THIRD STREET RETAIL ASSESSMENT

Transcription

1 THIRD STREET RETAIL ASSESSMENT prepared for The San Francisco Redevelopment Agency Prepared By Conley Consulting Group Revised April 2003

2 THIRD STREET RETAIL ASSESSMENT prepared for The San Francisco Redevelopment Agency Prepared By Conley Consulting Group 403 Martin Luther King Jr. Way Oakland, California Submitted January 2003 Revised April 2003

3 Table of Contents Executive Summary...2 I. Introduction...4 A. Assignment...4 B. Report Organization...4 II. Trade Area and Functions Served...5 A. Location...5 B. Retail Functions and Trade Area Served...5 III. Expenditure Potential and Leakage...6 A. Current Trade Area Demographics and Trends...6 B. Expenditure Potential...11 C. Leakage...12 D. Current Achieved Capture Share...12 IV. Third Street Retail Supply and Performance...15 A. Current Inventory...15 B. Sales Performance...18 C. Proposed Development...19 V. Third Street Retail Potential...23 A. Current Leakage and Retail Development Potential...23 B. Future Retail Potential...23 VI. Caveats and Limitations...30

4 Executive Summary

5 Executive Summary The San Francisco Redevelopment Agency commissioned this report to evaluate the retail potential of Third Street. Conley Consulting Group (CCG) has analyzed retail supply and demand conditions on Third Street, estimated the retail district s current success in capturing retail sales from the shopper base, and evaluated the likely future trends based on proposed and projected development in the Trade Area. Current Performance In the last five years, Third Street retail uses have shown stagnating sales performance. Today these retailers capture only a small portion of the expenditure potential generated by Trade Area residents and employees of local businesses. CCG estimates that Third Street retailers currently capture less than 13% of the residents' expenditure potential, and that nearly $160 million in total expenditure potential is lost each year as leakage to other retail areas. This is an extension of a long-documented trend: Over the past twenty years, various retail analysts have reported annual leakage in excess of $100 million for the district. Local shoppers report that they travel outside of the Trade Area to patronize other districts, including the nearby San Bruno Avenue neighborhood shopping district, for basic shopping needs. The current retail environment including the poor condition of the street and sidewalks; deteriorated storefronts; poor pedestrian environment; evidence of deferred investment and poor maintenance standards of the surrounding uses; people congregating near liquor and convenience stores; and lack of a critical mass of shopper attractions suggests that there is limited potential to recapture the current retail leakage. Future Trends Supporting Retail However, there are recent indicators that physical conditions will improve on Third Street in the near term. Streetscape improvements planned on Third Street between Kirkwood and Shafter as part of the Light Rail system will include improved sidewalks, lighting, and provision of street furniture, public art, and paving. Improvements are scheduled to be completed in Planned residential development along Third Street, with provisions for ground-floor retail uses, will further improve the environment and support retail revitalization. Since most of the users of the Light Rail System in Bayview are projected to be people who already live in the Trade area, the Light Rail will improve visibility and shopper awareness of Third Street retailers, but likely will not generate a new shopper base for existing businesses. A façade improvement program could further improve the environment and potentially encourage support for the retail district. New housing development along Third Street, as is projected, will further strengthen the district s retail performance, by providing an increased level of pedestrian activity on the street and consequently adding to the flow of potential shoppers from which area stores can draw support. Most importantly, with appropriate street-level uses and urban design, these developments will improve the pedestrian environment on Third Street. Conley Consulting Group Page rd Street Report-revised 4-29

