DEVELOPMENT OPPORTUNITIES
PEPPER AVENUE SPECIFIC PLAN
CITY OF RIALTO
CALIFORNIA
JULY 2014
Prepared for:
THE CITY OF RIALTO
131 S. Riverside Avenue
Rialto CA 92376
Prepared by:
MARKET PROFILES
14032 Enderle Center Drive #220
Tustin, California 92780
Telephone Number: 714/546-3814
Facsimile Number: 714/546-0953
www.marketprofilesinc.com
Market Profiles
Real Estate Research and Consultants for over 40 years
14032 Enderle Center Drive, Suite 220, Tustin, Ca. 92780 (714) 546-3814 Fax (714) 546-0953
July 14, 2014
Mr. Robb R. Steel
City of Rialto
131 S. Riverside Avenue
Rialto, Ca 92376
SUBJECT: MARKET OPPORTUNITIES - PROPOSED PEPPER AVENUE SPECIFIC
PLAN IN RIALTO, CALIFORNIA
Dear Mr. Steel:
Market Profiles is pleased to present this study that eva luates and analyzes the market feasibility of developing the Commercial, Retail, B usiness Park (office and industrial) and Residential components for approximately 102 acre specific plan located at the 210 Freeway and Pepper Avenue in the city of Rialto, California.
The study delineates the opportunity for each concept and recommends the appropriate land uses for Specific Plan process . This comprehensive market study and opportunity analysis is intended to assist the planning and development team in th e creation of a Specific Plan. The study includes precise trade and market area boundaries for each land use, based on evaluation of locational characteristics including access and natural or man-made barriers, location of competitive facilities, concentr ation of population and traffic/commute patterns.
Based on a detailed analysis of projected demand and existing and proposed supply for each studied land use, the report presents conclusions regarding the appropriate mix of land uses.
We appreciate this additional opportunity to be of service and to be involved in this very exciting project, and would be pleased to answer any questions that you may have.
Sincerely,
MARKET PROFILES INC.
Boyd D. Martin
CEO
Market Profiles, Inc.
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE NO.
1 I INTRODUCTION
Introduction ......................................................................................... I-1 Location Map ...................................................................................... I-2 Specific Plan Locations ....................................................................... I-2 Aerial Photograph ............................................................................... I-4 Area Support Facilities ........................................................................ I-5
II CONCLUSTIONS AND RECOMMENDATIONS
Introduction/Background .................................................................... II-1 Market Considerations ....................................................................... II-2 Retail.................................................................................................. II-2 Business Park .................................................................................... II-5 Hotel .................................................................................................. II-7 Residential ......................................................................................... II-7 Rental ................................................................................................ II-8 Development Timing and Phasing ..................................................... II-9 Developable Acres ........................................................................... II-10
III RETAIL MARKET OPPORTUNITIES ANALYSIS
Introduction ....................................................................................... III-1 Summary of Findings and Conclusions............................................. III-1 Retail Sales Trends .......................................................................... III-4 Retail Trade Area ............................................................................. III-8 Regional-Scale Retail Demand-Supply Analysis ............................ III-10 Supermarket Analysis ..................................................................... III-12 Existing Retail Competition ............................................................. III-15 Retail Centers Location Map ........................................................... III-18 Retail Land ..................................................................................... III-19 Planned Retail Competition………………………………….……… .. III-21
Renaissance Specific Plan ............................................................. III-22
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SECTION DESCRIPTION PAGE NO.
2 IV BUSINESS PARK MARKET OPPORTUNITIES
Introduction ....................................................................................... IV-1 Summary of Findings and Conclusions............................................. IV-1 Commercial-Industrial Construction Trends ...................................... IV-2 Office and Industrial Space Market Trends ....................................... IV-5 Demand for New Business Space .................................................... IV-7 Composition of Business Space Demand ......................................... IV-8 Business Park Competition ............................................................. IV-11 Business Park / Industrial Lease Rates .......................................... IV-12 Business Park / Industrial Land Values........................................... IV-12
V HOTEL MARKET OPPORTUNITY ANALYSIS
Introduction/Background .................................................................... V-1 Summary of Findings and Conclusions.............................................. V-1 Hotel Occupancy and Room Rate Trends ......................................... V-2 Hotel Demand and Supply ................................................................. V-3 Hotel Competition .............................................................................. V-5
VI RESIDENTIAL MARKET OPPORTUNITIES ANALYSIS
Introduction ....................................................................................... VI-1 New Home Market Demand Projections ........................................... VI-1 Economic Study Area Definition ....................................................... VI-3 Demographic Profile ......................................................................... VI-4 Housing Profile ................................................................................. VI-4 New Home Sales Trends .................................................................. VI-7 New Home Inventory Trends ............................................................ VI-7 New Home Price Trends ................................................................... VI-9 Distressed Properties...................................................................... VI-11 Projected New Home Demand ....................................................... VI-12 New Home Sales by Price Range ................................................... VI-14 New Home Demand by Price Range .............................................. VI-15 New Home Market Demand Projections ......................................... VI-16 Apartment Occupancy and Rent Trends ......................................... VI-17 Demand for Rental Units ................................................................. VI-19 Market Leasing Volume and Product Absorption ............................ VI-21 Rent Affordability Analysis .............................................................. VI-22 Rental Pricing ................................................................................ VI-23 Projected Rental Absorption………………………………….……… . VI-24
SECTION I
INTRODUCTION
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SECTION I
INTRODUCTION
INTRODUCTION
The following report presents the findings of the Market Profiles study of development opportunities for the approximately 102-acre Pepper Street mixed use development in the City of Rialto, California. The proposed site is bisected by the 210 Freeway, with a potential mix of commercial uses and residential to the south of the Freeway . The plan area will consist of approximately 102 acres of land generally located east of Eucalyptus, south of the I-210 freeway, west of the U nion Pacific railroad and north of Walnut Avenue. The Pepper Avenue roadway extension bisects the east and west half of the project area. The majority of the land within the proposed plan area has a zoning designation of Single Family Residential (R-1A) with the exception of the northwest quadrant of the proposed area, which has a zoning designation of Commercial Manufacturing (C-M).
The study reviews existing and proposed supply and forecasted demand to evaluate and recommend opportuniti es for development of the subject site for various forms of commercial/retail, as well as a Business Park analysis that considers office parks, industrial parks, warehouse/distribution and residential uses.
The City of Rialto is located in the western part of the San Bernardino County on the east side of the I-15 Ontario Freeway, due east of the city of Fontana, west of the city of San Bernardino and the I -215 Freeway , and generally north of the I -10 Freeway .
According to City documents the City of Rialt o is believed to have been settled prior to the year 1500 by Indians living in the Rialto area between 1500 and 1800 AD. Records indicate that in 1769 the King of Spain awarded portions of this area to selected Spanish Dons.
In 1887 a railroad connector line was built between San Bernardino and Pasadena by the Santa Fe Railroad. Also in this year a group of Methodists arrived seeking a new college site. Although the college was never built, it was the Methodists who started the town of Rialto. A belief remains that Rialto was named after the Rialto Bridge located in Venice, Italy and the bridge has remained a community symbol and will continue as the "Bridge of Progress."
The Chamber of Commerce was established in 1907. Within four years the population had grown to 1,500 with 40 businesses and a local newspaper. The Chamber made its decision to incorporate in the spring of 1911. Rialto is four miles wide and 8 1/2 miles long.
Foothill Boulevard was repaired in 1913 and became Route 66 , a section of the transcontinental Highway System. Today the t racks above First Street and the Pacific Market Profiles, Inc.
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Electric depot on Riverside Avenue are a part of the Southern Pacific Railroad System.
Rialto's population had increased to 3,156 by 1950. In 1956 the population soared to 15,359. By 1964 it increased to 23,290 and 33,500 in 1978. Rialto's population has grown to over 80,000 as of December 1994.
Rialto is an ethnically diverse and progressive community, which boasts several unique community assets including its own Police and Fire Departments, a Municipal Airport, a City owned Racquet and Fitness Center, Performing Arts Theater, a Community Center and Senior Center. Rialto is conveniently located to various recreational pursuits from the mountains, beaches and desert.
Exhibit I-1 below shows the location of Rialto and the subject site in a regional context.
Exhibit I -2 on the following page indicates the approximate boundaries of the Renaissance Rialto area, based on maps supplied by the City of Rialto Planning Department.
EXHIBIT I-1
SUBJECT SITE REGIONAL LOCATION MAP
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PROPERTY LOCATION AND DESCRIPTION
The plan area will consist of approximately 102 gross acres of land generally located east of Eucalyptus, south of the I-210 freeway, west of the Union Pacific railroad and north of Walnut Avenue. The Pepper Avenue roadway extension bisects the east and west half of the project area. Approximately 30+ acres of the property are currently unmitigated habitat.
EXHIBT I-2
SUBJECT SITE AERIAL PHOTOGRAPH
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The plan area, which consists of multiple properties currently under a number of public and private ownerships, is generally flat land. A large portion of the site is protected habitat, and at the center of the development is the Pepper Street extension.
The area immediately surrounding the site consists of residential neighborhoods with a current residential population of 59,701 persons within two miles and 130,505 within three miles. The majority of existing housing in the immediate area was built between 1950 and 1990, accounting for approximately 70 percent of the homes within a five mile radius. Owner occupied homes account for 64% of the households with a median value of $169,192. The area has a median household income of $43, 857. For more detailed demographic information, refer to Section III of this report.
Primary access will be from the Pepper Avenue freeway access. The route of the SR - 210 Freeway runs between the city of San Bernardino to the east and continues west through Los Angeles County to the I -5 Freeway (Grapevine). Interstate 15 and the SR - 210 Freeway are major commuting routes to employment centers located in San Bernardino, Orange, Los Angeles, and San Diego Counties.
Secondary access to the plan areas will be from Eucalyptus Street and Pepper Avenue which are North/South arterial roads connecting to Baseline Road from the subject site.
The 210 Freeway is an important element for the proposed project.
AREA SUPPORT FACILITIES
The 210 Freeway is a primary link between the subject site and communities located in western San Bernardino County, as well as providing access to Interstate 15 and Interstate 215, two major commuting routes to employment centers located throughout the Inland Empire and the rest of Southern California.
Although the subject site is sparsely developed at present, there are a number of existing facilities in the area to serve the needs of potential residents within the Plan area, and plans for the site i tself includes significant areas of retail, schools, employment-generating uses and other population-supporting development.
Local Retail Facilities
There are five neighborhood centers near the subject property. These centers (see exhibit III-10) offer everyday-needs shopping goods, including grocery. They are:
Ralphs / Rite aid Center (NWC Riverside and 210 Freeway) Creekside (NEC Riverside and 210 Freeway)
Rialto Towne Plaza (NWC Riverside & Baseline)
North Rialto Shopping Center (NEC Riverside & Baseline) Rialto Square (SWC Riverside & Baseline)
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Regional Shopping Facilities
Victoria Gardens Mall is a recently-opened super regional-scale retail center located on Foothill Boulevard in Rancho Cucamonga, approximately six miles west of the subj ect site. This is a unique new open air "main street retail district" (also described by the developers as an open air Lifestyle Center) covering 159 acres, with more than 1.3 million square feet of retail area in its various sections. Victoria Gardens o ffers a mixture of regional and neighborhood -level retail shopping, restaurant and entertainment, professional services, civic and cultural uses making it a destination location for the entire Inland Empire. This center provides more than 100 different stores, with current anchors including AMC Theatres, JC Penney, and two locations of Macy’s.
Other major retail shopping centers are located within 10 miles of the plan area, including: Ontario Mills , a 1.5 million square foot retail and entertainment des tination featuring 23 anchors and over 250 specialty retailers, as well as a variety of theme restaurants, casual dining and cutting -edge entertainment venues ; and the Colonies Crossroads a 1.1 million square foot super regional center in the city of Uplan d that (at least prior to the opening of Victoria Gardens) proclaimed itself to be the “largest lifestyle shopping center in the Inland Empire.”
Medical
Hospitals are within reasonable distances of the subject site.
• The Kaiser Foundation Hospital (9961 Sierra Ave, Fontana, CA) is a 368-bed general medical and surgical hospital. The medical center is fully accredited with over 3,350 medical professionals and staff.
• The Riverside Community Hospital (4445 Magnolia Ave, Riverside, CA) is a 329- bed general medical and surgical hospital located near the 91 Freeway and 14 th Street in the city of Riverside.
• The Community Hospital of San Bernardino and the Sun Health Robert H.
Ballard Rehab Hospital are located at 1760 W 16th St, in the city of San Bernardino.
Recreation
A number of recreational facilities and attractions are located in close proximity to the Plan area.
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• Sierra Lakes Golf Club (16600 Clubhouse Dr, Fontana, CA) features a public 18- hole Ted Robinson designed golf course, which opened in 2000. The golf club also features a pro shop, practice facilities, and clubhouse.
• The El Rancho Verde Royal Vista Country Club (355 Country Club Drive Rialto, CA) is located north of Riverside Avenue in the city of Rialto. Established in 1957, the 18-hole public course designed by Harry Rainville has a new driving range, golf shop, and a clubhouse that can accommodate banquets, weddings and parties of various sizes.
• The Lewis Sports Complex is a C ity of F ontana-operated facility that opened in 2004 and features numerous lighted sports fields for local and regional soccer tournaments.
• The California Speedway is a national attraction located in the City of Fontana .
This 568- acre racing facility features a two- mile d -shaped oval track and seats over 90,000 spectators. Home to the California 500, the racetrack also features numerous NASCAR, Indy Racing League, CART, and NHRA races throughout the year.
The sections of the report that follow include conclusions regarding the market area, as well as recommendations regarding positioning, mix of land uses and product recommendations, office, retail and industrial development opportunities and a delineation of rental residential,. In addition, the report includes detailed analyses of supply and demand factors that lead to the conclusions and recommendations.
SECTION II
CONCLUSIONS AND RECOMMENDATIONS
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SECTION II
CONCLUSIONS AND RECOMMENDATIONS
INTRODUCTION
In addition to recommendations for development of the Specific Plan area, this section of the report presents key conclusions and selected findings for the market area and the subject site, an appr oximately 102-acre property in the City of Rialto also referred to as the Pepper Avenue Specific Plan area, generally located east of Eucalyptus, south of the I-210 freeway, west of the U nion Pacific railroad and north of Walnut Avenue..
The area, which encompas ses lands under multiple private ownerships, is defined in Exhibit II-1 below.
EXHIBIT II-1
PEPPER AVENUE SPECIFIC PLAN BOUNDARIES
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The conclusions and recommendations that follow are targeted to the 102 gross acres within the proposed Specific Plan Area. Detailed information on which these conclusions and recommendations are based can be found in the balance of the report.
For purposes of this analysis, the Rialto Primary Market Area (PMA) is defined as consisting of the cities of Rialto and Fontana and the immediately surrounding unincorporated areas
1. MARKET CONSIDERATIONS
Although the market for new housing in the Rialto competitive area has been very active and is expected to grow into the foreseeable future, the local market has experienced a slowdown in sales velocity during 2006 coinciding with a softening of the real estate market nationally and regionally. As the area continues to add new households due to the 210 Freeway complet ion through Rialto, a need for additional supporting retail and other land uses – including office space and other business-supporting properties – has been created
CONCLUSIONS AND RECOMMENDATIONS BY LAND USE TYPE
• Retail
o Rialto has been losing a large share of retail sales to competitive retail centers located in the neighboring cities of Fontana and San Bernardino.
o A substantial portion of these sales “leakages” could be recaptured by the development of new, well located retail centers within Rialto; a majority of the sales leakages will be recaptured with the development of the Renaissance Village retail center (833,000 sq. ft.)
located just over two miles to the west at Ayala Drive and the I-210 Freeway, along with the Rialto Gateway Plaza (220,000 sq. ft. potential) located further to the west at Alder Avenue and I-210. o These proposed retail centers pose strong competition for the subject property; nevertheless, given the property’s favorable accessibility and visibility characteristics with respect to the I-210 freeway along
1 See Exhibit III-1 in Section III for the precise boundaries of the Primary Market Area.
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with proximity to the I-215 freeway, there is market potential for retail/ commercial development at the site.
o The retail/commercial uses that offer the greatest market opportunities consist of restaurants, convenience retail, a neighborhood retail center, and freeway showroom/commercial. o Based upon the findings of the market analysis (report Section III), the following retail/commercial development opportunities were identified:
1. Restaurants (primarily fast casual) located at the southwest and southeast quadrants of Pepper Avenue and I-210 and as components of convenience- and neighborhood-scale retail centers (see below).
2. Approximately 5 acres (FAR 0.25+) for convenience retail space (including fast casual restaurants) to service the local population in the form of small retail centers fronting Pepper Avenue extending southward from the I-210 freeway up to one quarter mile; a depth of 300’ to 400’ is recommended for these retail sites with greater depth at street intersections.
