16
Market Demand Analysis
Supply, Vacancy, & Lease Rates
(Retail
& Industrial
)
1. Analysis
Kosmont Retail NOW!®
San Bernardino/Riverside Area
Retail Submarkets
Victorville
Moreno Valley/
Riverside
Rancho
Cucamonga/Chino
S. Riverside
County Palm
Desert
Rialto
Source: REIS (Q1 2019)
Rialto falls within the Colton/San Bernardino Retail submarket.
Colton/
San Bernardino
17 Kosmont Retail NOW!®
Retail Vacancy
by Submarket
7.0%
7.6%
9.0%
9.8% 9.8%
11.2%
13.8%
0.0%
5.0%
10.0%
15.0% Retail Vacancy (Q1 2019)
4.5 10.4 9.7 10.0 52.2 9.8 7.8
Total Gross Leasable Area (GLA) in millions of SF:
18 Source: REIS (Q1 2019); Note: Rialto Total Retail Market GLA = 701,300 SF (Taken from rental comps.) REIS observes retail rates from neighborhood shopping centers (GLA 30K – 150K SF) and community shopping centers (GLA 100K – 350K SF).
Rialto falls within the Colton/San Bernardino Retail submarket.
Kosmont Retail NOW!®
Retail Lease Rates
by Submarket
$18.27
$20.64
$22.40 $23.12 $23.60
$25.78 $25.92
$0.00
$10.00
$20.00
$30.00 Asking Retail Rent – $PSF / Yr. NNN (Q1 2019)
4.5 9.8 10.4 52.2 9.7 10.0 7.8
Total Gross Leasable Area (GLA) in millions of SF:
19 Source: REIS (Q1 2019); Note: Rialto Total Retail Market GLA = 701,300 SF (Taken from rental comps.) REIS observes retail rates from neighborhood shopping centers (GLA 30K – 150K SF) and community shopping centers (GLA 100K – 350K SF).
Rialto falls within the Colton/San Bernardino Retail submarket.
Kosmont Retail NOW!®
Retail Market Summary
Retail Summary (Q1 2019)
Colton/San Bernardino
Submarket
San Bernardino/Riverside
Market
Availability
NNN Rent Per SF $20.64 $23.12
Vacancy Rate 11.2% 9.8%
Vacant SF 1,097,000 5,130,000
Net Absorption (SF) (49,000) (222,000)
Inventory
Existing SF 9,777,000 52,212,000
20 Source: REIS (Q1 2019)
Kosmont Retail NOW!®
Vacancy Rates
NNN Asking Rent/SF
Retail Market History
Colton/San Bernardino Submarket
Year Inventory SF Vacant SF Total Vacant Percent % Total Net Absorption SF Total NNN Rent Overall 2018 9,777,000 1,048,000 10.7% 1,000 $20.21
2017 9,712,000 984,000 10.1% 194,000 $20.10
2016 9,472,000 938,000 9.9% (24,000) $18.97
2015 9,472,000 914,000 9.6% 110,000 $18.37
2014 9,460,000 1,012,000 10.7% 79,000 $17.96
2013 9,301,000 932,000 10.0% (40,000) $18.04
2012 9,301,000 892,000 9.6% 48,000 $17.77
2011 9,301,000 940,000 10.1% (16,000) $17.96
2010 9,246,000 869,000 9.4% 104,000 $18.05
2009 9,246,000 973,000 10.5% (342,000) $18.52
2008 9,169,000 554,000 6.0% (270,000) $18.94
2007 9,146,000 261,000 2.9% (64,000) $19.59
21 Source: REIS (Q1 2019)
Kosmont Retail NOW!®
San Bernardino/Riverside Area
Warehouse Submarkets
Rialto
Fontana
San Bernardino/
Redlands
Perris/
Moreno Valley
Victorville
Source: REIS (Q1 2019). REIS divides industrial uses into warehouse and flex/R&D space. For this analysis, we observed both warehouse and flex/R&D markets. Warehouse space is defined by REIS as industrial buildings used for storage and/or distribution of goods, including smaller regional warehouses, large bulk warehouses, and heavy distribution centers. Rialto falls within the San Bernardino/Redlands Warehouse submarket.