6 Retail Opportunities This report is not a prediction that new retail on Third Street is likely to recapture all of the current retail leakage from the market area. Rather, CCG estimates the maximum amount of retail sales potentially available for capture in the future. The maximum amount of retail sales available for capture by the year 2011 would support more than 400,000 SF of new retail. However, the portion of the retail leakage that can be successfully recaptured is largely a function of the retail improvement implementation strategy enacted for the district, and whether new retail with sufficient drawing power and performance potential can be added to the retail mix on Third Street. In the near term, the best opportunities for market success are stores selling convenience goods and restaurants. Additionally, preventing the development of new package liquor stores or markets that sell liquor uses already prevalent in the area is also important to retail revitalization on Third Street. Personal services like beauty shops, beauty supply stores, and nail salons are potentially successful additions to the retail inventory in the near term. Attraction of comparison goods stores is likely to be the most difficult, because of the critical mass and co-tenancy requirements for success of apparel, general merchandise, and specialty retail stores. These stores typically perform best with an anchor tenant securing shopper patronage patterns and enough stores to accommodate the comparison aspect of shopping for these goods. A careful strategy to attract anchor or mini-anchor comparison goods stores is needed to successfully attract this portion of the retail sales potential to Third Street retail outlets. Conley Consulting Group Page rd Street Report-revised 4-29

7 Introduction

8 I. Introduction A. Assignment The Conley Consulting Group has been retained by the San Francisco Redevelopment Agency to evaluate the market potential for retail development on Third Street. Over the last decade or so, the City and Agency have hired consultants to evaluate the potential for retail revitalization on Third Street multiple times, including: 1993, Sedway, Third Street Corridor Study. Identifies Economic development opportunities for Third Street, including retail and business development opportunities. Identified 156,000 SF of retail space which could be supported by recapturing sales leakage. 1996, Keyser Marston Associates,Inc (KMA), Bayview Hunters Point Concept Plan. Examines retail revitalization opportunities. Identified $115 million in sales leakage which would support up to 134,000 SF of new retail space. 1998, Pittman Hames and Keyser Marston Associates. This analysis, performed for MUNI, evaluated revitalization opportunities in conjunction with the planned development of the Light Rail System on Third Street. Included in the report is a 1996 retail analysis, performed by KMA, which identified $75 to $95 million in sales leakage for the two retail districts in Bayview Hunters Point (Third Street and Bayshore Boulevard). It was estimated that 65,000 to 85,000 SF of new retail space could be supported. Each analysis has found that while there is market potential in terms of unsatisfied retail demand, there are significant barriers to retail revitalization. B. Report Organization Following this Introduction, which is the first section, this report is organized as follows: Section II describes the Trade area served by the existing retail supply on Third Street. Section III estimates the retail expenditure potential of the residents in the Trade Area. Section IV evaluates the current inventory of retail stores on Third Street, the sales performance of the retail uses, and estimates the existing capture share of the expenditure potential. Section V estimates the existing retail Sales Leakage of expenditure potential from the Trade Area, and evaluates the opportunity to recapture that leakage given both the current and estimated future population base. Section VI discusses the Caveats and Limitations of this analysis. Conley Consulting Group Page rd Street Report-revised 4-29