3. Approximately 10 to 15 acres for a neighborhood retail center (FAR 0.25+) situated at the southwest or southeast quadrants of the I-210 freeway and Pepper Avenue or other major
intersection (freeway visibility is desirable but not requisite); anchored by a supermarket or other mid-major tenant and featuring fast casual restaurants; this center may attract a mid- major retailer such as a discount clothier, or discount general merchandise store, and possibly a full-service restaurant; other potential tenant candidates include a drug store or fitness facility; the potential to attract a supermarket to the subject site is in question due to the following factors:
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• Supermarkets prefer locations surrounded by roof tops; a large portion of the 1-mile consumer trade area proximate to the site is open space; while some of this open space will be developed the majority will remain vacant.
• Just one mile to the west at Riverside Avenue and I-210 are existing neighborhood retail centers with a Ralphs
supermarket and Walgreens drug store; these centers
pose strong competition.
4. Approximately 5 acres of freeway frontage zoned for freeway showroom/ commercial (situated so as to provide maximum freeway visibility).
• The recommended configuration consists of one and two- story multi-tenant and flex buildings situated to maximize freeway exposure (FAR approx. 0.4); not all of the
buildings need have direct freeway exposure, however, a liberal sign ordinance that allows large and tall signs that are clearly visible from the freeway is essential.
• Due to the existence of very strong competition in the form of 100+acres of vacant freeway-frontage commercial sites along I-210 to the west (see Planned Retail Competition below), the ability to attract retailers to the subject property is speculative; it is therefore recommended that the
freeway showroom/commercial site be zoned for mixed
use— freeway showroom/commercial and multi-family—in
order to facilitate and potentially accelerate development thereby maximizing the land value.
5. Gas Station – Freeway locations often attract gas stations, however, this industry has become extremely selective with regard to new sites and very high traffic volumes on adjacent Market Profiles, Inc.
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surface streets are typically required and the site must offer exceptional ease of ingress and egress.
6. With regard to auto dealers, the research identified opportunity to recapture sales leakages, however, there are a numerous high quality sites to the west along the I-210 freeway that pose very strong competition; it is possible but unlikely that a dealership would choose to locate at the subject property. o Retail Development Timing – The success of neighborhood and convenience retail centers are dependent upon the support of local residential neighborhoods; these land uses will not be viable until a majority of the residential units planned for the Pepper Avenue Specific Plan have become occupied (see Development Timing and Phasing below); convenience retail uses can be phased in as the residential neighborhoods are developed, however, due to its larger scale of development the neighborhood retail center will likely not be viable until the residential neighborhoods have reached near built-out status; the timing of a freeway showroom/commercial center requires an increase in the traffic volume on the I-210 freeway, such increase will be occurring over the next few years.
• Business Park
o As with the retail sector, Rialto has been losing businesses to competitive business parks located beyond the city limits; all non- residential land use categories have been impacted including office and business park/industrial.
o As the regional economy continues to improve, the city could recapture market share if desirable business sites were made available (i.e., accessible, visible, and within an attractive setting).
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o The subject property benefits from proximity to the I-215 freeway which is an important commercial transportation corridor serving the east San Bernardino Valley and which connects the subject site with other important existing commercial centers.
o The land use configuration that offers the greatest market potential consists of single and two-story multi-tenant structures and individual flex/R&D buildings; estimated average FAR of 0.4 (however, the maximum degree of land use flexibility should be offered enabling uses ranging from light manufacturing to office).
o The recommended acreage dedicated to business park use is between 15 and 20 acres; freeway visibility is desirable but not requisite.
o Given the existence of very strong competition in the form of 600+acres of vacant business park sites located three miles to the west on the south side of the I-210 freeway (i.e., the Renaissance Specific Plan area), the ability to attract businesses to the subject property is speculative; it is therefore recommended that the business park land be zoned for mixed use— business park and multi-family-- in order to facilitate and accelerate development thereby maximizing the land value.
o Business Park Development Timing – Market support for the business park will arise following a period of sustained economic growth in the East San Bernardino Valley; the Inland Empire economy is yet to fully recover from the national recession and it is projected that an additional three to five years of economic growth are necessary to produce the necessary business conditions.
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• Hotel
o The subject property has a single attribute that may attract a hotel/motel developer, that being freeway frontage; conversely, the following market factors suggest that the subject property is not a prime candidate for a hotel/motel:
There are 100+acres of vacant freeway-frontage commercial sites situated along I-210 to the west that pose strong competition. There no destination land uses in the immediate vicinity of the site that might attract business or leisure travelers.
The traffic volume passing by the site is modest (28,000 ADT) compared to other area freeways, i.e., I-215, I-15, I-10 (100,000+ADTs), and the I-210 to the west of the site (50,000+ ADT).
o It is thus concluded that hospitality land uses are not viable on the subject property.
• Residential
o Given the projected improvement in the Inland Empire economy and the associated growth in employment, significant improvement in the new home market is projected.
o Employment growth will fuel rising new home demand which in turn will support moderately rising new home prices.
o The demand for new homes in the Economic Study Area “ESA” is projected average 700 homes per year in the 2015 through 2019 period.
o New home sales are projected to strengthen in 2016 through 2019 as builders respond to the favorable demand- supply conditions and bring greater numbers of homes to the market.
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o In the 2017 through 2019 period, annual new home demand is projected to average 800 homes per year.
o In the first quarter of 2007, 65% of the new homes sold in the submarket were priced over $450,000; in the first quarter of 2014, 18% of the homes sold were priced over $450,000.
o In the first quarter of 2007 attached homes accounted for all of the sales of homes priced under $300,000; there were no sales of attached homes in the first quarter of 2014.
o It is thus concluded that residential land uses are not the highest and best use of sites on the subject property.
• Rental
o Multi-family units have accounted for 10 percent of all residential permits issued in the ESA.
o Multi-family construction has been sporadic due to the relatively low volume of apartment construction activity.
o Since 2000, permits for an average of 140 multi-family units per year have been issued in the ESA.
o Apartment vacancy rates in the ESA are low; as of March 2014, the average apartment vacancy rate was 3.3 percent in the Rialto-Fontana submarket and 2.9 percent in the San Bernardino-Colton-Highland submarket (Exhibit VI-2).
o Rents have improved modestly over the past three years; the average rent increased by 1.4 percent over the past year in Rialto-Fontana and by 3.1 percent in San Bernardino-Colton-Highland.
o The average rent for apartment units built between 2000 and 2009 is $1,419 in Rialto-Fontana (Exhibit VI-3); no newer apartments were identified for the quarterly survey in San Bernardino-Colton-Highland.
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o The demand for new rental units in the ESA is projected to average 474 units per year over the next five years (Exhibit VI-4). o Over the next five years, traditional, multi-family apartments are projected to account for between 50 and 60 percent of the projected annual demand for rental units in the ESA, or roughly 240 to 300 units per year.
o New apartment communities in Rialto can generally command rents of between $900 and $1,800 for 1-bedroom to 3-bedroom floor plans depending on location and amenities offered.
o With respect to the subject property, the annual apartment leasing volume must be qualified to include only those renter households that can afford the subject’s proposed rents; based on a rent affordability analysis (described below), there are about 10,180 renter households in the ESA that are income-qualified candidates for occupancy at the subject property; application of an annual apartment turnover rate of 40% to this target population yields an annual leasing volume of about 4,000 units per year (the turnover rate among apartments is estimated to be about 40% as apartments turnover at a higher rate than do single family homes).
o It is our conclusion that a rental land uses is a significant opportunity for the subject property.
Based on this combination of demand sources, performance of comparable projects, and assuming that the subject project enters the market in 2018 , Market Profiles projects an overall absorption rate of approximately 30 units per m onth, resulting in full occupancy (95%) of the 400+unit project within approximately one year from the beginning of lease- up. An absorption rate of up to 40+ units per month may be achievable at the subject development if no new competitive developments ar e in the market during the lease-up phase for the subject development.
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DEVELOPMENT TIMING AND PHASING
At any given time, there will be potential support for any of the proposed product types that are suggested for the subject site . The segments and land uses recommended for the subject development are positioned within a segment of the market that will account for more than 80 percent of total market demand. At the time they are built, the non- residential uses will support existing residents and provide for the needs of future residents as the area surrounding developments come on line.
Assuming that the market remains healthy, there appears to be sufficient market demand to absorb the recommended programs over a reasonable period of time, particularly when the community’s critical mass of activity and support facilities is established. Based on its location – Market Profiles estimates that the subject project will capture sufficient potential demand in each of the land use categories studied in this report to recommend proceeding with the specific plan process.
PEPPER AVENUE SPECIFIC PLAN
Developable Acres Market Entry Phase
RETAIL
CONVENIENCE RETAIL
5 B
NEIGHBORHOOD RETAIL
CENTER 10-15 C
FREEWAY COMMERCIAL
5 B
BUSINESS PARK
20-25 C
RENTAL RESIDENTIAL
20 A
TOTAL 70
SECTION III
RETAIL MARKET OPPORTUNITIES
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SECTION III
RETAIL MARKET OPPORTUNITIES
• Introduction
o This section presents an evaluation of the market opportunities for retail development at the subject site.
o A summary of findings and conclusions is presented first, followed by:
1) a review of market trends, 2) an analysis of market demand, and 3) a summary of competition, retail lease rates, and land values.
• Summary of Findings and Conclusions
o As described below, Rialto has been losing a large share of retail sales to competitive retail centers located in the neighboring cities of Fontana and San Bernardino.
o A substantial portion of these sales “leakages” could be recaptured by the development of new, well located retail centers within Rialto; a majority of the sales leakages will be recaptured with the development of the Renaissance Village retail center (833,000 sq. ft., described below) located just over two miles to the west of the subject property at Ayala Drive and the I-210 Freeway, and the Rialto Gateway Plaza (220,000 sq. ft. potential) located further to the west at Alder Avenue and I-210. o These planned retail centers pose strong competition for the subject property; nevertheless, given the property’s favorable accessibility and visibility characteristics with respect to the I-210 freeway, there is market potential for retail/commercial development at the site. o Retail land uses are highly location sensitive; beyond the prevailing market demand-supply conditions, the scale of development opportunity is strongly influenced by locational factors such as traffic volumes past the site, ease of ingress/egress, community setting, surrounding land uses, and shopper demographics.
o Based upon the integration of the market and site-specific factors, the retail/commercial uses that offer the greatest market opportunities Market Profiles, Inc.
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consist of restaurants, convenience retail, a neighborhood retail center, and freeway showroom/commercial as described below.
o Restaurants – The primary retail opportunity consists of fast casual restaurants; these include drive-through fast food and inline types (i.e., Subway, Starbucks, etc.); there is also potential to attract a full-service, sit down restaurant, however, there are numerous locations to the west along the I-210 freeway that pose very strong competition; the optimum sites for restaurants are at the southwest and southeast quadrants of Pepper Avenue and I-210.
o Convenience Retail (approx. 5 acres) – In association with fast casual restaurants, there are opportunities for convenience retail space to service the local population in the form of small retail centers fronting Pepper Avenue extending southward from the I-210 freeway up to one quarter mile; a depth of 300’ to 400’ is recommended for these retail sites with greater depth at street intersections.
Tenants for the convenience retail space will include businesses such as: convenience stores, cell phone providers, financial services (i.e., bank, insurance, tax), beauty supplies and services, Game Stop, cleaners, dental and medical providers, optical, real estate agents, auto parts, clothing, jewelry and accessories, fitness, Laundromat, etc.
o Neighborhood Retail Center (10 to 15 acres, FAR approx. 0.25) – Retail center anchored by a supermarket or other mid-major tenant and featuring fast casual restaurants; this center may attract a mid-major retailer such as a discount clothier, or discount general merchandise store, and possibly a full-service restaurant; other potential tenant candidates include a drug store or fitness facility, however, the existence of CVS and Walgreens stores and Fitness 19 just one mile to the west at Riverside Avenue and I-210 may preclude these options.
o The optimum location for a neighborhood center would be the southwest or southeast quadrants of I-210 and Pepper Avenue, or other major intersection (freeway visibility desirable but not requisite).
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o Although, theoretically, there is sufficient consumer support (as described below), the potential to attract a supermarket to the subject site is in question due to the following factors:
Supermarkets prefer locations surrounded by roof tops; a large portion of the 1-mile consumer trade area proximate to the site is open space; while some of this open space will be developed with residential neighborhoods the majority will remain vacant. Just one mile to the west at Riverside Avenue and I-210 are existing neighborhood retail centers with a Ralphs supermarket and Walgreens drug store; these centers pose strong competition. o Freeway Showroom/Commercial (approx. 5 acres) – There are a number of discount retailers and wholesale outlets, many relating to home improvement (i.e., floor and wall coverings, appliances, furniture, etc.), that desire freeway visibility but that cannot afford top-of-the- market retail rents; in addition to home improvement outlets, there are a variety of other price-sensitive wholesalers, small manufacturers, and service businesses that also desire freeway commercial locations. The configuration of a freeway showroom/commercial center consists of one- and two-story, multi-tenant and individual showroom/flex buildings situated to maximize freeway exposure; due to the grade differential between the subject property and the freeway, liberal signage applications should be granted (sign sizes and heights).
The southwest and southeast quadrants of I-210 and Pepper Avenue offer strategic sites for a freeway showroom/commercial center; freeway visibility is a requirement for success. Given the existence of very strong competition in the form of 100+acres of vacant freeway-frontage commercial sites to the west along I-210 (see Planned Retail Competition below), the ability to attract retailers to the subject property is speculative; it is therefore recommended that the freeway showroom/commercial site be zoned for mixed use— freeway showroom/commercial and Market Profiles, Inc.
III-4
multi-family—in order to facilitate and accelerate development thereby maximizing the land value.
o Gas Station – Freeway locations often attract gas stations, however, this industry has become extremely selective with regard to new sites and very high traffic volumes on adjacent surface streets are typically required and the site must offer exceptional ease of ingress and egress. o With regard to auto dealers, the research identified opportunity to recapture sales leakages, however, there are a numerous high quality sites to the west along the I-210 freeway that pose very strong competition; it is possible but unlikely that a dealership would choose to locate at the subject property.
• Retail Sales Trends
o Retail sales in San Bernardino County slowed after 2006 due to the effects of the national economic recession (Exhibit III-1). o Retail sales rose in 2010 through 2012 in response to the economic recovery (data for 2013 has not been released by the state). o Retail sales trends in Rialto mirrored the countywide trend.
EXHIBIT III-1
TAXABLE RETAIL SALES TRENDS
CITY OF RIALTO* AND SAN BERNARDINO COUNTY
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
200120022003200420052006200720082009201020112012
Retail Sales (in Thousands)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
Retail Sales (in Thousands)
Rialto* San Bernardino Co.
Source: Calif. Dept. of Equalization, Market Profiles
* Sales totals for Rialto exclude gas
stations.
Market Profiles, Inc.
III-5
• Retail Center Market Trends
o Retail lease rates eroded in 2009 through 2012 before stabilizing in 2013 (Exhibit III-2).
o Retail center vacancy rates rose to over 10% during the recession before declining slightly in 2012 and 2013.
o Vacancy rates are projected to decrease modestly over the next two years supported by the improving economy and increased retail spending.
EXHIBIT III-2
RETAIL LEASE RATE AND VACANCY TRENDS
RIALTO/SAN BERNARDINO/COLTON SUBMARKET
AND SAN BERNARDINO-RIVERSIDE COUNTIES
2009 THROUGH FIRST QUARTER 2014
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
$22.0
2009 2010 2011 2012 2013 1Q 2014
Asking Lease Rate / Sq. Ft. / Yr.
5%
6%
7%
8%
9%
10%
11%
12%
Vacancy Rate
Submarket Lease Rate S.B./Riv. Co.s Lease Rate
Submarket Vacancy S.B./Riv. Co.s Vacancy
Source: ReisReports, Market Profiles
Market Profiles, Inc.
III-6
o Exhibit III-3 shows that lease rates are higher in newly constructed retail centers and in community-scale centers.
o The average vacancy rates among neighborhood-scale and community- scale centers built since 2000 are 8.0% and 6.7%, respectively.
Average Average
Year Built Rent* Vacancy Rent* Vacancy
Before 1970 $13.31 7.2% $21.05 10.5%
1970-1979 $15.10 5.8% $18.90 8.6%
1980-1989 $16.14 11.5% $20.81 8.0%
1990-1999 $15.82 7.5% $20.27 10.3%
2000-2009 $22.65 8.0% $23.96 6.7%
After 2009 n/a n/a n/a n/a
Totals / Ave. $16.54 10.5% $18.89 9.3%
* Annual non-anchor asking rent per square foot
Source: ReisReports, Market Profiles
Neighborhood Cntrs Community Centers
EXHIBIT III-3
RETAIL CENTER RENT AND VACANCY BY AGE
RIALTO/SAN BERNARDINO/COLTON SUBMARKET
MARCH 2014
Market Profiles, Inc.