Rancho
Cucamonga
Ontario
22 Kosmont Retail NOW!®
Warehouse Vacancy
by Submarket
4.5%
6.0%
7.8% 8.0%
9.6%
14.1%
15.0%
0.0%
5.0%
10.0%
15.0%
20.0% Warehouse Vacancy (Q1 2019)
83.9 30.2 88.5 400.2 39.4 10.6 41.1
Total Gross Leasable Area (GLA) in millions of SF:
23 Source: REIS (Q1 2019); Note: Rialto Total Warehouse Market GLA = 6,034,700 SF (Taken from rental comps.) Rialto falls within the San Bernardino/Redlands Warehouse submarket.
Kosmont Retail NOW!®
$4.64
$5.34 $5.67 $5.67 $5.72 $5.73 $6.09
$0.00
$5.00
$10.00 Asking Warehouse Rent – $PSF / Yr. NNN (Q1 2019) Warehouse Lease Rates
by Submarket
10.6 88.5 30.2 400.2 39.4 83.9 41.1
Total Gross Leasable Area (GLA) in millions of SF:
24 Source: REIS (Q1 2019); Note: Rialto Total Warehouse Market GLA = 6,034,700 SF (Taken from rental comps.) Rialto falls within the San Bernardino/Redlands Warehouse submarket.
Kosmont Retail NOW!®
Warehouse Market Summary
Warehouse Summary (Q1 2019)
San Bernardino/Redlands
Submarket
San Bernardino/Riverside
Market
Availability
NNN Rent Per SF $5.34 $5.67
Vacancy Rate 7.8% 8.0%
Vacant SF 6,909,000 31,956,000
Net Absorption (SF) 336,000 4,031,000
Inventory
Existing SF 88,467,000 400,245,000
25 Source: REIS (Q1 2019)
Kosmont Retail NOW!®
Vacancy Rates NNN Asking Rent/SF
Warehouse Market History
San Bernardino/Redlands Submarket
Year Inventory SF Vacant SF Total Vacant Percent % Total Net Absorption SF Total NNN Rent Overall 2018 88,467,000 7,245,000 8.2% 3,117,000 $5.30
2017 82,984,000 4,879,000 5.9% 4,145,000 $5.00
2016 78,815,000 4,855,000 6.2% 3,325,000 $4.64
2015 76,711,000 6,076,000 7.9% 4,368,000 $4.31
2014 73,126,000 6,859,000 9.4% 3,637,000 $4.04
2013 69,986,000 7,356,000 10.5% 2,283,000 $3.82
2012 66,741,000 6,394,000 9.6% 2,679,000 $3.67
2011 64,629,000 6,961,000 10.8% 2,999,000 $3.56
2010 64,012,000 9,343,000 14.6% (224,000) $3.91
26 Source: REIS (Q1 2019)
Kosmont Retail NOW!®
San Bernardino/Riverside Area
Flex/R&D Submarkets
Rialto
San Bernardino/
Redlands
Perris/
Moreno Valley
Victorville
Source: REIS (Q1 2019). REIS divides industrial uses into warehouse and flex/R&D space. Flex/R&D space is defined by REIS as industrial buildings with a minimum total office percentage of 25% and consisting of either warehouse/distribution and/or specialty industrial space; such as research and development and high-tech space. Rialto falls within the San Bernardino/Redlands Flex/R&D submarket.
Rancho
Cucamonga
Ontario
27 Kosmont Retail NOW!®
Flex/R&D Vacancy
by Submarket
1.6%
2.5%
3.0%
3.5%
4.7%
0.0%
5.0%
10.0% Flex/R&D Vacancy (Q1 2019)
0.6 3.4 3.3 3.5 27.2 0.3
Total Gross Leasable Area (GLA) in millions of SF:
28 Source: REIS (Q1 2019); Note: Rialto Total Flex/R&D Market GLA = 293,600 SF (Taken from rental comps.) Rialto falls within the San Bernardino/Redlands Flex/R&D submarket.
22.3%
Kosmont Retail NOW!®
$8.63 $8.75 $9.29 $9.34 $9.85 $9.95
$0.00
$5.00
$10.00
$15.00 Asking Flex/R&D Rent – $PSF / Yr. NNN (Q1 2019)
Flex/R&D Lease Rates
by Submarket
27.2 3.3 0.3 3.4 3.5 0.6
Total Gross Leasable Area (GLA) in millions of SF:
29 Source: REIS (Q1 2019); Note: Rialto Total Flex/R&D Market GLA = 293,600 SF (Taken from rental comps.) Rialto falls within the San Bernardino/Redlands Flex/R&D submarket.
Kosmont Retail NOW!®
Flex/R&D Market Summary
Flex/R&D Summary (Q1 2019)
San Bernardino/Redlands
Submarket
San Bernardino/Riverside
Market
Availability
NNN Rent Per SF $8.75 $8.63
Vacancy Rate 3.0% 4.7%
Vacant SF 99,000 1,288,000
Net Absorption (SF) 2,000 90,000
Inventory
Existing SF 3,318,000 27,225,000
30 Source: REIS (Q1 2019)
Kosmont Retail NOW!®
Vacancy Rates NNN Asking Rent/SF
Flex/R&D Market History
San Bernardino/Redlands Submarket
Year Inventory SF Vacant SF Total Vacant Percent % Total Net Absorption SF Total NNN Rent Overall 2018 3,318,000 101,000 3.0% 23,000 $8.71
2017 3,318,000 124,000 3.7% 97,000 $8.41
2016 3,318,000 221,000 6.7% 51,000 $8.16
2015 3,318,000 272,000 8.2% 43,000 $7.98
2014 3,318,000 315,000 9.5% 58,000 $7.80
2013 3,318,000 373,000 11.2% (42,000) $7.57
2012 3,318,000 331,000 10.0% 42,000 $7.57
2011 3,318,000 373,000 11.2% 82,000 $7.60
2010 3,318,000 455,000 13.7% (53,000) $7.45
31 Source: REIS (Q1 2019)
Kosmont Retail NOW!® 32
• Supply, vacancy and lease/rental rates for retail, warehouse, and flex/R&D uses were compared between neighboring submarkets and the San Bernardino/Riverside market average
• City of Rialto falls within the “Colton/San Bernardino” submarket for retail and the “San Bernardino/Redlands” submarket for warehouse and flex/R&D uses (as defined by REIS)
• The Colton/San Bernardino Retail submarket features higher vacancy rates and lower lease rates compared to the San Bernardino/Riverside market and neighboring submarkets, indicating limited demand for retail in the submarket • However, current Q2 2019 retail vacancy and lease rates may differ, given the recent opening of the 430,000-square foot, Renaissance Marketplace shopping center.
Summary: Supply, Vacancy, & Lease Rates
Retail Use
Kosmont Retail NOW!®
Summary: Supply, Vacancy, & Lease Rates
Industrial Uses
33 • REIS divides industrial uses into warehouse and flex/R&D space. Kosmont observed both industrial uses in this analysis. The City of Rialto falls within the “San Bernardino/Redlands” submarket for both warehouse and flex/R&D uses • The San Bernardino/Redlands Warehouse submarket features slightly lower vacancy and lower lease rates compared to the San Bernardino/Riverside market and most neighboring submarkets, indicating demand for warehouse space. Furthermore, given the increased presence of e-commerce businesses, the demand for warehouse remains strong
• The San Bernardino/Redlands Flex/R&D submarket features lower vacancy rates compared to the greater market area and most neighboring submarkets.