III-7
• Retail Sales Per Capita
o Exhibit III-4 shows the annual retail sales per capita that are being captured by the city of Rialto and the neighboring cities of Fontana, San Bernardino, and Colton; also shown are the per capita sales figures for San Bernardino County and California.
o The total retail sales per capita figure for Rialto of $4,113 is only half those of the 4-city average ($8,204) and of the county ($8,782); this indicates that roughly half of the retail expenditures of Rialto residents is being captured by retail establishments located in neighboring cities. o A substantial portion of this sales “leakage” could potentially be recaptured by the development of new, well located retail centers within Rialto.
o The potential to recapture retail sales leakages is evaluated below.
EXHIBIT III-4
ANNUAL RETAIL SALES PER CAPITA
BY RETAIL OUTLET CATEGORY
CITIES OF RIALTO, FONTANA, SAN BERNARDINO AND COLTON
SAN BERNARDINO COUNTY AND CALIFORNIA
2012*
San 4-City San Ber.
Retail Category Rialto Fontana Bernardino Colton Average County California Apparel $178 $304 $527 ** $337 $722 $865
General Merchandise ** $1,361 $2,376 ** $1,868 $1,447 $1,336 Drugs ** ** ** ** ** $374 $461
Food Stores $1,349 $1,599 $1,744 $2,079 $1,692 $1,529 $1,687 Packaged Liquor Stores ** ** ** ** ** $61 $93
Eating and Drinking $752 $957 $1,242 $958 $888 $1,192 $1,577 Furniture and Home Furnishings $65 $104 $376 $718 $91 $440 $659 Building Materials $255 $377 $361 ** $331 $362 $440
Auto Dealers and Supplies $256 $2,881 $1,718 $1,688 $2,002 $1,701 $1,644 Parts & Supplies ** ** ** ** ** $231 $180
Specialty and Other $1,258 $862 $656 $1,990 $994 $954 $882 Specialty ** ** ** ** ** $872 $765
Other ** ** ** ** ** $82 $117
TOTALS: $4,113 $8,444 $9,000 $7,434 $8,204 $8,782 $9,644 Median Household Income 2014 $47,074 $59,012 $36,008 $38,674 $45,192 $50,080 $58,504 * Most recent full year for which data has been published. ** Data for this category is included in Specialty and Other.
Source: California Board of Equalization, Market Profiles
Market Profiles, Inc.
III-8
• Retail Trade Area
o Exhibit III-5 shows the geographic areas encompassed by 2-, 3-, and 4- mile retail trade areas.
EXHIBIT III-5
2-, 3-, AND 4-MILE RADIUS RETAIL TRADE AREAS
• Demographic Profile
o Exhibit III-6, on the following page, presents a summary of demographic characteristics for the 2-, 3-, and 4-mile radius trade areas. o There are 59,701 persons residing within a 2-mile radius of the subject property; this is a modest population density due to the large undeveloped areas that surround much of the site created by the expansive Cajon Wash which extends to the northwest and southeast.
Market Profiles, Inc.
III-9
o The influence of the Cajon Wash on the population density extends into the 3-mile and 4-mile radius areas, the populations of which are 130,505 and 241,625 persons, respectively.
o The median household incomes in the 2-, 3-, and 4-mile areas are $43,857, $51,579, and $40,106, respectively; this compares to a countywide median income figure of $50,080.
2-Mile 3-Mile 4-Mile 5-Mile
DESCRIPTION* Radius Radius Radius Radius
POPULATION
2019 ESTIMATE 61,269 134,105 248,797 373,075
2014 ESTIMATE 59,701 130,505 241,625 361,856
2010 CENSUS 58,755 128,276 237,030 354,519
2000 CENSUS 53,727 115,816 212,987 314,742
GROWTH 2014-2019 2.6% 2.76% 2.97% 3.10%
GROWTH 2010-2014 1.6% 1.74% 1.94% 2.07%
GROWTH 2000-2010 9.4% 10.76% 11.29% 12.64%
HOUSEHOLDS
2019 ESTIMATE 14,605 33,502 64,120 97,328
2014 ESTIMATE 14,258 32,684 62,410 94,639
2010 CENSUS 14,079 32,272 61,514 93,213
2000 CENSUS 13,645 31,076 58,519 88,332
GROWTH 2014-2019 2.4% 2.50% 2.74% 2.84%
GROWTH 2010-2014 1.3% 1.28% 1.46% 1.53%
GROWTH 2000-2010 3.2% 3.85% 5.12% 5.53%
AVERAGE PERSON PER HH 4.15 3.95 3.82 3.77
ESTIMATED HOUSEHOLDS BY INCOME 14,258 32,684 62,410 94,639 UNDER $15,000 15.0% 16.4% 17.3% 17.6%
$15,000 TO $24,999 11.5% 12.8% 13.7% 13.6%
$25,000 TO $34,999 12.1% 12.6% 12.2% 12.0%
$35,000 TO $49,999 19.3% 18.3% 17.7% 16.9%
$50,000 TO $74,999 18.4% 17.9% 18.3% 18.4%
$75,000 TO $99,999 11.1% 10.3% 9.8% 10.0%
$100,000 TO $124,999 7.0% 6.1% 5.8% 5.8%
$125,000 TO $149,999 2.7% 2.7% 2.5% 2.7%
$150,000 TO $199,999 2.0% 2.0% 1.8% 2.0%
$200,000 TO $249,999 0.4% 0.4% 0.4% 0.5%
$250,000 TO $499,999 0.4% 0.4% 0.4% 0.5%
$500,000 AND OVER 0.1% 0.1% 0.1% 0.1%
EST. AVERAGE HOUSEHOLD INCOME $54,026 $51,970 $50,939 $51,917 EST. MEDIAN HOUSEHOLD INCOME $43,857 $51,679 $40,727 $41,106 * All data is as of 2014 unless noted.
Source: Nielsen/Sitereports, Market Profiles
EXHIBIT III-6
DEMOGRAPHIC PROFILE
TWO, THREE, FOUR-, AND FIVE-MILE RADIUS TRADE AREAS
Market Profiles, Inc.
III-10
• Regional-Scale Retail Demand-Supply Analysis
o Exhibit III-7, on the following page, presents an analysis of retail demand and supply relating to the 2-, 3-, and 4-mile radius trade areas; the retail demand figures are based upon projected retail expenditures of the resident households adjusted for variations in consumer behavior relating to income and geographic location1; the retail supply figures are estimates of actual retail sales derived from periodic surveys of retail businesses
2. o Any significant differences between the demand and supply estimates indicate that imbalances exist within the retail sector as follows:
A demand figure in excess of the respective supply figure (positive amount) suggests opportunity for additional retailers to enter the market to take advantage of the excess demand. A supply figure in excess of the respective demand figure (negative amount) suggests that substantial competition exists within the trade area.
o As described above, the city of Rialto has been losing a significant share of retail sales dollars to the neighboring cities of San Bernardino and Fontana.
o The positive figures in Exhibit III-7 suggest that there are retail opportunities in the following merchandise categories:
Home Furnishings
Computer and Software
Building Materials
Convenience Stores/Specialty Foods/Beer & Wine
Health and Personal Care/Optical
Clothing and Accessories
Sporting Goods
1 Estimates derived by Nielsen/Claritas from the Consumer Expenditure Survey, U.S. Bureau of Labor Statistics
2 Estimated derived by Nielsen/Claritas from the Census of Retail Trade, U.S. Census Bureau Market Profiles, Inc.
III-11
2-Mile 3-Mile 4-Mile 5-Mile
Ring Ring Ring Ring
Total Retail Sales (Excluding Gas Sta.s): $277,874 $512,123 $993,106 $1,098,386 Retail Stores by Merchandise Line
Furniture and Home Furnishings $7,501 $15,362 $27,391 $27,268 Electronics and Appliance
Appliances, TVs, Electronics -$695 -$711 $3,719 -$14,738 Computer and Software $1,235 $3,102 $7,177 -$10,132
Camera and Photographic Equipment $271 $565 $678 $313
Building Material, Garden Equip $39,868 $41,388 $91,638 $148,170 Food and Beverage
Supermarkets, Grocery -$676 $8,494 $49,596 $70,720
Convenience Stores $2,137 $5,438 $9,025 $13,620
Specialty Food Stores $7,236 $14,893 $28,499 $43,835
Beer, Wine and Liquor Stores $16,037 $35,566 $68,882 $105,510 Health and Personal Care
Pharmacies and Drug -$10,963 -$5,828 -$1,144 -$11,763
Cosmetics, Beauty Supplies, Perfume $234 $895 $1,958 $2,633 Optical Goods Stores $1,335 $3,018 $5,614 $6,675
Other Health and Personal Care $1,174 $3,213 $6,188 $10,833 Clothing and Clothing Accessories
Clothing $17,911 $36,620 $69,880 $83,008
Shoes $2,130 $4,264 $9,875 $12,151
Jewelry, Luggage, Leather Goods $7,430 $15,605 $28,806 $41,963 Sporting Goods, Hobby, Book, Music
Sporting Goods, Hobby, Musical Inst
Sporting Goods Stores $6,240 $12,980 $23,921 $33,104
Hobby, Toys and Games $2,515 $5,009 $9,398 $14,196
Book, Periodical and Music $1,429 $2,039 $3,888 -$7,673 General Merchandise -$26,627 $21,449 $116,473 $63,972
Miscellaneous Store Retailers
Florists $521 $1,066 $1,341 $1,572
Office Supplies, Stationery, Gift
Office Supplies and Stationery $2,965 -$1,594 -$3,145 $1,514 Gift, Novelty and Souvenir $3,358 $7,534 $14,091 $20,616 Used Merchandise $967 $2,350 $2,850 $4,711
Other Miscellaneous Store Retailers $4,863 $8,567 $17,102 $23,741 Foodservice and Drinking Places
Full-Service Restaurants $11,923 $25,081 $55,938 $67,993 Limited-Service Eating Places $14,686 $6,615 $10,673 $2,030 Drinking Places -Alcoholic Beverages $1,940 $4,173 $6,619 $7,811 Motor Vehicle and Parts Dealers
Automotive Dealers $98,802 $142,629 $183,838 $179,553
Other Motor Vehicle Dealers $9,965 $11,734 -$19,441 -$64,782 Automotive Parts/Accsrs, Tire -$74 -$451 $2,791 -$9,425 Source: Nielsen/SiteReports, Market Profiles
EXHIBIT III-7
RETAIL STORES OPPORTUNITY ANALYSIS
2-, 3, 4-, AND 5-MILE RADIUS TRADE AREAS
Retail Sales in Thousands
Market Profiles, Inc.
III-12
Jewelry/Gift/Novelty
Toys/Hobby
Full- and Limited-Service Restaurants and Bars
Used Merchandise/Other Miscellaneous
Auto Dealers
o Apparent market support for book and music stores is negated by strong market trends toward expanding online competition.
o Regarding food stores (i.e., supermarket), a separate analysis was conducted focusing on a sub-2-mile retail trade area; this analysis is presented below.
• Supermarket Analysis
o The average per capita retail sales figures for the cities of Rialto, Fontana, San Bernardino, and Colton (Exhibit III-4 above) in combination with the figures for San Bernardino County constitute indicators of the retail sales that will be generated by the current and future residents of the local retail trade area.
o Exhibit III-8, on the following page, shows the configuration of the local, neighborhood-scale retail trade area (LRTA) from which the subject property will draw the majority of shopper patronage.
o The configuration of the neighborhood-scale PRTA is determined primarily by the locations of the existing supermarket-anchored retail centers that surround the subject site; the trade area boundaries are positioned approximately midway between the subject site and the competitive retail centers.
o This approach does not ignore the fact that some shoppers will originate from outside the trade area, rather, the trade area boundaries identify the point at which the attraction of shoppers into the trade area is in equilibrium with the leakage of shoppers out of the trade area, based upon the locations of competing retail centers.
Market Profiles, Inc.
III-13
o The boundaries of the neighborhood-scale trade area encompass the consumer population whose retail expenditures can be considered to be exclusive to the LRTA.
EXHIBIT III-8
NEIGHBORHOOD-SCALE, LOCAL RETAIL TRADE AREA (LRTA)
o Currently, the population of the LRTA is estimated to be 14,123 persons (estimate by Nielsen/SiteReports); the future addition of approximately 600 residential units to be developed in the Pepper Avenue Specific Plan Area (preliminary estimate) will add roughly 1,500 residents to the LRTA, thereby increasing the LRTA population to about 15,600 persons3. o To quantify the scope of demand for retail space in the LRTA a prototypical pattern of annual retail expenditures per capita was created based on the data shown in Exhibit III-4.
3 Should the number of homes planned within the Pepper Street SP ultimately vary from the preliminary estimate of 600, this would not materially alter the findings derived from the retail demand analysis.
Market Profiles, Inc.
III-14
o Exhibit III-9 shows the projected demand for retail space in the LRTA based upon the estimated future population base. The projections were derived as follows:
Column (a) – Prototypical expenditures per capita
Column (b) – Total annual retail sales (expenditures per capita multiplied by trade area population)
Column (c) -- Expected retail sales per square foot by merchandise category
Column (d) – Total retail square feet supportable
Column (e) – Projected capture by a neighborhood-scale retail center (i.e., excluding community-scale centers, power centers, and regional malls)
Column (f) – Projected neighborhood-scale retail space supportable within the LRTA by merchandise category
EXHIBIT III-9
PROJECTED DEMAND FOR NEW RETAIL SPACE
NEIGHBORHOOD-SCALE RETAIL CENTERS
PEPPER STREET LOCAL RETAIL TRADE AREA
Expenditures Annual Sales Per Total Retail Capture Square Merchandise Category
Per Capita
(a)
Expenditures
(b)
Sq. Ft.
(c)
Sq. Ft.
(d)
%*
(e)
Feet
(f)
Apparel $350 $5,468,050 $250 21,872 25% 5,468
General Merchandise $1,300 $20,309,900 $350 58,028 20% 11,606 Drugs $350 $5,468,050 $300 18,227 95% 17,315
Food Stores $1,500 $23,434,500 $450 52,077 95% 49,473
Packaged Liquor Stores $60 $937,380 $300 3,125 80% 2,500 Eating and Drinking $900 $14,060,700 $400 35,152 20% 7,030 Furniture and Appliances $300 $4,686,900 $250 18,748 0% 0 Building Materials $350 $5,468,050 $250 21,872 20% 4,374 Auto Parts & Supplies $200 $3,124,600 $250 12,498 50% 6,249 Specialty and Other
Specialty $800 $12,498,400 $250 49,994 30% 14,998
Other $100 $1,562,300 $200 7,812 30% 2,343
Total Retail Store Space: 299,404 121,357
Services 53,893 21,844
TOTAL RETAIL SPACE: 353,296 143,202
* Percent of market activity that can be captured by neighborhood-scale retail centers (excluding community-scale (centers, regional malls and power centers).
Source: Market Profiles
Neighborhood-
Scale Retail Space
Market Profiles, Inc.
III-15
o The demand projections yield support for 143,000 square feet of retail space, including a typical increment of demand consisting of service businesses; the distribution of demand by major merchandise category is shown in Exhibit III-9.
o The appropriate size of a retail center is largely determined by the number and type of anchor tenants; the retail demand projections indicate support for nearly 50,000 square feet of supermarket space and 17,000 square feet of drug store space at the subject site. o The retail space demand projections conform closely to the market support associated with a typical neighborhood-scale retail center anchored by a supermarket coupled with a drug store.
o With a supermarket in place, a full compliment of retailers, restaurants, and service businesses will be attracted to fill the center’s shop space.
• Existing Retail Competition
o Exhibit III-10 (page III-16) presents a summary of the competitive retail centers that are located in proximity to the subject property and Exhibit III-11 shows the locations of the centers; also shown in the exhibit are the major retailers that are located within a 4- to 5-mile radius of the subject site.
o Annual lease rates among the competitive neighborhood-scale retail centers range from $15 to $33 per square foot; the lease rates vary widely depending upon the number and quality of the major tenants, the location of the center, the unit size, and the placement of the unit within the center; the typical lease rate for a neighborhood retail property is between $16.00 and $18.00; however, the Creekside center located at the northeast quadrant of I-210 and Riverside Avenue is commanding lease rates of between $21.00 and $33.00.
o Lease rates of between $28.00 and $45.00 are being commanded in the new, high quality retail centers located north of the I-210 in the Sierra Lakes community in Fontana.
Market Profiles, Inc.
III-16
o Vacancy rates among the neighborhood centers range from 1.9% to
18.7%; the highest vacancies are reported by the two retail centers located on the north side of I-210 at Riverside Avenue; the majority of the vacant space in the Creekside property is due to the recent closure of a Fresh & Easy market.
Market Profiles, Inc.
III-17
Map Total Vacant Lease*
Key Name/Address Sq. Ft. Sq. Ft./% Rate/SF Major Other Restaurants Comments A Ralphs / Rite Aid Center 109,989 20,620 $15.00 Ralphs GNC, Verizon, Metro PCS, Gift Shop, Mail Carls Jr., Starbucks, Freeway visible.