Additionally, lease rates in the San Bernardino/Redlands Flex/R&D submarket are slightly higher than the greater market area, but lower than the neighboring submarkets, indicating demand for flex/R&D space • Among industrial uses, there appears to be demand for both warehouse and flex/R&D space. While the flex/R&D market remains stable, the warehouse market is tight given the increased demand for warehouse facilities by e- commerce businesses
Kosmont Retail NOW!® 34
Market Demand Analysis
Retail Sales Performance
1. Analysis
Kosmont Retail NOW!®
Rialto & Comparison Regions
35 Ontario
Rancho
Cucamonga
Fontana
San
Bernardino
10 Miles
Jurupa
Valley
Riverside
Redlands
Colton
Grand Terrace
Loma Linda
Bloomington CDP
Rialto
Source: ESRI (2019)
Kosmont Retail NOW!®
2018 Population (000s):
$75 $115 $227
$715 $775 $775
$1,347
$2,365 $2,405
$2,635
$4,132
$4,889
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
Retail Sales in 2017
(in $ millions)
Retail Sales Comparison
Rialto & Comparison Regions
12 25 25 104 54 104 72 212 178 219 175 322
36 Source: ESRI, Infogroup (2019); Includes taxable and non-taxable sales Kosmont Retail NOW!®
2018 Population (000s):
$4.6
$6.0 $6.9 $7.5
$9.0
$11.2 $12.0 $12.0 $12.2
$13.5 $14.2
$15.2
$18.8
$23.6
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
Per Capita Retail Sales in 2017
(in $ thousands)
Per Capita Retail Sales
Rialto & Comparison Regions
25 12 104 104 25 212 219 2,425 2,173 178 54 322 72 175
37 Source: ESRI, Infogroup (2019); Includes taxable and non-taxable sales Kosmont Retail NOW!® 38
Retail Category Definitions
• Shopper Goods / GAFO (General Merchandise, Apparel & Accessories, Furniture & Other Sales) – Clothing & Clothing Accessories Stores
– General Merchandise Stores
– Furniture & Home Furnishings Stores
– Health & Personal Care Stores
– Sporting Goods, Hobby, Book & Music Stores
– Electronics & Appliance Stores
– Miscellaneous Store Retailers (incl. Office Supply)
• Convenience Goods
– Food and Beverage (Grocery Stores)
– Food Service and Drinking Places (Restaurants & Bars) • Heavy Commercial Goods
– Building Materials (Home Improvement)
– Auto Dealers & Supplies
– Gasoline / Service Stations
• Non-Store Retailers (e.g., Online Shopping & Mail-Order) Note: Retail Categories delineated by NAICS / California Board of Equalization Kosmont Retail NOW!®
Key: Indicates higher or same value for Rialto Indicates lower value for Rialto Per Capita Retail Sales by Category
Rialto & Comparison Regions
Per Capita Retail Sales Rialto Colton Fontana Jurupa
Valley
Loma
Linda Ontario Rancho
Cuc. Redlands Riverside San
Bernardino
San
Bernardino
County
Shopper Goods (GAFO):
Clothing & Accessories Stores $108 $117 $153 $88 $72 $1,881 $1,160 $608 $690 $587 $556 General Merchandise Stores $1,190 $1,465 $1,719 $479 $848 $2,023 $2,962 $2,396 $2,255 $2,676 $2,055 Furniture & Home Stores $61 $1,582 $183 $201 $21 $1,431 $1,062 $1,500 $286 $216 $475 Health & Personal Care Stores $392 $788 $346 $169 $464 $443 $608 $1,131 $632 $459 $502 Sporting Goods, Hobby, Book Stores $41 $91 $96 $268 $159 $383 $968 $541 $285 $291 $305 Electronics & Appliance Stores $32 $110 $159 $152 $84 $651 $464 $179 $457 $211 $264 Miscellaneous Store Retailers $336 $103 $155 $477 $119 $1,045 $480 $513 $850 $367 $412 Total GAFO $2,160 $4,257 $2,811 $1,834 $1,767 $7,857 $7,704 $6,868 $5,455 $4,809 $4,570 Convenience Goods:
Food & Beverage Stores (Grocery) $1,947 $3,042 $1,371 $1,825 $1,404 $2,117 $1,828 $3,356 $2,026 $1,737 $1,752 Food Services & Drinking Places
(Restaurants) $994 $1,056 $841 $712 $825 $1,703 $1,744 $1,639 $1,411 $1,228 $1,186 Total Convenience $2,941 $4,098 $2,212 $2,537 $2,229 $3,820 $3,572 $4,995 $3,436 $2,966 $2,938 Heavy Commercial:
Bldg Materials, Garden Equip. Stores $1,085 $1,687 $1,232 $502 $210 $1,725 $904 $1,426 $852 $724 $941 Motor Vehicle & Parts Dealers $415 $3,182 $2,884 $707 $3,811 $7,088 $349 $4,354 $4,200 $2,426 $2,157 Gasoline Stations $851 $988 $2,031 $1,247 $741 $3,052 $895 $1,083 $1,222 $1,040 $1,534 Total Heavy Commercial $2,351 $5,858 $6,148 $2,456 $4,762 $11,865 $2,148 $6,863 $6,273 $4,190 $4,633 Non-store Retailers $27 $23 $2 $43 $220 $87 $109 $58 $22 $53 $50 Total Retail $7,479 $14,237 $11,172 $6,870 $8,978 $23,630 $13,533 $18,784 $15,186 $12,016 $12,191 Source: ESRI, Infogroup (2019), Includes taxable and non-taxable sales 39 Kosmont Retail NOW!® 40
Summary: Retail Sales Performance
• Consumer spending across retail categories is totaled and normalized for population within the City and comparison regions for the purpose of evaluating potential sales leakage / capture across jurisdictions • Retail sales per capita for the City (~$7,500) is less than the retail sales per capita of both Riverside and San Bernardino County (~$12,000 and ~$12,200, respectively)
• Higher performing sales categories include grocery stores and building materials stores
• Lower performing retail categories include clothing and accessories stores; general merchandise stores; furniture and home stores; health and personal care stores; sporting goods, hobby, books, and music stores; electronics and appliance stores; miscellaneous store retailers; restaurants; motor vehicle and parts dealers; gasoline stations; and non- store retailers
Kosmont Retail NOW!® 41
Market Demand Analysis
Retail Sales Surplus / Leakage
1. Analysis
Kosmont Retail NOW!®
$6.9 $7.5
$9.0
$11.2 $12.0 $12.2
$13.5
$14.2 $15.2
$18.8
$23.6
$8.7 $7.9
$15.3
$9.5
$7.4
$10.8
$16.0
$8.1
$10.9
$16.2
$9.3
Retail Sales Per Capita in $000s (2017)
Retail Spending Potential Per Capita in $000s (2017)
Retail Sales Surplus / Leakage
“Cash Registers vs. Wallets”
Note: Spending potential based on number of households, average household income, and estimated percentage of income spent on retail goods and services Source: ESRI, Infogroup (2019) Per Capita Sales Surplus/Leakage, Total Surplus/Leakage, and Percent Surplus/Leakage:
Leakage
($1.8K) ($0.4K) ($6.3K) $1.7K $4.6K $1.4K ($2.5K) $6.1K $4.3K $2.6K $14.3K ($194M) ($43M) ($160M) $364M $1,023M $3,000M ($431M) $337M $1,373M $188M $2,514M (21%) (5%) (41%) 18% 63% 13% (15%) 77% 39% 16% 155%
42 Kosmont Retail NOW!®
Retail Sales Surplus / Leakage by Category
City of Rialto
Retail Category
Retail
Spending
Potential
Retail
Sales
Retail
Surplus/
(Leakage)
Percent
Surplus/
(Leakage)
Online Sales
Leakage
Potential
Shopper Goods (GAFO):