NWC Riverside & 210 Freeway 18.7% Rite Aid Store, Smoke Shop, H&R Block, Curves, Del Taco, Subway Nail Salon, Hair Salon, Barber, Water, Panda Paradise,
Insurance, Cleaners, Dentist, Pool Supplies, Mexican Restaurant Medical Building
B Creekside 98,000 18,000 $21.00 Walgreens Alta Vista Credit Union Mexican Restaurant Freeway visible from the west.
NEC Riverside & 210 Freeway 18.4% to Fitness 19 Dentist Bakery 14,000 SF of vacant space $33.00 is former Fresh & Easy market
C Rialto Towne Plaza 139,286 7,819 N.A. Walmart Market GameStop, Sprint, Boostmobile, Pizza Hut, Sizzler, High traffic intersection NWC Riverside & Baseline 5.6% dd's Discounts Allstate, Tax Service, Insurance, Taco Bell, Carrows 99c Only Bank of America, Herbalife, T-Mobile Subway, Chinese Food Rainbow Books, Hair Salon, Nail Salon, Beauty Salon,
Beauty Supply, Unlimited Pics, Medical Clinic,
Century 21, Smoke 4 Less, Water
D North Rialto Shopping Center 158,239 3,000 $16.80 Stater Brothers Dollar Tree, Bank of America, Video, Liquor, Wendy's, Papa John's High traffic intersection NEC Riverside & Baseline 1.9% Walgreens Goodwill, Beauty Salon, Cleaners, Bakery, Fried Chicken 18,750 sq. ft. pad avail. at Nail Salon, H&R Block, Clothing (3), Water, Tam's Burger $4,000/mo.
Check Cashing, Insurance, Beauty Supply,
Dentist, Affordable Housing Service
E Rialto Square 125,000 3,700 N.A. Superior Grocers Supercuts, Auto Zone, Fitness Center, McDonalds, Bakers High traffic intersection SWC Riverside & Baseline 3.0% CVS Family Dollar, Save & Tell Outlet Pizza Loca * Annual lease NNN
Source: LoopNet, Market Profiles
Tenants
EXHIBIT III-10
SUMMARY OF COMPETITIVE NEIGHBORHOOD RETAIL CENTERS
JUNE 2014
Market Profiles, Inc.
III-18
EXHIBIT III-11
RETAIL CENTERS LOCATION MAP
Market Profiles, Inc.
III-19
• Retail Land Values
o Exhibit III-12 presents a summary of retail sites that are offered for sale; the locations of the properties are shown in Exhibit III-13.
o Sale prices range from $6.47 to $35.22 per square foot; prices are influenced by both site location and size. o The land value that can be expected for a well located retail property of significant size (i.e., over 5 acres) is approximately $10 per square foot.
Map Site Size Sale Price Per
Key Site Location City (Acres) Price Sq. Ft. Comments
1 2479 Foothill Bl. Rialto 1.33 $480,000 $8.29 Mid-block location 2 NWC Foothill & Acacia Rialto 0.44 $675,000 $35.22 Priced unrealistic 3 SEQuadrant Rialto & Pepper Rialto 0.48 $525,000 $25.11 Just off corner, price unrealistic 4 136 W. Valley Bl. Rialto 2.8 $1,224,000 $10.04 Just east of Riverside Ave., near Walmart 5 3071 Kendall Dr. San Bern. 1.49 $775,000 $11.94 W side of I-215 at Palm Ave., Palm Pavillion 6 NEC Base Line & California San Bern. 2.05 $850,000 $9.52 Proposed retail center of 21,000 sq. ft. 7 3850 Cajon Bl. San Bern. 0.71 $200,000 $6.47 NW San Bernardino Industrial Park Source: Loopnet, Market Profiles
EXHIBIT III-12
SUMMARY OF AVAILABLE RETAIL-COMMERCIAL LAND
RIALTO AND VICINITY
Market Profiles, Inc.
III-20
EXHIBIT III-13
RETAIL LAND FOR SALE
Market Profiles, Inc.
III-21
• Planned Retail Competition
o Renaissance Village (Exhibit III-11, map #1) – A 50+acre community- scale retail center is planned at the southwest quadrant of I-210 and Ayala Drive; the center will consist of as much as 830,000 (The City Council initiated a process to update this plan in May 2014 to allow up to an additional 200,000 square feet of retail) square feet of retail space featuring several major retailers including a Target store; the site has excellent freeway access and visibility; the earliest date for development is estimated to be early 2016.
o Rialto Gateway Plaza (map #2) – Located at the southwest quadrant of Alder Avenue and I-210 is a site that could accommodate over 200,000 square feet of retail space; the developer is considering alternative land uses for the property including a business park, however, the portion of the site that offers freeway frontage will likely be developed as retail uses.
o NEC Base Line Street and California Street (map #3) – This 2+acre site is planned for 21,000 square feet of retail space.
o Renaissance Specific Plan – Located two miles to the west of the subject property at Ayala Drive and extending about two miles further westward, this specific plan area includes the following:
Over 100 acres of retail/commercial land situated adjacent to the I-210 freeway (including Renaissance Village described above); An additional 90+acres adjacent to the freeway that can accommodate a variety of commercial/retail uses;
This two-mile freeway corridor has undergone extensive landscape and other improvements which provide an impressive and attractive business environment.
The Renaissance land use plan and statistical land use breakdown are provided on the following two pages.
Renaissance Specifi c Plan
Figure 2-1 Illustrative Conceptual Plan
NOTE: This drawing is the artist’s interpretation for illustrative purposes only . The placement, arrangement, design, and footprints of the structures and amenities depicted are not to be considered the final plan.
Renaissance Specifi c Plan
3 Figure 2-2 Land Use Diagram
LEGEND
NOTES:
1. The boundaries of the land use
designations are approximate
and generally follow streets and
property lines. Minor changes
in boundary alignment and
location are permissible
as described in Section 7,
Implementation.
2. The transfer of residential
units is allowed as described in
Section 7, Implementation.
3. If the school is relocated or
if the school district chooses
not to develop a school
within Renaissance, then the
underlying land use shall
revert to the Medium Density
Residential (MDR) land use
designation and can accept
the transfer of residential units
from other areas of the Specific
Plan, as described in Section 7,
Implementation.
4. Planning Area 55 can either
develop as residential or
general commercial.
5. Parcels within Planning Area
5 may develop under the
uses and standards of the
Employment land use category .
6. Planning Area 81 is developed
as a parking lot for the Jerry
Eaves Park.
SECTION IV
BUSINESS PARK MARKET OPPORTUNITIES
Market Profiles, Inc.
IV-1
SECTION IV
BUSINESS PARK MARKET OPPORTUNITIES
• Introduction
o This section presents an evaluation of the market opportunities for business park development at the subject site.
o A summary of findings and conclusions is presented first, followed by:
1) a review of market trends, 2) an analysis of market demand, and 3) a review of competition.
• Summary of Findings and Conclusions
o To date, Rialto has been losing potential businesses to competitive business parks located outside of the city; all non-residential land use categories have been impacted including retail, office, and industrial. o This suggests that the city could recapture market share if desirable business sites were made available (i.e., accessible, visible, and within an attractive setting).
o The land uses that offer the greatest market potential are retail/ commercial (see report Section III) and business park.
o The subject property is desirable due to its adjacency to the I-210 freeway along with its proximity to the I-215 freeway (two miles to the east); the I-215 freeway carries a high volume of traffic (100,000+ ADT) and connects the subject property to a number of important, established business districts.
o The recommended business park concept consists of a mix of one- and two-story, multi-tenant structures and individual flex/R&D buildings; estimated average FAR of 0.4 (however, site coverage ratios ranging from 3.5 to 0.5 should be allowed to accommodate uses ranging from light manufacturing to office).
o The recommended acreage dedicated to business park use is between 15 and 20 acres; freeway visibility is desirable but not requisite.
Market Profiles, Inc.
IV-2
o Given the existence of very strong competition in the form of 600+acres of vacant business park sites located three miles to the west on the south side of the I-210 freeway (see Business Park Competition below), the ability to attract businesses to the subject property is speculative; it is therefore recommended that the business park land be zoned for mixed use--business park and multi-family—in order to facilitate and accelerate development thereby maximizing the land value.
o For the reasons described below, conventional multi-tenant office land uses are not viable at the subject site; nevertheless, the business park zoning should accommodate both R&D/flex/light industrial and office uses as the business park is likely to attract price-sensitive office tenants.
• Commercial-Industrial Construction Trends
o Exhibit IV-1 (on the following page) shows the pattern of commercial- industrial construction throughout San Bernardino County since 2001, as measured by construction permit valuations.
o The East San Bernardino Valley has accounted for 20 percent of the countywide valuations.
o Exhibit IV-2 shows the permit valuations distributed by major land use category; as is typical for suburban communities, retail centers have accounted for the majority of the construction activity in the city of Rialto (66%) and industrial buildings have accounted for 10%.
o In the city of San Bernardino, industrial buildings have composed the majority of valuations (54%) followed by retail structures (23%); and in Colton the largest categories were retail (40%) followed by industrial (27%).
o Throughout the county office buildings have accounted for 8% of commercial building permit valuations; the proportions of office valuations among the cities are: Rialto 1%, San Bernardino 8%, and Colton 8%.
Market Profiles, Inc.
IV-3
Community* 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Rialto $13,436 $495 $1,922 $8,635 $3,947 $1,429 $514 $10,579 $10,632 $218 $282 $7,318 $5 San Bernardino $17,907 $25,524 $51,341 $59,502 $87,175 $59,204 $134,690 $21,357 $3,855 $6,075 $4,325 $54,250 $104,363 Colton $6,105 $7,972 $5,885 $15,986 $7,286 $11,787 $7,948 $849 $3,347 $908 $183 $1,436 $23,150 Grand Terrace $1,150 $487 $427 $983 $1,927 $2,365 $3,275 $305 $226 $4,519 $229 $1,130 $142 Highland $3,092 $8,612 $6,547 $7,841 $7,017 $80,750 $8,782 $10,550 $2,245 $2,243 $2,007 $2,894 $6,066 Loma Linda $1,171 $3,042 $471 $3,462 $3,067 $2,381 $26,704 $2,102 $14,815 $678 $738 $4,189 $2,015 Redlands $41,899 $27,059 $50,007 $12,070 $75,475 $58,676 $83,350 $25,736 $3,591 $973 $1,608 $17,348 $8,949 Yucaipa $8,137 $6,652 $12,617 $15,220 $10,998 $12,837 $18,751 $11,579 $3,026 $847 $1,167 $948 $12,296 East San
Bernardino Valley $92,897 $79,843 $129,217 $123,699 $196,892 $229,429 $284,014 $83,057 $41,737 $16,461 $10,539 $89,513 $156,986 Chino $100,816 $64,258 $82,234 $103,728 $62,578 $74,573 $96,664 $22,545 $3,327 $9,463 $18,543 $39,045 $127,383 Chino Hills $25,326 $39,417 $39,806 $19,681 $68,284 $36,199 $64,980 $39,199 $8,801 $5,300 $2,348 $3,186 $7,482 Fontana $32,079 $60,467 $20,452 $41,414 $134,124 $100,358 $74,136 $18,935 $15,296 $6,236 $11,511 $85,137 $47,087 Montclair $21,089 $5,772 $6,825 $2,198 $2,235 $371 $9,938 $997 $53 $1,006 $61 $688 $5,406 Ontario $156,777 $102,798 $114,813 $124,469 $108,366 $187,614 $227,046 $39,150 $19,736 $30,663 $23,303 $29,047 $133,455 Rancho Cuc. $84,148 $92,449 $123,322 $249,763 $100,899 $164,763 $73,356 $28,308 $9,475 $8,573 $3,887 $3,470 $15,825 Upland $5,296 $12,263 $4,578 $12,071 $10,517 $3,774 $2,984 $1,198 $1,526 $1,014 $875 $3,263 $1,814 West San
Bernardino Valley $425,531 $377,424 $392,030 $553,324 $487,003 $567,652 $549,104 $150,332 $58,214 $62,255 $60,528 $163,836 $338,452 San Bernardino
County $651,547 $607,127 $669,239 $939,119 $882,292 $1,084,110 $1,102,129 $503,057 $176,036 $123,703 $162,858 $345,915 $574,124 * Excluding the Victor Valley, Yucca Valley, and unincorporated areas.
Source: Real Estate Research Council, Market Profiles
Permit Valuations in Thousands
EXHIBIT IV-1
COMMERCIAL-INDUSTRIAL BUILDING PERMIT VALUATIONS -- NEW CONSTRUCTION
CITIES OF WESTERN SAN BERNARDINO COUNTY
2001 THROUGH 2013
Market Profiles, Inc.
IV-4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Retail Stores $6,964 $0 $1,060 $5,780 $620 $520 $0 $10,195 $10,195 $10,433 $0 $0 $0 Office Buildings $736 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Hotels $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Comm'l $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Commercial $7,700 $0 $1,060 $5,780 $620 $520 $0 $10,195 $10,195 $10,433 $0 $0 $0 Industrial $101 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,195 $0 Other Misc. $5,636 $495 $862 $2,855 $3,297 $909 $514 $385 $385 $199 $218 $123 $5 Rialto Totals $13,437 $495 $1,922 $8,635 $3,917 $1,429 $514 $10,580 $10,580 $10,632 $218 $7,318 $5 Retail Stores $727 $1,498 $11,527 $3,716 $40,980 $29,025 $29,003 $635 $635 $0 $0 $28,110 $4,345 Office Buildings $2,444 $9,879 $1,001 $13,949 $2,700 $9,420 $0 $5,016 $5,016 $0 $0 $0 $0 Hotels $0 $0 $0 $3,603 $3,869 $0 $4,459 $0 $0 $0 $0 $23,259 $0 Other Comm'l $0 $2,477 $681 $124 $0 $0 $145 $360 $360 $0 $3,264 $0 $908 Total Commercial $3,171 $13,854 $13,209 $21,392 $47,549 $38,445 $33,607 $6,011 $6,011 $0 $3,264 $51,369 $5,253 Industrial $12,904 $477 $34,826 $33,368 $34,052 $17,641 $94,590 $10,775 $10,775 $0 $0 $0 $97,379 Other Misc. $1,831 $11,193 $3,307 $4,744 $5,574 $3,119 $6,493 $4,571 $4,571 $3,855 $2,811 $2,881 $1,731 San Ber.Totals $17,906 $25,524 $51,342 $59,504 $87,175 $59,205 $134,690 $21,357 $21,357 $3,855 $6,075 $54,250 $104,363 Retail Stores $473 $6,080 $734 $1,404 $0 $8,802 $134 $0 $0 $2,918 $0 $0 $17,626 Office Buildings $0 $506 $0 $0 $4,335 $1,200 $2,107 $0 $0 $0 $0 $0 $0 Hotels $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Comm'l $0 $0 $0 $705 $0 $0 $0 $0 $0 $0 $800 $0 $0 Total Commercial $473 $6,586 $734 $2,109 $4,335 $10,002 $2,241 $0 $0 $2,918 $800 $0 $17,626 Industrial $4,607 $0 $3,889 $11,388 $253 $355 $0 $0 $0 $0 $0 $0 $5,500 Other Misc. $1,026 $1,387 $1,262 $2,489 $2,697 $1,430 $5,707 $849 $3,327 $429 $108 $1,436 $25 Colton Totals $6,106 $7,973 $5,885 $15,986 $7,285 $11,787 $7,948 $849 $3,327 $3,347 $908 $1,436 $23,151 Retail Stores $177,739 $162,766 $225,398 $175,893 $232,291 $294,350 $350,573 $243,447 $33,875 $26,747 $57,608 $102,272 $128,109 Office Buildings $20,208 $29,991 $61,273 $83,840 $84,844 $115,457 $117,865 $33,217 $8,246 $7,041 $1,172 $16,394 $31,764 Hotels $8,766 $16,419 $2,589 $32,106 $28,134 $21,661 $65,745 $14,568 $24,429 $0 $0 $23,259 $0 Other Comm'l $14,659 $12,584 $4,706 $18,277 $18,201 $9,255 $35,171 $19,616 $3,823 $5,593 $994 $4,853 $3,731 Total Commercial $221,372 $221,760 $293,966 $310,116 $363,470 $440,723 $569,354 $310,848 $70,373 $39,381 $59,774 $146,778 $163,604 Industrial $330,929 $243,003 $244,855 $435,579 $321,773 $372,801 $350,521 $92,200 $34,029 $21,854 $50,630 $152,048 $335,339 Other Misc. $98,781 $142,366 $130,419 $174,089 $195,826 $237,879 $182,253 $100,009 $71,634 $62,468 $51,680 $47,090 $75,182 County Totals $651,082 $607,129 $669,240 $919,784 $881,069 $1,051,403 $1,102,128 $503,057 $176,036 $123,703 $162,084 $345,916 $574,125 Source: Construction Industry Research Board, Market Profiles EXHIBIT IV-2
COMMERCIAL AND INDUSTRIAL BUILDING PERMIT VALUATIONS
CITIES OF COLTON, RIALTO, AND SAN BERNARDINO
2001 THROUGH 2013
BY SUBCATEGORY
AND SAN BERNARDINO COUNTY
San Bernardino
Rialto
San Bernardino County
Building Permit Valuations in Thousands
Colton
Building Category
Market Profiles, Inc.
IV-5
• Office and Industrial Space Market Trends
o Exhibits IV-3 and IV-4 show the lease rate and vacancy trends for industrial and flex-R&D space in the Rialto-San Bernardino-Colton submarket area.
EXHIBIT IV-3
INDUSTRIAL* LEASE RATE AND VACANCY TRENDS
RIALTO/SAN BERNARDINO/COLTON SUBMARKET
AND SAN BERNARDINO-RIVERSIDE COUNTIES
2010 THROUGH FIRST QUARTER 2014
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
2010 2011 2012 2013 1Q 2014
Asking Lease Rate / Sq. Ft. / Yr.
5%
7%
9%
11%
13%
15%
Vacancy Rate
Submarket Lease Rate S.B./Riv. Co.s Lease Rate
Submarket Vacancy S.B/Riv. Vacancy
Source: ReisReports, Market Profiles
* Warehouse/
Distribution
EXHIBIT IV-4
FLEX/R&D LEASE RATE AND VACANCY TRENDS
RIALTO/SAN BERNARDINO/COLTON SUBMARKET
AND SAN BERNARDINO-RIVERSIDE COUNTIES
2010 THROUGH FIRST QUARTER 2014
$3.0
$3.5
$4.0
$4.5
$5.0
$5.5
$6.0
$6.5
$7.0
$7.5
$8.0
2010 2011 2012 2013 1Q 2014
Asking Lease Rate / Sq. Ft. / Yr.
5%
7%
9%
11%
13%
15%
17%
19%
Vacancy Rate
Submarket Lease Rate S.B./Riv. Co.s Lease Rate
Submarket Vacancy S.B/Riv. Vacancy
Source: ReisReports, Market Profiles
Market Profiles, Inc.
IV-6
o With economic conditions strengthening, industrial and flex/R&D vacancy rates have improving over the past four years while lease rates have remained stable; further improvement in vacancy rates is projected over the next three to four years.
o Lease rates are projected to rise modestly as vacancy rates decline and new construction pulls the market lease rate structure upwards. o Exhibit IV-5 shows that the office market remains very soft with a vacancy rate near 25%; lease rates have stabilized after eroding throughout the recession.
o The office market is projected to improve slowly over the next three to five years; however, very little new office construction activity is anticipated to occur within that time period.
EXHIBIT IV-5
OFFICE LEASE RATE AND VACANCY TRENDS
EAST SAN BERNARDINO VALLEY
AND SAN BERNARDINO-RIVERSIDE COUNTIES
2009 THROUGH FIRST QUARTER 2014
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
$22.0
2009 2010 2011 2012 2013 1Q 2014
Asking Lease Rate / Sq. Ft. / Yr.
5%
10%
15%
20%
25%
30%
Vacancy Rate
Submarket Lease Rate S.B./Riv. Co.s Lease Rate
Submarket Vacancy S.B/Riv. Vacancy
Source: ReisReports, Market Profiles
Market Profiles, Inc.
IV-7
• Demand for New Business Space
o The most important factor relating to the demand for new business space is employment growth.
o Exhibit IV-6 shows the correlation between job growth and business space demand; the healthy job growth in 2012 and 2013 has stimulated a strong increase in commercial-industrial construction. o Over the next three years construction activity is projected to continue to expand as job creation generates the need for new business space. o As shown in Exhibit IV-7, commercial-industrial construction in the East San Bernardino Valley has generally followed the countywide trend and is, thus, projected to participate in the positive countywide expansion that is occurring.
EXHIBIT IV-6
COMERCIAL-INDUSTRIAL BUILDING PERMIT VALUATIONS
SAN BERNARDINO COUNTY
AND INLAND EMPIRE JOB GROWTH
1995 - 2016
-50,000
-30,000
-10,000
10,000
30,000
50,000
70,000
90,000
1995199619971998199920002001200220032004200520062007200820092010201120122013201420152016 J
o
b
s
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
H
o
m
e
s
Net Change in Jobs C-I Permit Valuations
Market Profiles
Projected
JOBS PERMIT
VALUATIONS
Market Profiles, Inc.
IV-8
EXHIBIT IV-7
COMMERCIAL-INDUSTRIAL BUILDING PERMIT VALUATIONS*
EAST SAN BERNARDINO VALLEY
AND SAN BERNARDINO COUNTY
2001 THROUGH 2013
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
2001200220032004200520062007200820092010201120122013
Permits* in Thousands -- East Valley $0
$200
$400
$600
$800
$1,000
$1,200
Permits* in Millions -- San Ber. Co.
East SB Valley San Ber. Co.
Source: Construction Industry Research Council, Market Profiles * New
construction
• Composition of Business Space Demand
o Exhibit IV-8 presents a summary of employment within 2-, 3-, and 4-mile rings around the subject property, with jobs distributed by business category; the categories have been grouped to correspond to the major land-use types of Retail, Office/Flex-R&D, and Industrial; Office and Flex-R&D were grouped because in low-density, suburban communities office users commonly chose tenancy in Flex-R&D multi-tenant buildings due to their more attractive lease rates relative to traditional office space. o The numbers of jobs per business category are shown in Exhibit IV-8 as jobs per household ratios; the ratio of total jobs per household in Rialto is
0.59:1 compared to a countywide ratio of 1.01:1, this indicates that the city has not attracted a full compliment of businesses relative to the size of its household base.
o The jobs per household ratios are low among nearly every land use category; this suggests that if attractive sites were made available the city could recapture market share for the full spectrum of land uses.
Market Profiles, Inc.
IV-9
TYPE OF BUSINESS SPACE / 2-MILE 3-MILE 4-MILE SAN BER.
TYPE OF BUSINESS RADIUS RADIUS RADIUS COUNTY
JOBS/HOUSEHOLD 0.59 0.66 0.80 1.01
TOTAL JOBS* 8,363 21,656 49,832 634,587
JOBS PER HOUSEHOLD 0.14 0.14 0.13 0.23
TOTAL JOBS 1,950 4,578 7,884 142,149
RETAIL TRADE 1,239 2,628 4,257 79,198
RESTAURANTS AND BARS 641 1,631 2,891 48,672
AUTO DEALERS AND PARTS 70 319 736 14,279
JOBS PER HOUSEHOLD 0.35 0.38 0.50 0.52
TOTAL JOBS 4,939 12,316 31,473 329,251
INFORMATION 83 180 494 7,716
REAL ESTATE 165 532 971 20,265
PROFESSIONAL SERVICES 209 402 1,142 29,698
FINANCE AND INSURANCE 139 364 674 17,556
MANAGEMENT SERVICES 0 2 2 228
ADMINISTRATIVE & SUPPORT 257 617 1,207 18,580
EDUCATION SERVICES 1,544 2,804 11,567 55,339
HEALTH CARE & SOCIAL ASSISTANCE 1,218 4,014 7,916 97,336 ARTS, ENTERTAINMENT & RECREATION 57 148 365 10,371
OTHER SERVICES 369 1,109 2,292 32,909
GOVERNMENT 898 2,144 4,843 39,253
JOBS PER HOUSEHOLD 0.10 0.14 0.16 0.23
TOTAL JOBS 1,383 4,529 9,975 146,258
AGRICULTURE & MINING 4 8 14 1,764
CONSTRUCTION 361 695 1,335 28,961
MANUFACTURING 386 1,109 1,984 44,596
WHOLESALE TRADE 124 578 1,467 40,075
TRANSPORTATION & WAREHOUSING 508 2,139 5,175 30,862
JOBS PER HOUSEHOLD 0.01 0.01 0.01 0.03
TOTAL JOBS 91 233 500 16,929
HOTELS & LODGING 50 64 166 10,276
UTILITIES 11 77 171 3,062
OTHER MISC. 30 92 163 3,591
POPULATION 59,701 130,505 241,625 2,105,914
HOUSEHOLDS 14,258 32,684 62,410 627,835
* Including self-employed.
Source: Nielsen Sitereports, Market Profiles
2014
EXHIBIT IV-8
JOBS PER HOUSEHOLD BY BUSINESS SPACE CATEGORY
TWO-, THREE-, AND FOUR-MILE RADIUS TRADE AREAS AND SAN BERNARDINO COUNTY
EMPLOYMENT BASE PROFILE
RETAIL BUILDINGS
OFFICE / FLEX-R&D BUILDINGS
INDUSTRIAL BUILDINGS
OTHER
Market Profiles, Inc.
IV-10
o To date, northern Rialto has been losing potential business tenants to competitive business parks and retail centers located along the I-215 and I-15 freeway corridors (see Business Park Competition below). o Beyond a 3- to 4-mile radius, the jobs per capita ratios shown in Exhibit IV-8 are more into conformance with the countywide ratios; a map showing the 3-, 4-, and 5-mile rings is presented below. o To the east of the subject site, moving beyond two miles, ever greater amounts of business park competition is encountered along the I-215 freeway corridor.
EXHIBIT IV-9
2-, 3-, AND 4-MILD RINGS
Market Profiles, Inc.
IV-11
o With respect to office land uses, in low-density suburban communities office tenants largely consist of locally-oriented, population-serving businesses such as medical/dental, personal services, education services, finance, insurance, and real estate.
o As described above, many of these tenants chose to locate in Flex/R&D multi-tenant buildings; alternatively, a large proportion of these tenants chose to locate in retail centers; only a small segment of the tenants chose to locate in traditional office buildings; this explains the small amount of office space that has been constructed to date in Rialto.
• Business Park Competition
o Exhibit IV-9 above shows the locations of the major business parks and office locations found within a 4-mile radius of the subject property. o There is a large amount of inexpensive land within the competitive area available to accommodate industrial business growth:
The Renaissance Specific Plan area located approximately three miles to the west will ultimately provide over 600 acres of buildable sites offering good access to the I-210 freeway (see description of Renaissance SP at the end of report Section III). Immediately to the northwest of the Renaissance SP are several hundred additional acres of vacant land zoned for industrial uses. Similarly, three miles to the northeast, the northwest San Bernardino industrial district has an abundance of improved sites available within an attractive business park setting and with all infrastructure improvements in place.
Various other industrial districts to the east and south have vacant sites available for a variety of industrial uses.
o With respect to office land uses, there is a good quality office district in Rialto located just over one mile to the west on Riverside Avenue south of the 210 Freeway; good sites remain available in this district; many of the tenants in this area are medical-related; in addition, the Renaissance Specific Plan area has a number of quality sites for office development.
Market Profiles, Inc.
IV-12
o Most high profile office tenants prefer to congregate in prestigious business districts; such an area exists about four miles to the southeast around the Carousel Mall in the San Bernardino city center complex; a second office concentration is found about six miles southeast of the subject site in the Hospitality Lane business district located off of the I-10 freeway at Waterman Avenue; several good sites for future office development remain available in the Hospitality Lane district.
• Business Park / Industrial Lease Rates
o Exhibit IV-10 presents a summary of office and business park/industrial properties that are currently offered for lease.
o Office lease rates range from $9.60 to $23.40 per square foot (annual rate); the typical lease rate for a good quality office property is between $16.00 and $18.00.
o Business park/industrial lease rates range from $4.00 to $10.00 annually based on building size and design; typical lease rates for multi-tenant units and small buildings range between $7.00 and $8.00.
• Business Park / Industrial Land Values
o Exhibit IV-11 presents a summary of business park sites that are offered for sale; sale prices range from $5.25 to $11.94 per square foot. o Most properties are priced between $6.50 and $8.00 per square foot. o The most comparable business park property is 1 Easton Park Frontage Road; this site is located on the southwest quadrant of the I-210 freeway and Alder Avenue; the asking price is $8.19 per square for the 18.2-acre site.
Market Profiles, Inc.
IV-13
Unit Lease
Site Location City Size* Rate** Comments
1851 Riverside Ave Rialto 2,428 $16.80 20,288 SF bldg, 50% vacant, 1,427-7,000 SF units 437 N. Riverside Ave. Rialto 1,222 $16.20 Morgan Office bldg., 6,500 SF, 740-1,222 SF units, 50% vacant 851 W. Foothill Bl. Rialto 7,000 $17.40
Arther Plaza, 20,036 SF bldg, 5,000-10,000 SF units, 85% vacant
16465 Sierra Lakes Pkwy Fontana 2,269 $21.00 60,000 SF bldg, 16,891 SF available, Sierra Lakes 17051 Casmalia St. Fontana 1,500 $21.00
39,000 SF medical bldg., Sierra Lakes, also for sale @
$307.53/SF
15391 Base Line Ave Fontana 1,833 $18.00 Medical bldg., 3 units @ $18.00/SF, 1 un. @ $15.00/SF 4030 Georgia Bl. San Bern. 25,000 $18.00 50,000 SF bldg., 100% vacant, also for sale @ $89.00/SF 494 No. E St. San Bern. 9,000 $18.00 65,950 SF bldg., 100% vacant, also for sale @ $65.00/SF 570 W. 4th St. San Bern. 1,650 $9.60 34,000 SF bldg., 40% vacant, also for sale @ $63.50/SF 600 N. Arrowhead Ave. San Bern. 4,218 $16.20 40,559 SF bldg, 24% vacant 590 No. D St. San Bern. 1,807 $14.40 Auto Club bldg,. 27% vacant 660 No. E St. San Bern. 9,222 $12.00 Verizon Bldg., 59,938 SF, 100% vacant 444 N. Arrowhead Ave San Bern. 1,140 $13.20 Beckworth Law bldg, 10,468 SF, 28% vacant 330 No. D St San Bern. 5,697 $12.00 Chace Bank bldg, 45,661 SF 303 No. D St. San Bern. 13,267 $15.00 52,258 SF bldg
290 No. D St. San Bern. 1,150 $23.40 Vanir Tower, 132,482 SF bldg, 22% vacant 255 No. D St. San Bern. 1,200 $11.88 43,208 SF bldg., 26% vacant 320 N. E St. San Bern. 1,206 $10.80 Andreson Bldg., 62,302 SF, 69% vacant 781 W. 2nd St. San Bern. 27,000 $12.00 100% vacant
1345 N. Fitzgerald Ave. Rialto 2,000 $7.20 Multi-tenant, Airport Ind. Pk., Renaissance SP 1285 N. Fitzgerald Ave. Rialto 1,964 $7.20 Multi-tenant, Fitzgerald Ind. Pk., Renaissance SP 2630 N. Locust Ave. Rialto 1,750 $7.37 Multi-tenant, north of I-210 1188 W. Leiske Dr. Rialto 6,000 $8.64 Distribution bldg., 15,000 SF, 71% vacant, Renaissance SP 170 N. Arrowhead Ave Rialto 2,184 $5.88 Flex space
1371 N. Laurel Ave Rialto 100,000 Bldg. for sale @ $85/SF 2223 Locust Ave Rialto 44,400 $9.00 Bldg. also for sale @ $78.83/SF, north of I-210, built 2009 2700 Little Mountain Dr. San Bern. 1,413 $10.80
74,892 SF multi-tenant all available, various unit sizes, Mountain Bus. Pk., SEQ I-215 & I-210
3524 Mike Daley Dr. San Bern. 94,108 $4.32 North San Ber. Industrial park 4280 N. Hallmark Pkwy San Bern. 19,068 $5.76 North San Ber. Industrial park 4010 Georgia San Bern. 106,000 $3.96 156,000 SF distribution bldg 656 W. 2nd St. San Bern. 15,001 $19.00 86,606 SF flex bldg, 62% vacant 1355 W. 26th St. San Bern. 17,000 $6.60 Flex space, SWQ I-215 & I-210 19949 Kendall Dr. San Bern. 104,500 Vacant, for sale @ $76.36/SF, built 2009 * Representative available unit.
** Annual lease rate per square foot.
Source: Loopnet, Market Profiles
Business Park / Industrial
EXHIBIT IV-10
SUMMARY OF OFFICE AND BUSINESS PARK LEASE COMPARABLES
RIALTO, SAN BERNARDINO, AND FONTANA
Office
Market Profiles, Inc.
IV-14
Site Size Sale Price Per
Site Location City (Acres) Price Sq. Ft. Comments
SEC Locust & Lowell Rialto 4.8 $1,750,000 $8.37 North of I-210 SWC Ayala & Fitzgerald Rialto 2.41 $787,400 $7.50 Renaissance SP, next to Airport Business Pk 1 Easton Frontage Rd. Rialto 18.2 $6,495,000 $8.19 Renaissance SP, next to I-210 Freeway.