Clothing & Clothing Accessories Stores $53,481,154 $11,193,259 ($42,287,895) (79.1%) High General Merchandise Stores $124,849,190 $123,236,004 ($1,613,186) (1.3%) Med Furniture & Home Furnishings Stores $27,192,216 $6,284,917 ($20,907,299) (76.9%) Med Health & Personal Care Stores $49,760,433 $40,621,721 ($9,138,712) (18.4%) Med Sporting Goods, Hobby, Book & Music Stores $23,940,390 $4,275,160 ($19,665,230) (82.1%) High Electronics & Appliance Stores $27,499,571 $3,276,146 ($24,223,425) (88.1%) High Miscellaneous Store Retailers $26,761,758 $34,812,497 $8,050,739 30.1% Varies Subtotal – GAFO $333,484,712 $223,699,704 ($109,785,008) (32.9%) Convenience Goods:
Food & Beverage Stores (Grocery) $120,387,180 $201,652,091 $81,264,911 67.5% Low Food Services & Drinking Places (Restaurants) $80,003,951 $102,983,541 $22,979,590 28.7% None Subtotal – Convenience $200,391,131 $304,635,632 $104,244,501 52.0% Heavy Commercial Goods:
Bldg Materials, Garden Equip. & Supply Stores $42,760,582 $112,381,735 $69,621,153 162.8% Low Motor Vehicle & Parts Dealers $152,377,183 $43,019,293 ($109,357,890) (71.8%) Low Gasoline Stations $67,874,980 $88,148,771 $20,273,791 29.9% None Subtotal – Heavy Commercial $263,012,745 $243,549,799 ($19,462,946) (7.4%) Non-store Retailers $21,017,185 $2,747,977 ($18,269,208) (86.9%) Varies Total Retail $817,905,773 $774,633,112 ($43,272,661) (5.3%) Source: ESRI, Infogroup (2019)
43 Kosmont Retail NOW!® 44
Surplus/Leakage Summary by Category
Surplus Retail Categories Leakage Retail Categories
• Miscellaneous Store Retailers
• Food & Beverage Stores (Grocery)
• Food Services & Drinking Places
(Restaurants)
• Bldg. Materials, Garden Equip. & Supply
Stores
• Gasoline Stations
• Clothing & Clothing Accessories Stores
• General Merchandise Stores
• Furniture & Home Furnishings Stores
• Health & Personal Care Stores
• Sporting Goods, Hobby, Book & Music
Stores
• Electronics & Appliance Stores
• Motor Vehicle & Parts Dealers
• Non-store Retailers
Kosmont Retail NOW!®
Retail Sales Leakage
Categories
Estimated
GLA (SF)
Estimated
Sales PSF
Estimated New
Retail Sales
Retail Sales
Surplus/(Leakage)
Remaining
Retail Sales
Surplus/(Leakage)
Clothing & Clothing
Accessories Stores 87,554 $300 $26,266,200 ($42,287,895) ($16,021,695) General Merchandise
Stores 8,213 $300 $2,463,900 ($1,613,186) $850,714
Furniture & Home
Furnishings Stores 4,536 $300 $1,360,800 ($20,907,299) ($19,546,499) Health & Personal Care
Stores 18,566 $300 $5,569,800 ($9,138,712) ($3,568,912) Sporting Goods, Hobby,
Book & Music Stores 5,000 $300 $1,500,000 ($19,665,230) ($18,165,230) Electronics & Appliance
Stores 5,544 $300 $1,663,200 ($24,223,425) ($22,560,225) Miscellaneous Store
Retailers 12,000 $400 $4,800,000 $8,050,739 $12,850,739 Food & Beverage Stores
(Grocery) 18,555 $400 $7,422,000 $81,264,911 $88,686,911 Food Services & Drinking
Places (Restaurants) 62,272 $400 $24,908,800 $22,979,590 $47,888,390 Building Materials Stores 4,442 $400 $1,776,800 $69,621,153 $71,397,953 Motor Vehicles & Parts
Dealers 0 $1,200 $0 ($109,357,890) ($109,357,890)
Gas Stations 3,100 $800 $2,480,000 $20,273,791 $22,753,791 Non-Store Retailers 0 $0 $0 ($18,269,208) ($18,269,208) Total Sales Leakage
Categories $80,211,500 ($43,272,661) $36,938,839
45 Source: Lewis Retail Centers; HdL Companies; Kosmont Companies (2019); Note: Estimated GLA by retail category taken from Renaissance Marketplace marketing brochure. Does not account for all leased space within shopping center nor non-store retailers.