NEC Baseline & Laurel Rialto 8.45 $3,680,820 $10.00 Renaissance SP 2698 Base Line Rd. Rialto 4.32 $583,000 $3.10 Industrial land SE of subject property 2174 Foothill Bl. Rialto 3.2 $416,782 $2.99 Mid-block location NWC Rialto & Cactus Rialto 3.7 $1,132,334 $7.03 Central Rialto industrial district Alder Ave. N of Base Line Rialto 4.5 $2,200,000 $11.22 Renaissance SP 3071 Kendall Dr. San Bern. 1.49 $775,000 $11.94 W side of I-215 at Palm Ave., Palm Pavillion Little Mtn. Dr. & I-215 San Bern. 5.83 $2,032,120 $8.00 Next to Mountain Business Park 3850 Cajon Bl. San Bern. 0.71 $200,000 $6.47 NW San Bernardino Industrial Park 5701 Industrial Parkway San Bern. 2.78 $787,129 $6.50 NW San Bernardino Industrial Park G St. No. of Mill St. San Bern. 6.06 $1,715,828 $6.50 Just east of I-215 445 W. Valley St. San Bern. 2.77 $748,500 $6.20 Near downtown San Bernardino So. E St. at I-215 San Bern. 9.31 $2,129,104 $5.25 Near downtown San Bernardino Source: Loopnet, Market Profiles
EXHIBIT IV-11
SUMMARY OF AVAILABLE BUSINESS PARK / INDUSTRIAL LAND
RIALTO AND SAN BERNARDINO
SECTION V
HOTEL MARKET OPPORTUNITIES
Market Profiles, Inc.
V-1
SECTION V
HOTEL MARKET OPPORTUNITIES
• Introduction
o This section presents an evaluation of the market opportunities for hotel development at the subject site.
o A summary of findings and conclusions is presented first, followed by:
1) a review of market trends, 2) an analysis of market demand, and 3) a summary of competition.
• Summary of Findings and Conclusions
o Due to the recession, little or no hotel development little has occurred in San Bernardino County over the past five years.
o With the economic recovery, occupancy rates have strengthened the past two years and are projected to continue to rise over the next three to four years; this market improvement is anticipated to support the development of a limited number of new hotel properties at select locations.
o The subject property has a single attribute that may attract a hotel/motel developer— freeway frontage; conversely, the following market factors suggest that the subject property is not a candidate for hotel/motel:
There are 100+acres of vacant freeway-frontage commercial sites situated along I-210 to the west that pose strong competition (see report Section III).
There no destination land uses of significance in the immediate vicinity of the site that might attract business or leisure travelers. The traffic volume passing by the site is modest (28,000 ADT) compared to other area freeways, i.e., I-215, I-15, I-10, and I-210 to the west of the site (50,000 to 100,000+ ADTs).
o It is thus concluded that hospitality land uses are not viable on the subject property.
Market Profiles, Inc.
V-2
• Hotel Occupancy and Room Rate Trends
o Exhibit V-1 shows the hotel occupancy and room rate trends for the cities of Rialto, Fontana, San Bernardino, and Colton; the trend data pertains to economy and mid-scale hotel properties consisting of 17 properties totaling 1,600 rooms.
o Due to the national recession, the average occupancy rate declined from 72% in 2005 to a low of 51% in 2009; with the economic recovery the occupancy rate increased to 66% in 2013; as the Inland Empire economy continues to improve further increases in occupancy are projected over the next three years.
o The average room rate declined from 2007 through 2009 before stabilizing in 2010; modest increases in the average room rate occurred in 2013 and early-2014; room rates are projected to increase modestly over the next three years as the occupancy rate strengthens.
EXHIBIT V-1
HOTEL ROOM RATE AND OCCUPANCY TRENDS
RIALTO, FONTANA, SAN BERNARDINO AND COLTON
2000 THROUGH APRIL 2014
$30.0
$35.0
$40.0
$45.0
$50.0
$55.0
$60.0
$65.0
$70.0
20002001200220032004200520062007200820092010201120122013Apr-14 Average Room Rate
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
Occupancy
Room Rate Occupancy
Source: Smith Travel Research, Market Profiles
Market Profiles, Inc.
V-3
• Hotel Demand and Supply
o Exhibit V-2 shows the growth of hotel room night demand in the 4-city market area since 2000 as represented by actual room occupancy experience.
Ave. Daily % Annual Annual Percent Annual Annual
Year Rate Change Supply Demand Occupancy Supply Demand
2013 $66 2.2% 583,727 386,201 66.2% 0.0% 13.7%
2012 $65 -1.6% 583,609 339,602 58.2% 0.1% 4.9%
2011 $66 2.4% 582,905 323,768 55.5% 0.0% 3.5%
2010 $64 0.3% 583,025 312,845 53.7% 7.7% 13.4%
2009 $64 -3.7% 541,525 275,969 51.0% 8.5% -13.2%
2008 $66 -2.3% 499,320 318,086 63.7% 0.0% -6.2%
2007 $68 4.4% 499,320 338,999 67.9% 4.8% 4.0%
2006 $65 7.0% 476,478 325,882 68.4% 2.5% -2.9%
2005 $61 5.4% 465,010 335,756 72.2% 0.0% -3.2%
2004 $58 3.2% 465,010 346,680 74.6% 0.0% -1.9%
2003 $56 4.2% 465,010 353,382 76.0% 0.4% 11.1%
2002 $54 4.9% 463,019 318,007 68.7% 0.4% -0.4%
2001 $51 7.6% 460,995 319,228 69.2% 0.0% 4.2%
2000 $48 N.A. 460,995 306,474 66.5% N.A. N.A.
Source: Smith Travel Research, Market Profiles
Percent Change
2000 THROUGH 2013
EXHIBIT V-2
HISTORICAL LODGING ROOM SUPPLY AND DEMAND
RIALTO, FONTANA, SAN BERNARDINO AND COLTON
ECONOMY TO MID-SCALE HOTELS
Room Rate Room Nights
o Exhibit V-3 shows that occupancy rates rise in the summer season and drop somewhat in December and January; occupancies rise temporarily in February and March due to major races held at the Auto Club Speedway in Fontana.
o The economic recovery is projected to fuel increased leisure and business travel in combination with modest rates of residential growth and commercial-industrial expansion.
o It is projected that the demand for hotel rooms will expand at a rate of between 2.0 and 3.0 percent per year over the next three to four years (i.e., 2.5% annual average increase).
Market Profiles, Inc.
V-4
2000- 2005- 2010- 1st Qtr
Month 2004 2009 2012 2013 2014
January 67.1% 65.8% 52.9% 59.6% 61.7%
February 75.4% 71.9% 60.3% 70.2% 68.7%
March 74.0% 69.4% 61.4% 69.8% 69.6%
April 71.0% 63.6% 54.5% 65.0% 65.3%
May 71.4% 63.8% 55.2% 63.0%
June 76.1% 66.8% 56.3% 69.2%
July 71.2% 66.4% 57.9% 72.0%
August 72.9% 66.2% 58.9% 71.8%
September 69.4% 63.9% 56.2% 68.7%
October 72.3% 64.0% 56.0% 67.3%
November 68.6% 60.6% 50.8% 60.5%
December 62.2% 54.6% 49.5% 57.2%
Annual 71.0% 64.6% 55.8% 66.2% N.A.
Ave. Daily Rate $53 $65 $65 $66 $68
Source: Smith Travel Research, Market Profiles
2000 THROUGH APRIL 2014
Annual Average
EXHIBIT V-3
HOTEL OCCUPANCY BY MONTH
ECONOMY TO MID-SCALE HOTELS
RIALTO, FONTANA, SAN BERNARDINO AND COLTON
o Exhibit V-4 shows that, assuming the addition of an average of 50 rooms per year, the average occupancy in the 4-city market area will remain at about 65 percent; if new rooms are added at a faster rate, the occupancy rate will erode, and if fewer rooms are added the occupancy rate will strengthen.
Market Profiles, Inc.
V-5
Percent Change
Number Annual Annual Percent Annual Annual
Year of Rooms Supply Demand Occupancy Supply Demand
2017 1,800 657,000 426,294 64.9% 2.9% 2.5%
2016 1,750 638,750 415,896 65.1% 2.9% 2.5%
2015 1,700 620,500 405,752 65.4% 3.0% 2.5%
2014 1,650 602,250 395,856 65.7% 3.2% 2.5%
2013 1,600 583,727 386,201 66.2% 0.0% 13.7%
2012 1,600 583,609 339,602 58.2% 0.1% 4.9%
2011 1,600 582,905 323,768 55.5% 0.0% 3.5%
2010 1,600 583,025 312,845 53.7% 7.7% 13.4%
2009 1,368 541,525 275,969 51.0% 8.5% -13.2%
2008 1,368 499,320 318,086 63.7% 0.0% -6.2%
2007 1,368 499,320 338,999 67.9% 7.4% 4.0%
2006 1,274 465,010 325,882 70.1% 0.0% -2.9%
2005 1,274 465,010 335,756 72.2% N.A. N.A.
Source: Smith Travel Research, Market Profiles
Projections
2005 - 2017
EXHIBIT V-4
RIALTO, FONTANA, SAN BERNARDINO AND COLTON
HISTORICAL AND PROJECTED LODGING ROOM SUPPLY AND DEMAND
ECONOMY AND MID-SCALE HOTEL PROPERTIES
• Hotel Competition
o Exhibit V-4 above illustrates that the 4-city market area is presently in a near demand-supply equilibrium condition as represented by the 66% average occupancy rate.
o Exhibit V-5 shows the locations of the hotels and motels located in and surrounding Rialto:
There are two major concentrations of hotels: 1) surrounding the Carousel Mall in downtown San Bernardino, and 2) in the Hospitality Lane business district next to the 10 Freeway (see map key on page V-7).
Market Profiles, Inc.
V-6
EXHIBIT V-4
HOTEL / MOTEL LOCATION MAP
Market Profiles, Inc.
V-7
Map
Key Property
A Days Inn
B America's Best Value Inn
C Country Inn
D Leisure Inn & Suites
E Economy Inn
F Econo Lodge
G Roadway Inn
H America's Best Value Inn
I Radisson
J Orange Show Inn
K Travel Lodge
L Quality Inn
M Hilton Garden Inn
N Comfort Inn & Suites
O Days Inn
P Best Western
Q Hilton
R La Quinta
S Comfort Inn & Suites
T Hampton Inn & Suites
U Days Inn
Hotel Map List
o There are a number of small motel properties along Foothill Boulevard (historic Route 66) in Rialto, these generally consist of older properties that suffer from outdated design and deferred maintenance. o At present there no hotel or motel properties situated along the 210 Freeway corridor with the exception of a Days Inn located in San Bernardino about 5.5 miles to the east of the subject site. o The most competitive/comparable hotel property with respect to the subject property is the Days Inn located off of the I-215 Freeway in the northwest San Bernardino industrial district (map key A). o In addition, three comparable freeway-oriented properties include the Days Inn in south Rialto (map key U), Comfort Inn and Suites-Colton (map key S), and Hampton Inn and Suites-Colton (map key T), all of which are located along the I-10 Freeway corridor;
o Descriptions of the four comparable, freeway-oriented hotels are provided below.
Market Profiles, Inc.
V-8
DAYS INN – UNIVERSITY PARKWAY
Location: One quarter mile off the I-210 Freeway to the southwest at University Parkway. The property is visible from the freeway to southbound traffic. There is also a Motel 6 at this freeway off ramp which is freeway visible. • This location is at the primary entrance to the northwest San Bernardino industrial district. There is a concentration of retail stores and restaurants in the area including the following:
Southwest of Freeway
Walmart
Taco Bell, Jack-in-the-Box, Subway, Don Martin Restaurant Strip/Convenience Retail/Gas Stations
• Also at this location is a vacant big box retail property, and there are a handful of improved, vacant retail sites.
Northeast of Freeway
Ralphs Staples
McDonald’s, I-Hop, Starbucks, Carl’s Jr., Del Taco, KFC, Wienerschnitzel, Papa John’s, Little Caesar’s, Mexican Restaurant
Strip/Convenience Retail/Gas Stations
Market Profiles, Inc.
V-9
# of Rooms: 115
Amenities: Outdoor pool (seasonal), hot tub, free continental breakfast, two business meeting rooms with capacity of up to 100.
Room Rates: $65 - $100
DAYS INN – VALLEY BOULEVARD
Location: Adjacent to the I-10 Freeway approximately one half mile west of Riverside Avenue. The property is visible from the freeway but does not have freeway signage.
The hotel is surrounded by industrial uses. A Walmart store is located on Riverside Avenue one half mile to the east.
# of Rooms: 93
Amenities: Outdoor pool, hot tub, restaurant, business meeting room.
Room Rates: $76 - $109
Market Profiles, Inc.
V-10
HAMPTON INN AND SUITES – COLTON
Location: One block north of the I-10 Freeway at 9th Street in downtown Colton. The property is partially visible from the freeway and it has freeway signage. There is a concentration of retail stores and restaurants in the area including the following:
Stater Brothers
Denny’s Subway McDonald’s Several Independent Restaurants Strip/Convenience Retail/Gas Stations
This retail district is of generally low quality with a significant amount of vacant space.
# of Rooms: 84
Amenities: Outdoor pool, hot tub, fitness room, free breakfast, business center.
Room Rates: $139 to $159
Market Profiles, Inc.
V-11
COMFORT INN AND SUITES – COLTON
Location: Built in 2010, this property is two blocks north of the I-10 Freeway to the east of Mt. Vernon Avenue. The property is visible from the freeway and has direct access from the freeway via Sperry Drive. There are other three small motels in this location. The surrounding area consists primarily of residential neighborhoods.
# of Rooms: 99 Renovated in 2011
Amenities: Outdoor pool, hot tub, fitness room, business center and small meeting rooms, free breakfast.
Room Rates: $75 - $139
SECTION VI
RESIDENTIAL MARKET OPPORTUNITIES
Market Profiles, Inc.
VI-1
SECTION VI
RESIDENTIAL DEMAND PROJECTIONS
• Introduction
o This section presents an analysis of the demand for residential units in the Rialto market area, including projections of demand for both new homes and rental units.
o New home market demand projections are presented first followed by rental market demand.
New Home Market Demand Projections
• Regional Employment Growth
o Historically, employment in the Inland Empire (i.e., San Bernardino and Riverside counties) has expanded more rapidly than the rates of all other Southern California counties, however, the recent economic difficulties have hit Inland Empire employment particularly hard because residential development has been the region’s primary growth industry (see Exhibit IIII-1 below).
Exhibit III-1
Annual Percent Change in Employment
Inland Empire, Southern California, and the United States 1981 Through 2013
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Inland Empire So. Calif. United States
Source: Calif. Emp. Dev. Dept., Market Profiles
Market Profiles, Inc.
VI-2
o Positive employment growth was reestablished in the Inland Empire in 2011 (2,900 net new jobs) and with the improving economic conditions total employment accelerated to 32,000 and 48,600 jobs in 2012 and 2013, respectively.
o Employment growth is projected to gain momentum as the economic recovery continues with job growth averaging 39,000 jobs over the next three years.
o The expansion of the Inland Empire economy is projected to fueled in large part by the recovery of the housing market.
Total Annual Change
Year Employment Number Percent
2016 1,359,000 40,000 3.0%
2015 1,319,000 40,000 3.1%
2014 1,279,000 38,000 3.1%
2013 1,241,000 46,800 3.9%
2012 1,194,200 32,000 2.8%
2011 1,162,200 2,900 0.3%
2010 1,159,300 (18,300) -1.6%
2009 1,177,600 (81,200) -6.5%
2008 1,258,800 (43,600) -3.3%
2007 1,302,400 3,000 0.2%
2006 1,299,400 45,200 3.6%
2005 1,254,200 62,500 5.2%
2004 1,191,700 61,800 5.5%
2003 1,129,900 37,100 3.4%
2002 1,092,800 35,400 3.3%
2001 1,057,400 42,000 4.1%
2000 1,015,400 48,600 5.0%
Source: California Employment Dept., California State
University Long Beach, Market Profiles
EXHIBIT III-2
PROJECTED
2000-2016
SAN BERNARDINO-RIVERSIDE COUNTIES
EMPLOYMENT GROWTH
Market Profiles, Inc.
VI-3
• Economic Study Area Definition
o For the purposes of monitoring the San Bernardino County new home market the county has been divided into six submarket areas as follows:
Rialto-Fontana
San Bernardino-Colton-Highland
Rancho Cucamonga-Upland
Redlands-Yucaipa-Grand Terrace-Loma Linda
Chino-Ontario-Chino Hills-Montclair
Victor Valley
o The Rialto Economic Study Area (ESA) consists of the Rialto-Fontana and San Bernardino-Colton-Highland submarket areas; the boundaries of the ESA are shown below.
RIALTO ECONOMIC STUDY AREA
Market Profiles, Inc.
VI-4
• Demographic Profile
o Exhibit III-3 on the following page presents demographic profiles of the Rialto ESA and the city of Rialto, along with San Bernardino County. o The population of the ESA totals 704,587 persons forming 184,276 households equating to an average household size of 3.77 persons. o From 2010 to 2014 the ESA’s population expanded by 2.6%; over the next five years the population is projected to increase by 3.6% (Claritas/ Site Reports projection).
o The ESA’s population growth is projected to result in an increase of 1,174 households per year through 2019.
o The median household income in the ESA is $44,521compared to a countywide median figure of $50,080.
• Housing Profile
o Exhibit III-4 (on page III-6) presents housing profiles of the Rialto ESA, the city of Rialto, and of San Bernardino County.
o Single family detached homes compose 70% of the ESA’s housing stock compared to a 71% proportion for San Bernardino County. o Fifty-nine percent of the ESA’s households are homeowners compared to 63% countywide.
o The median home value in the ESA is $193,305 (stock of all existing homes) compared to a countywide median value of $215,851.
Market Profiles, Inc.
VI-5
Rialto City of San Bernardino
DESCRIPTION* ESA Rialto County
POPULATION
2019 ESTIMATE 729,825 102,851 2,199,543
2014 ESTIMATE 704,587 100,634 2,105,914
2010 CENSUS 687,057 99,171 2,035,210
2000 CENSUS 586,132 94,321 1,709,144
GROWTH 2014-2019 3.6% 2.20% 4.45%
GROWTH 2010-2014 2.6% 1.48% 3.47%
GROWTH 2000-2010 17.2% 5.14% 19.08%
HOUSEHOLDS
2019 ESTIMATE 190,146 26,001 653,654
2014 ESTIMATE 184,276 25,480 627,835
2010 CENSUS 181,190 25,180 611,618
2000 CENSUS 165,333 25,270 528,503
GROWTH 2014-2019 3.2% 2.04% 4.11%
GROWTH 2010-2014 1.7% 1.19% 2.65%
GROWTH 2000-2010 9.6% -0.36% 15.73%
AVERAGE PERSON PER HH 3.77 3.93 3.29
ESTIMATED HOUSEHOLDS BY INCOME 184,276 25,480 627,835
UNDER $15,000 15.3% 12.85% 13.08%
$15,000 TO $24,999 12.4% 12.00% 11.55%
$25,000 TO $34,999 12.1% 10.51% 10.65%
$35,000 TO $49,999 16.2% 18.19% 14.66%
$50,000 TO $74,999 18.6% 18.69% 18.69%
$75,000 TO $99,999 11.5% 12.26% 12.54%
$100,000 TO $124,999 6.6% 7.75% 7.95%
$125,000 TO $149,999 3.2% 3.53% 4.09%
$150,000 TO $199,999 2.7% 2.88% 4.08%
$200,000 TO $249,999 0.7% 0.64% 1.06%
$250,000 TO $499,999 0.7% 0.58% 1.37%
$500,000 AND OVER 0.2% 0.12% 0.28%
EST. AVERAGE HOUSEHOLD INCOME $56,886 $59,278 $65,329
EST. MEDIAN HOUSEHOLD INCOME $44,521 $47,074 $50,080
* All data is as of 2014 unless noted.
Source: Nielsen/Sitereports, Market Profiles
EXHIBIT III-3
DEMOGRAPHIC PROFILE
CITY OF RIALTO AND SAN BERNARDINO COUNTY
RIALTO ECONOMIC STUDY AREA
Market Profiles, Inc.
VI-6
EXHIBIT III-4
HOUSING PROFILE
Rialto San Bernardino
DESCRIPTION ESA County
YEAR ROUND UNITS IN STRUCTURE 199,679 717,890
SINGLE UNITS DETACHED 69.8% 71.1%
SINGLE UNITS ATTACHED 2.9% 3.5%
DOUBLE UNITS 1.5% 1.8%
3 T0 19 UNITS 14.0% 12.5%
20 TO 49 UNITS 2.4% 5.0%
50+ UNITS 4.1% 6.1%
MOBILE HOME OR TRAILER 5.2% 0.2%
ALL OTHER 0.1% 0.2%
OCCUPIED UNITS 184,276 627,835
OWNER OCCUPIED 59.2% 62.6%
RENTER OCCUPIED 40.8% 37.4%
OWNER OCCUPIED PROPERTY VALUES 109,093 393,072
UNDER $80,000 13.1% 12.6%
$80,000 TO $99,999 5.2% 5.2%
$100,000 TO $149,999 16.3% 13.5%
$150,000 TO $199,999 17.8% 14.9%
$200,000 TO $299,999 26.3% 24.0%
$300,000 TO $399,999 14.0% 14.7%
$400,000 TO $499,999 4.6% 7.4%
$500,000 TO $749,999 2.3% 5.9%
$750,000 TO $999,999 0.2% 1.1%
$1,000,000+ 0.3% 0.7%
MEDIAN PROPERTY VALUE $193,305 $215,851
HOUSING UNITS BY YEAR BUILT 199,679 717,890
BUILT 2005 TO PRESENT 5.2% 7.8%
BUILT 2000 TO 2004 8.0% 9.3%
BUILT 1990 TO 1999 11.9% 13.0%
BUILT 1980 TO 1989 21.8% 22.8%
BUILT 1979 OR EARLIER 53.0% 47.0%
Source: Nielsen SiteReports, Market Profiles
AND SAN BERNARDINO COUNTY
2014
RIALTO ECONOMIC STUDY AREA
Market Profiles, Inc.
VI-7
• New Home Sales Trends
o Exhibit III-5 on the following page shows the pattern of new home sales in San Bernardino County by submarket area.
o From 2005 through 2009, the Rialto ESA accounted for 23% of total new home sales in San Bernardino County; from 2010 through 2013 the ESA’s share rose to 30%; in the first quarter of 2014 the ESA’s share of sales was 33%.
o New home sales in the ESA increased from 292 homes in 2011 to 410 homes in 2012 and 528 homes in 2013.
o Despite strengthening market demand, new home sales for 2014 are projected to be only slightly higher than the total for 2013; this is due to shortages of supply as described below.
o New home sales are projected to strengthen in 2016 through 2019 as builders respond to the favorable demand-supply conditions and bring greater numbers of homes to the market (see New Home Demand below).
• New Home Inventory Trends
o A balance between quarterly sales and the unsold inventory is generally considered to be a healthy inventory condition:
Ratio of unsold/quarterly sales = 1.0 = balanced condition. Less than 1.0 denotes under supply; greater than 1.0 denotes oversupply.
o The current unsold inventory of new homes in the Rialto ESA is very favorable equating to an unsold/sold ratio of only 0.43:1 (Exhibit III-6, page III-9).
o The unsold inventory throughout San Bernardino County is also very low, i.e., 0.52:1 inventory ratio.
Market Profiles, Inc.
VI-8
# of % # of % # of % # of % # of %
Submarket Area Sales Dist. Sales Dist. Sales Dist. Sales Dist. Sales Dist.
Rialto-Fontana 1,564 15.9% 899 13.5% 708 14.4% 342 11.5% 515 22.6% San Ber./Colton/Highland 627 6.4% 553 8.3% 401 8.2% 210 7.1% 239 10.5% Redlands/Yucaipa* 909 9.3% 655 9.9% 514 10.5% 229 7.7% 148 6.5% Rancho Cucamonga-Upland 1,268 12.9% 530 8.0% 504 10.3% 425 14.3% 270 11.9% Ontario-Chino-Chino Hills** 646 6.6% 1,076 16.2% 906 18.5% 670 22.6% 606 26.6% Victor Valley 4,792 48.9% 2,922 44.0% 1,875 38.2% 1,094 36.8% 496 21.8% Totals 9,806 100.0% 6,635 100.0% 4,908 100.0% 2,970 100.0% 2,274 100.0% # of % # of % # of % # of % # of %
Submarket Area Sales Dist. Sales Dist. Sales Dist. Sales Dist. Sales Dist.
Rialto-Fontana 191 18.0% 154 16.8% 192 13.7% 282 16.5% 59 17.2% San Ber./Colton/Highland 82 7.7% 138 15.1% 218 15.5% 246 14.4% 53 15.5% Redlands/Yucaipa* 41 3.9% 78 8.5% 61 4.3% 5 0.3% 0 0.0% Rancho Cucamonga-Upland 164 15.4% 180 19.7% 332 23.7% 374 21.9% 69 20.1% Ontario-Chino-Chino Hills** 184 17.3% 214 23.4% 435 31.0% 529 31.0% 119 34.7% Victor Valley 400 37.7% 152 16.6% 165 11.8% 272 15.9% 43 12.5% Totals 1,062 100.0% 916 100.0% 1,403 100.0% 1,708 100.0% 343 100.0% * Includes Grand Terrace and Loma Linda
** Includes Montclair
Source: Residential Trends, Market Profiles
2011 2012
2005
2010 2014 1st Qtr
EXHIBIT III-5
NEW HOME SALES DISTRIBUTION BY SUBMARKET AREA
SAN BERNARDINO COUNTY
2005 THROUGH FIRST QUARTER 2014
2009
2013
20082006 2007
Market Profiles, Inc.
VI-9
Exhibit III-6
Ratio of Unsold Inventory to Quarterly Sales
Rialto Economic Study Area
and San Bernardino County
2006 Through First Quarter 2014
0.0 0.2
0.4 0.6
0.8 1.0
1.2 1.4
1.6 1.8
2.0 2.2
2.4 2.6
2006 2007 2008 2009 2010 2011 2012 2013 2014
1st Qtr
Unsold / Sold Ratio*
Rialto ESA San Bernardino Co.
Source: Residential Trends, Market Profiles
* 1.0 ratio denotes balanced
demand-supply condition
1.0* = Demand--
Supply Balance
• New Home Price Trends
o Exhibit III-7 (following page) shows the historical trend of the average new home sale price in the Rialto ESA and throughout San Bernardino County (1st qtr. of each year).
o The average sale price jumped by 28% from first quarter 2012 to first quarter 2013, then remained virtually unchanged as first quarter 2014. o Exhibit III-8 shows the average new home sale price (detached homes) among the submarkets of San Bernardino County as of the first quarter of 2014.
o The average price figure for the Rialto-Fontana submarket was $406,215 compared to a figure of $431,407 for San Bernardino County (there were no sales in the Redlands-Yucaipa submarket).
Market Profiles, Inc.
VI-10
Exhibit III-7
Weighted A verage New Home Sale Price*
Rialto-Fontana Submarket and San Bernardino County
First Quarter 2004 Through First Quarter 2014
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
2004-1Q2005-1Q2006-1Q2007-1Q2008-1Q2009-1Q2010-1Q2011-1Q2012-1Q2013-1Q2014-1Q Wt. Ave. Sale Price*
Rialto-Fontana San Ber. Co
Source: Residential Trends, Market Profiles
* Detached homes
Exhibit III-8
Weighted Average New Home Sale Price--Detached Homes
San Bernardino County Submarkets
First Quarter 2014
$406,215
$376,508
$594,469
$481,814
$225,778
$431,407
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
Rialto-FontanaSan Ber.-Colton
Rancho Cuc.-Upland
Ontario-ChinoVictor Valley San Ber. Co.
Wt. Ave. Sale Price
Source: Residential Trends, Market Profiles
Market Profiles, Inc.
VI-11
• Distressed Properties
o Until recently, the recovery of the new home market had been impeded by the inventory of distressed and foreclosed properties. o Exhibit III-9 shows that over the past three years the inventory of distressed properties in San Bernardino County has declined substantially to reasonable levels.
o Home prices in San Bernardino County have been rising and further reductions in the distressed inventory coupled with economic recovery will enable home prices to rise moderately over the next three years.
EXHIBIT III-9
DISTRESSED HOME INVENTORY TRENDS
SAN BERNARDINO COUNTY
0 2,000
4,000
6,000
8,000
10,000
12,000
4Q-
'10
1Q-
'11
2Q-
'11
3Q-
'11
4Q-
'11
1Q-
'12
2Q-
'12
3Q-
'12
4Q-
'12
1Q-
'13
2Q-
'13
3Q-
'13
4Q-
'13
1Q-
'14
Quarter
# of Homes
Preforeclosure Scheduled for Sale Bank Owned (REO)
Pre. = Preforclosure
Sched. = Scheduled for Sale
REO = Bank Owned
Source:
ForeclosureRadar,
Market Profiles
Sched.
REO
Pre.
Market Profiles, Inc.
VI-12
• Projected New Home Demand
o Given the projected improvement in the Inland Empire economy and the associated growth in employment, significant improvement in the new home market is projected.
o Exhibit III-10 below shows the historical and projected new home sales and inventory conditions relating to the San Bernardino County new home market.
o Employment growth will fuel rising new home demand which in turn will support moderately rising new home prices.
o Based on the projected growth of households within the Rialto ESA (Exhibit III-3), Exhibit III-11 (following page) presents a summary of the household growth forecast and the associated demand for new homes.
EXHIBIT III-10
NEW HOME SALES, INVENTORY AND PRICE TRENDS
SAN BERNARDINO COUNTY
AND INLAND EMPIRE JOB GROWTH
1987 - 2016
-50,000
-30,000
-10,000
10,000
30,000
50,000
70,000
90,000
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 J
o
b
s
0 2,000
4,000
6,000
8,000
10,000
12,000
H
o
m
e
s
Jobs New Home Sales
Inventory Price IndexMarket Profiles
Projected
Jobs
Sales
Price Index
Inventory
Market Profiles, Inc.
VI-13
o The demand for new homes in the ESA is projected average 700 homes per year in the 2015 through 2019 period.
o New home sales are projected to strengthen in 2016 throug h 2019 as builders respond to the favorable demand- supply conditions and bring greater numbers of homes to the market.
o In the 2017 through 2019 period, annual new home demand is projected to average 800 homes per year.
New
Total HH*
Year Total Jobs Incr./Yr Households Per Year Owner Renter 2000 1,015,400 165,333
to 14,390 1,586 936 650
2010 1,159,300 181,190
to 29,925 772 455 316
2014 1,279,000 184,276
to 39,000 1,174 700 474
2019** 1,474,000 190,146
* HH = Households
** Wine Country ESA household projections from Market Profiles, Inc.
Source: Calif. Employment Development Dept., Nielsen/Claritas, Market Profiles Projected**
Housing Demand
Riverside-San
Bernardino Co.s
Rialto Economic Study Area
Annual
EXHIBIT III-11
HOUSING GROWTH SUMMARY
AND INLAND EMPIRE EMPLOYMENT
2000 - 2019
RIALTO ECONOMIC STUDY AREA
Market Profiles, Inc.
VI-14
• New Home Sales by Price Range
o Exhibit III-12 below shows that the major volume price ranges for new home sales in the Rialto ESA have shifted toward the lower end of the price spectrum compared to 2007.
o In the first quarter of 2007, 65% of the new homes sold in the submarket were priced over $450,000; in the first quarter of 2014, 18% of the homes sold were priced over $450,000.
o In the first quarter of 2007 attached homes accounted for all of the sales of homes priced under $300,000; there were no sales of attached homes in the first quarter of 2014.
Exhibit III-12
Distribution of New Home Sales by Price Range
Rialto Economic Study Area
First Quarter 2007 and First Quarter 2014
0%
5%
10%
15%
20%
25%
30%
Under $250K$250-300K$300-350K$350-400K$400-450K$450-500K$500-550K$550-600K $600K+
Percent
2007 1st Qtr 2014 1st Qtr
Source: Residential Trends, Market Profiles
Market Profiles, Inc.
VI-15
• New Home Demand by Price Range
o Exhibit III-13 presents the projected price distribution of new home demand in the Rialto ESA.
o The projected price distribution of demand is derived from a synthesis of historical sales with consideration of the underlying value structure of the existing housing stock.
PRICE RANGE AVERAGE ANNUAL SALES* % OF TOTAL
Under $300,000 100 13%
$300,000-$350,000 160 20%
$350,000-$400,000 175 22%
$400,000-$450,000 145 18%
$450,000-$500,000 100 13%
$500,000-$550,000 50 6%
$550,000 and Over 70 9%
TOTAL 800 100.0%
EXHIBIT III-13
RIALTO ECONOMIC STUDY AREA
2017 - 2019
PROJECTED ANNUAL NEW HOME DEMAND
DISTRIBUTED BY PRICE RANGE
ANNUAL NEW HOME DEMAND
RIALTO ECONOMIC STUDY AREA
2017-2019
0 20
40 60
80 100
120
140
160
180
200
Under
$300K
$300-
350K
$350-
400K
$400-
450K
$450-
500K
$500-
550K
$550K+
Price Range
# of Homes*
Source: Market Profiles
Market Profiles, Inc.
VI-16
New Home Market Demand Projections
• Residential Construction
o Exhibit VI-1 on the following page shows the number of residential building permits issued in the Rialto Economic Study Area (ESA) since 2000 (see map below for ESA boundaries).
o Multi-family units have accounted for 10 percent of all residential permits issued in the ESA.
o Multi-family construction has been sporadic due to the relatively low volume of apartment construction activity.
o Since 2000, permits for an average of 140 multi-family units per year have been issued in the ESA.