Estimated New Retail Sales
Generated from Renaissance Marketplace
Kosmont Retail NOW!®
Source: ESRI; Directory
of Major Malls (2019)
46 Major Shopping Center Map
1, 3, 5 mile Radii from Pepper Ave. Site
1 Mile
3 Miles
5 Miles
Renaissance Marketplace
430,000 GLA
Kosmont Retail NOW!® 47
Summary: Retail Sales Surplus / Leakage
• Overall retail sales in the City are lower than retail spending potential suggesting that the City is not likely capturing a significant portion of Rialto resident retail purchases nor additional retail spending by residents of other cities (i.e. retail sales leakage). • Retail categories displaying sales leakage within the City include:
‒ Clothing & Clothing Accessories Stores
‒ General Merchandise Stores
‒ Furniture & Home Furnishings Stores
‒ Health & Personal Care Stores
‒ Sporting Goods, Hobby, Book & Music Stores
‒ Electronics & Appliance Stores
‒ Motor Vehicle & Parts Dealers
‒ Non-store Retailers
• It is important to note the data does not factor into account the recent opening of the new 430,000-square foot Renaissance Marketplace shopping center. While the data shows a retail sales leakage in the City, our retail sales estimates for the new shopping center show the Renaissance Marketplace capturing much of that leakage. Furthermore, our estimates show that the new shopping center could potentially lead to a retail sales surplus in the City, thus limiting demand for retail uses in the City. Many categories displaying a sales leakage may also be leaking sales to online retailers
Kosmont Retail NOW!®
Summary of Findings
48 Demographics & Economic Profile
• Young, predominantly Hispanic population; larger than average HH size with lower incomes compared to County and State
• Most employees who live in the City work in other areas such as San Bernardino, Ontario, Rancho Cucamonga, Fontana, and Riverside, leading to a net outflow of jobs • Rialto’s jobs/housing ratio is lower than the County and State ratios, indicating a possible need for more jobs in the City
Market Demand Analysis
• Rialto falls within the “Colton/San Bernardino” submarket for retail uses and the “San Bernardino/Redlands” submarket for both warehouse and flex/R&D uses • The Colton/San Bernardino submarket features high vacancy and low lease rates compared to the San Bernardino/Riverside market area and neighboring submarkets, indicating limited demand for retail • Retail sales in the City are lower than retail spending potential, suggesting that the City is leaking resident retail purchases to neighboring cities leading to a retail sales leakage. However, the opening of the Renaissance Marketplace shopping center in Rialto appears to have captured much of the previous retail sales leakage and could possibly lead to a retail sales surplus in the City, thus leading to less demand for retail. It is also important to note that many retail categories experiencing retail sales leakage are leaking sales to online retailers
• The industrial market was observed across two building types – warehouse and flex/R&D. Our analysis shows demand for both warehouse and flex/R&D uses
• While the flex/R&D market remains stable, the warehouse market remains tight. There is increased demand for warehouse space given the large presence of e-commerce businesses Kosmont Retail NOW!®
Land Use / SWOT
Analysis
49 2. Strategy
Kosmont Retail NOW!®
Planning Areas and Land Use
50 Kosmont Retail NOW!®
Opportunity Site Assessment
51 • The City of Rialto designated Planning Areas (PA) 1, 2 & 3 (aka Pepper Property) for potential future development as Mixed Business Park/Retail/Commercial/ Residential uses
• Kosmont categorized the Pepper Property with Strengths, Challenges, and Opportunities assessed in consideration of development feasibility of various uses including the Planning Areas 2 & 3 designations as well as warehouse/industrial/distribution/flex/R&D
• The Pepper Property Opportunity Site Areas include:
1. 24-Acres south of the I-210 Fwy on Pepper Ave. (PA-2 & 3)
2. Potential to acquire 15-Acres south of I-210 Fwy and adjacent to Pepper Ave. (PA-1)
Kosmont Retail NOW!®
Site Area Profile
Pepper Ave. Site
52 Property APNs Size
(SF/AC) Owner Zoning
Vacant Land
Next to I-210
Fwy and
Pepper Ave.
0264-201 (-
05, -06 and -
26)
(~24.23 AC)
1,055,800 SF
Howard
Industrial
Partners
Planning Area 1,
2 & 3 w/ Mixed
Business Park,
Retail/
Commercial &
Residential
TOTAL SIZE 1,055,800 SF (~24.23 AC)
Strengths Challenges Opportunities
• Near the I-210 Fwy transportation
corridor and Pepper Ave off-ramp
• Freeway network includes: I-210, I-10,
CA-215, CA-15
• Good visibility
• Local retail demand
• Currently no freeway frontage
• Access limited to Pepper Ave
• Commercial/industrial blend of uses, including
possible convenience retail and
industrial/distribution
• Potential to combine 24 acre site with adjacent
15 acre property
Sources: ESRI (2018); City of Rialto
~15 acres
~24 acres
Pepper Ave
~24-acre Site Owned by
Howard Industrial Partners
Howard Industrial Partners has the
potential to acquire the ~15-acre Site
Kosmont Retail NOW!®
SWOT Analysis
Pepper Ave. Site
53 Strengths Weaknesses
• Good visibility
• Near the I-210 Fwy transportation corridor and Pepper Ave off-ramp
• Freeway network includes: I-210, I-10, CA-215, CA-15
• Greater demand for warehouse space indicates a tight
market for warehouse uses
• Access limited to Pepper Ave.
• Currently no direct I-210 Fwy frontage
Opportunities Threats
• Potential development with commercial/industrial blend of uses, including warehouse, distribution, flex/R&D,
and possible convenience retail
• Potential to combine 24 acres with adjacent 15 acre
property
• Potential to leverage freeway visibility with signage and location identification
• Potential job creation depending on use
• Recent opening of nearby retail center appears
to have captured leaking retail sales
• Fiscal impact of retail vs. warehouse/flex/R&D
use
• Relevance of format of retail space in a
changing market (e.g., place-making, and retail
right-sizing)
Kosmont Retail NOW!®
Land Use/SWOT Analysis Findings
54 Overview & Considerations
• The Pepper Property is a ~24-Acre site near the I-210 Fwy transportation corridor with freeway network including I-10, CA-15, and CA-215 Highways • Fiscal impact of retail vs. warehouse/distribution/flex/R&D uses • Relevance of format of retail space in a changing market (e.g., place-making, retail right- sizing) as well as the advent of online sales leakage
• Recent opening of Renaissance Marketplace appears to have captured much of the previously leaking retail sales and potentially lead to a retail sales surplus in the City. • Potential job creation depending on land use
• Potential to combine 24-acre site with adjacent 15-acre property Overview of Findings
• There is limited demand for retail space, especially when considering the recent opening of the 430,000-square foot Renaissance Marketplace shopping center along the I-210 Freeway corridor
• While there is demand for both warehouse and flex/R&D space in the area, there is greater demand for warehouse space given the tighter market caused by the increased presence of e-commerce businesses
• Potential development with commercial/industrial blend of uses, including warehouse, distribution, flex/R&D, and possible convenience retail Kosmont Retail NOW!®
Questions & Discussion
Thank you
Kosmont Companies | Kosmont Realty | Kosmont Transactions Services 1601 N. Sepulveda Blvd., #382 | Manhattan Beach, CA 90266 (424) 297-1070 | www.kosmont.com | CA Broker #01182660 55