RIALTO ECONOMIC STUDY AREA
Market Profiles, Inc.
VI-17
Single Multi- Single Multi- Single Multi- Single Multi- Year Family Family Total Family Family Total Family Family Total Family Family Total 2013 69 0 69 223 0 223 38 0 38 24 120 144
2012 16 0 16 179 98 277 23 0 23 11 0 11
2011 7 75 82 136 0 136 24 0 24 1 0 1
2010 66 75 141 103 202 305 6 80 86 19 0 19
2009 26 0 26 326 200 526 11 0 11 15 0 15
2008 23 6 29 177 10 187 21 0 21 17 0 17
2007 49 181 230 794 26 820 159 90 249 43 0 43
2006 157 64 221 1,001 0 1,001 286 0 286 64 0 64
2005 66 130 196 1,851 14 1,865 537 0 537 89 0 89
2004 63 33 96 1,359 186 1,545 296 0 296 77 0 77
2003 121 4 125 1,340 0 1,340 185 132 317 42 0 42
2002 99 0 99 1,806 2 1,808 310 75 385 75 0 75
2001 90 4 94 1,083 0 1,083 144 0 144 146 0 146
Single Multi- Single Multi- Single Multi- Single Multi- Year Family Family Total Family Family Total Family Family Total Family Family Total 2013 8 0 8 0 0 0 362 120 482 2,040 1,384 3,424
2012 29 0 29 13 0 13 271 98 369 1,381 516 1,897
2011 16 0 16 15 0 15 199 75 274 1,103 369 1,472
2010 23 0 23 1 0 1 218 357 575 1,260 529 1,789
2009 8 0 8 0 0 0 386 200 586 1,481 782 2,263
2008 6 0 6 1 0 1 245 16 261 1,976 1,207 3,183
2007 75 0 75 3 14 17 1,123 311 1,434 6,302 1,450 7,752
2006 185 0 185 77 0 77 1,770 64 1,834 12,616 708 13,324 2005 344 0 344 1 0 1 2,888 144 3,032 15,135 1,500 16,635 2004 297 0 297 21 0 21 2,113 219 2,332 13,960 4,057 18,017 2003 366 0 366 3 0 3 2,057 136 2,193 10,541 1,358 11,899 2002 289 0 289 1 0 1 2,580 77 2,657 9,126 1,093 10,219
2001 265 0 265 9 0 9 1,737 4 1,741 6,818 1,587 8,405
Source: U.S. Census Bureau, Market Profiles
Highland Grand Terrace 6-City Totals San Bernardino Co. 2001 THROUGH 2013
Rialto Fontana
EXHIBIT VI-1
RESIDENTIAL BUILDING PERMITS
CITIES OF RIALTO, FONTANA, SAN BERNARDINO, COLTON, HIGHLAND AND GRAND TERRACE
AND SAN BERNARDINO COUNTY
San Bernardino Colton
• Apartment Occupancy and Rent Trends
o Forty-one percent of the ESA’s households are renters compared to 37 percent countywide.
o Apartment vacancy rates in the ESA are low; as of March 2014, the average apartment vacancy rate was 3.3 percent in the Rialto-Fontana submarket and 2.9 percent in the San Bernardino-Colton-Highland submarket (Exhibit VI-2).
Market Profiles, Inc.
VI-18
o The apartment vacancy rate has been improving steadily over the past five years.
o Rents have improved modestly over the past three years; the average rent increased by 1.4 percent over the past year in Rialto-Fontana and by 3.1 percent in San Bernardino-Colton-Highland.
o Two-bedroom units account for 64 percent of the Rialto-Fontana apartment stock, 1-bedroom units 28 percent, 3-bedroom units 6.4 percent, and studio units 2.1 percent.
Ave. Ave. Ave. %
Rent* Sq. Ft. $ / Sq. Ft. Mix 1st Qtr '14 1-Year 3-Year 5-Year Studio $723 502 $1.44 2.1% -2.0% -9.0% -0.8% 0.2%
One Bedroom $907 686 $1.32 27.9% 0.3% -0.2% 1.4% 0.2%
Two Bedroom $1,063 890 $1.19 63.6% 0.2% 2.2% 2.2% 0.3%
Three Bedroom $1,454 1,107 $1.31 6.4% 1.7% 1.9% 2.0% 0.9% $1,037 100% 0.3% 1.4% 2.0% 0.3%
Mar. 2014 1st Qtr '14 1-Year 3-Year 5-Year
3.3% 3.3% 3.9% 5.5% 6.4%
Ave. Ave. Ave. %
Rent* Sq. Ft. $ / Sq. Ft. Mix 1st Qtr '14 1-Year 3-Year 5-Year Studio $616 444 $1.39 2.9% 0.6% 2.0% 7.7% 3.2%
One Bedroom $740 654 $1.13 33.5% 0.4% 0.5% 2.1% 0.3%
Two Bedroom $912 890 $1.02 59.0% 1.0% 0.1% 1.9% 0.0%
Three Bedroom $1,151 1,186 $0.97 4.6% 0.3% 1.7% 0.9% 0.2% $857 100% 0.5% 3.1% 2.7% 1.5%
Mar. 2014 1st Qtr '14 1-Year 3-Year 5-Year
2.9% 2.9% 4.1% 5.2% 6.4%
* Asking Rent
Source: ReisReports, Market Profiles
Average Vacancy Rate
Average Vacancy
Rialto - Fontana
San Bernardino - Colton - Highland
Ave. Annual Rent Change
Average Rent / Trend
Average Vacancy
Average Rent / Trend
Average Vacancy Rate
Ave. Annual Rent Change
RIALTO-FONTANA AND SAN BERNARDINO-COLTON-HIGHLAND SUBMARKET AREAS EXHIBIT VI-2
AVERAGE RENT, UNIT MIX, AND UNIT SIZE BY TYPE
FIRST QUARTER 2014
AND ANNUAL RENT AND VACANCY TRENDS
Market Profiles, Inc.
VI-19
o The average rent for apartment units built between 2000 and 2009 is $1,419 in Rialto-Fontana (Exhibit VI-3); no newer apartments were identified for the quarterly survey in San Bernardino-Colton-Highland.
Average Inventory
Year Built Rent* Vacancy Dist.
Before 1970 $987 6.5% 1%
1970-1979 $928 2.2% 5%
1980-1989 $984 3.3% 79%
1990-1999 $1,180 3.1% 2%
2000-2009 $1,419 2.8% 10%
After 2009 $1,204 2.7% 3%
Totals / Ave. $1,037 3.3% 100%
Before 1970 $717 7.8% 8%
1970-1979 $710 8.2% 12%
1980-1989 $884 3.7% 75%
1990-1999 $997 0.8% 5%
2000-2009 n/a n/a 0%
After 2009 n/a n/a 0%
Totals / Ave. $857 2.9% 100%
* Asking rent
Source: ReisReports, Market Profiles
APARTMENT RENT, VACANCY, AND INVENTORY BY AGE
EXHIBIT VI-3
Rialto-Fontana
San Bernardino-Colton-Highland
FIRST QUARTER 2014
AND SAN BERNARDINO-COLTON-HIGHLAND SUBMARKET
RIALTO-FONTANA SUBMARKET
• Demand for Rental Units
o The demand for new rental units in the ESA is projected to average 474 units per year over the next five years (Exhibit VI-4). o This is a modest demand forecast based on an annual household growth rate of less than 1.0 percent (i.e., 0.83%/yr.) as forecast by Nielsen/Site Reports.
o As shown in Exhibit VI-5, in the city of Rialto, as throughout San Bernardino County, about half of all rental units consist of single family homes; this is largely due to the modest rents offered for older single family homes.
Market Profiles, Inc.
VI-20
New
Total HH*
Year Total Jobs Incr./Yr Households Per Year Owner Renter 2000 1,015,400 165,333
to 14,390 1,586 936 650
2010 1,159,300 181,190
to 29,925 772 455 316
2014 1,279,000 184,276
to 39,000 1,174 700 474
2019** 1,474,000 190,146
* HH = Households
Source: Calif. Employment Development Dept., Nielsen SiteReports, Market Profiles Projected**
Housing Demand
Inland Empire
Rialto Economic Study Area
Annual
Employment
EXHIBIT VI-4
HOUSING GROWTH SUMMARY
AND INLAND EMPIRE EMPLOYMENT
2000 - 2019
RIALTO ECONOMIC STUDY AREA
Housing
Type Owners Renters Owners Renters
Single Family Detached or Attached 337,427 108,482 91% 47% 2 to 9 Units 5,350 60,263 1% 26%
10 or More Units 1,453 51,694 0% 22%
Mobile Homes and Other 27,232 9,426 7% 4%
Totals 371,462 229,865 100% 100%
Single Family Detached or Attached 13,626 4,335 89% 48% 2 to 9 Units 89 2,363 1% 26%
10 or More Units 95 1,939 1% 22%
Mobile Homes and Other 1,463 359 10% 4%
Totals 15,273 8,996 100% 100%
Source: U.S. Census Bureau, 2010-2012 American Community Survey, Market Profiles San Bernardino County
City of Rialto
Number of Households Percent Distribution
EXHIBIT VI-5
HOUSING TENURE BY TYPE OF UNIT
2012
SAN BERNARDINO COUNTY AND CITY OF RIALTO
o Over the next five years, traditional, multi-family apartments are projected to account for between 50 and 60 percent of the projected annual demand for rental units in the ESA, or roughly 240 to 300 units per year.
Market Profiles, Inc.
VI-21
o Virtually all new apartments are targeted to “move-up” renters who desire to upgrade their place of residence.
o Exhibit VI-6 shows the distribution of renters by monthly rent range for the city of Rialto; virtually all of the residential units commanding rents above $1,400 consist of single family homes.
EXHIBIT VI-6
HOUSEHOLDS BY RENT RANGE
CITY OF RIALTO
2012
Number of
Rent Range Households
Under $500 431
$500-$750 1,774
$750-$1,000 2,519
$1,000-$1,250 1,671
$1,250-$1,500 1,174
$1,500-$2,000 1,189
$2,000 and Over 65
Total 8,823
Source: U.S. Census Bureau, American
Community Survey, Market Profiles
o Exhibit VI-2 above shows that the average rent in the Rialto-Fontana submarket for apartments built between 2000 and 2009 is $1,419; rents are generally moderately lower in Rialto than in Fontana; properties commanding rents above $1,500 generally consist of single family homes.
o New apartment communities in Rialto can generally command rents of between $900 and $1,800 for 1-bedroom to 3-bedroom floor plans depending on location and amenities offered.
• Market Leasing Volume and Product Absorption
o The rate of absorption of new apartment product is related to the total annual apartment leasing volume within the ESA (i.e., not limited to the annual new demand described above):
Market Profiles, Inc.
VI-22
Historical monitoring of rental unit turnover in the cities of Rialto and San Bernardino has revealed an annual turnover rate among renter households of 32%1.
Application of this turnover rate to the existing rental households in the ESA (75,185 households) yields an annual leasing volume of 24,285 rental units.
With respect to the subject property, the annual apartment leasing volume must be qualified to include only those renter households that can afford the subject’s proposed rents; based on a rent affordability analysis (described below), there are about 10,180 renter households in the ESA that are income-qualified
candidates for occupancy at the subject property; application of an annual apartment turnover rate of 40% to this target population yields an annual leasing volume of about 4,000 units per year (the turnover rate among apartments is estimated to be about 40% as apartments turnover at a higher rate than do single family homes).
• Rent Affordability Analysis
o New rental units are targeted to the upper end of the market’s rental price structure; new units attract relatively affluent, discretionary renters seeking a high quality product.
o It is anticipated that the subject rental units will be offered at monthly rents falling within the general rent range from $1,000 to $1,500 per month.
o Exhibit VI-7 shows that, with respect to affordability, the $875 to $1,875 rent ranges have the largest number of potential renters (18,846 renter households).
1 Geographic Mobility in the Past Year by Tenure, U.S. Census Bureau, 2008-2010 American Community Survey
Market Profiles, Inc.
VI-23
Percent Percent
Income Range Owners Renters Owners Renters
Under $5,000 31% 69% 1,124 2,471 N.A. N.A.
$5,000 to $10,000 29% 71% 1,515 3,656 N.A. N.A.
$10,000 to $15,000 25% 75% 2,194 6,736 N.A. N.A.
$15,000 to $20,000 33% 67% 2,373 4,877 $375 $500
$20,000 to $25,000 39% 61% 2,970 4,704 $500 $625
$25,000 to $35,000 47% 53% 7,889 8,778 $625 $875
$35,000 to $50,000 57% 43% 12,594 9,554 $875 $1,250
$50,000 to $75,000 68% 32% 19,863 9,292 $1,250 $1,875
$75,000 to $100,000 78% 22% 13,658 3,824 $1,875 $2,500
$100,000 to $150,000 87% 13% 13,974 2,049 $2,500 $3,750 $150,000 and Up 90% 10% 5,413 626 $3,750 & Over
Source: U.S. Census Bureau, 2007-2009 American Community Survey, Market Profiles EXHIBIT VI-7
TENURE BY HOUSEHOLD INCOME
RIALTO ECONOMIC STUDY AREA
@ 30% of Income
Households Imputed Rent
PRICING AND ABSORPTION
The subject site’s proposed program can offer 400+ residential units, in addition to its supporting facilities a nd community amenities. The recommended rental structure is based on a review of competing properties and a reasonable market positioning analysis. It was concluded that the subject property will have a level of amenities and features comparable to apartm ents build since 2007. This design and amenity level as well as being a new property, will allow the rental value shown below. Exhibit I -1 below presents the subject product matrix and the recommended unit rents.
EXHIBIT I-1
APARTMENTS PRODUCT MATRIX
# UNITS/ 2013 RENT
DENSITY/ PLAN UNIT PLAN MONTHLY UNIT PER
DESIGN TYPE MIX TYPE RENT SIZE SQ. FT.
1/1 40% Flat $1,000 700 $1.43
400+ 2/1 10% Flat $1,150 900 $1.28
3-Story 2/2 50% Flat $1,300 1100 $1.18
Totals/Averages 200+ $1,150 1,025 $1.13
Market Profiles, Inc.
VI-24
The recommended rents are stated in today’s dollars (June 2014) exclusive of inflation and concessions, as if the project were in the market today. With an entry date of 2016 for the subject units to begin leasing, it is projected that rent values will increase three percent each year over the next 3 years.
PROJECTED ABSORPTION
Baseline average demand for new rental units in the Primary Market Area is projected to average 474 units per year. As a result, in part because there have been low level s of new rental apartment construction in the market area in recent years virtually all apartment projects currently in the market are running at or near full occupancy (7%).
The subject project will be competing directly for a share of market turnover and relocations due to a new product entering the market, as well as to capture elements of demand from already -present residents and workers who may desire a new development and who are currently under-paying at rent levels they can easily afford.
Market Profiles has found that a single project cannot capture all of the forecasted demand within a market area due to the variety of subjective choices made by consumers when they have only one alternative (e.g., they do not like the location, they prefer a different style of architecture, etc).
Based on this combination of demand sources, performance of comparable projects, and assuming that the subject project enters the market in 2016, Market Profiles projects an overall absorption rate of approximately 30 units per month, resulting in full occupancy (95%) of the 400+unit project within approximately one year from the beginning of lease- up. An absorption rate of up to 40+ units per month may be achievable at the subject development if no new competitive developments are in the market during the lease-up phase for the subject development.
The specific design development standards are found in the appendix to this report.
SECTION VI
APPENDIX
Map #: 1 Phone: 888-498-4914
Address: 11711 Collet Avenue 951-588-5235
Riverside, CA 92505 Surve y Date: Feb. 2013
Number of Units: 588 Year Built: 2004
Floors: 3-stor y
Occupancy: 94%
Floor Plans 12345678
Base Rent: $1,064 $1,215 $1,099 $1,175 $1,242 $1,368 $1,468 $1,684 Sq. Ft.: 715 820 850 970 975 1,060 1,085 1,332
Base $/Sq. Ft. $1.49 $1.48 $1.29 $1.21 $1.27 $1.29 $1.35 $1.26 Bedrooms: 1112 1+Den 2 2 3
Baths: 11111222
Parking: Carports, open, detached garages available
Features: 9' ceilings Washer/dryers (full size) Ceiling fan Walk-in closets Crown molding Internet access Mirrored wardrobe doors
Patio/balcony Microwave Fireplace (gas)
Amenities: Clubhouse w/ TV, coffee bar, fitness center, business center Pools (2), spas (2) Large putting green
Pets allowed Expansive, landscaped, furnished grounds
Concessions: None
Comments: Located one block south of subject property. Good quality throughout.
Best comparable.
Source: Market Profiles
APARTMENT PROPERTY PROFILE
ESPLANADE AT RIVERWALK
ESPLANADE AT RIVERWALK
Entry
Clubhouse
Clubhouse
Recreation Area
Recreation Area
Kitchen
Living / Dinning
Bath