9 Trade Area and Functions Served

10 II. Trade Area and Functions Served A. Location The Trade Area served by Third Street is characterized by its isolation from the rest of San Francisco. The Bayview Hunters Point neighborhood is the extreme southeastern portion of the City, divided by major transportation routes from the rest of the City, including Cesar Chavez to the North, and the 101 and I-280 freeways to the West. These geographic barriers limit the influx of potential shoppers from adjacent neighborhoods. B. Retail Functions and Trade Area Served CCG surveyed the Third Street retail area from Cesar Chavez to Jamestown in Fall, Appendix A presents the results of our survey, providing an inventory of ground floor uses throughout the district. One hundred eighty-four uses were identified in the survey, with small markets selling liquor being the most common store type identified. Fifteen of the uses were vacant at the time of the survey. Thirty-five percent of the uses surveyed were non-retail uses including both social organizations and churches, as well as business and personal services. Notably absent from the retail district are continuous groupings of retail uses at the ground-floor level, as the street-level network is frequently interrupted by non-retail uses including service businesses and social-service uses, business functions, and vacant storefronts. The northern side of the street has historically had a more continuous retail network, despite the more frequent interruptions caused by the intersection of Third Street with the street grid pattern. The primary retail functions served along Third Street are food related: small grocery stores and food and beverage outlets dominate both the number of stores and reported taxable sales in the area. In our survey work we noted pedestrian activity on the street concentrated near the corner stores, with evidence of loitering and unsavory activity serving to discourage shopper traffic. According to local sources, retail uses are most successful in the blocks around Evans Street, where eating places, in particular, benefit from the support of employees at local businesses. This success translates into higher sales performance and rental rates. The primary source of shopper support for the district are the residents of the Bayview Hunters Point neighborhood, the area commonly understood to be bounded by Cesar Chavez and Islais Creek to the North, Bayshore Boulevard to the West, the Bay shoreline to the east, and The San Mateo County line to the south. This area represents the primary Trade Area served by Third Street retail. In addition to drawing support from Trade Area residents, local retailers are patronized by the more than 30,000 employees of local businesses. Merchant interviews along Third Street confirm that few shoppers are drawn from outside of the Trade Area. Conley Consulting Group Page rd Street Report-revised 4-29

11 Expenditure Potential and Leakage

12 III. Expenditure Potential and Leakage A. Current Trade Area Demographics and Trends The primary source of data available today for demographics related to population, housing, and households is the 2000 US Census. As this study was being conducted, most of the relevant data from the Census had been released. The projections included in this report are primarily based on 2000 Census data. However, due to the relatively recent release of the Census, forecasts of future demographics based on this data are not accessible for all demographic categories. In these cases, existing forecasts based on data from the 1990 Census are utilized. 1. Population The total population for the Trade Area per the 2000 Census is 33,170, estimated at 34,694 for 2002, and is projected by Claritas to grow to 38,121 by The Trade Area has historically been home to one of the City s primary concentrations of African-Americans. Though the population of the Trade Area remains predominantly African-American, the racial composition of the Area is in flux and numbers of African- Americans have been declining. In 2000, 48.0% of the population was African- American, a decline from 62.5% in 1990 according to the Census. The decline in the percentage represented by African-Americans in the Trade Area population is projected to continue: by 2002 this group is estimated to represent 45.98% of the total. In comparison, the 2000 Census indicated that only 7.8% of the City s population is African-American (see Table 1). In the Trade Area, Caucasians, Asians/Pacific Islanders, and All Other Races constituted 9.6%, 27.9%, and 10.4% of the population, respectively. For the City of San Francisco as a whole, Caucasians, Asians/Pacific Islanders, and All Other Races constituted 49.7%, 31.3%, and 6.9% of the population, respectively. The Asian and Pacific Islander population increased 28.1% between 1990 and 2000, from 21.8% of the Trade Area population to 27.9%. The Caucasian population decreased by 11.4% and All Other Races increased 113.7%. The Trade Area has also seen a major increase in its Latino population, growing from 9.5% in 1990 to 16.7% in 2000, with estimates at 17.7% in Meanwhile, the City s Caucasian and African- American populations both decreased. The Caucasian population decreased from 53.6% to 49.7%, a 7.2% decrease, and the African-American population decreased from 10.9% to 7.8%, a 28.5% decrease. The Asian population increased by 7.5%, from 29.13% to 31.3% of the overall population. Compared to the Trade Area, the City s Latino population has increased at a slower rate, from 13.9% to 14.1%. The Trade Area s population is 47.8% male and 52.2% female. The community s age composition is evenly balanced, with approximately 33% of the Trade Area population under 20 years of age and 21% between 20 and 44 years of age, 35% between 35 years and 65 years, and 10.5% above age 65. The median age of Trade Area residents is estimated at years of age for 2002 (see Table 2). Conley Consulting Group Page rd Street Report-revised 4-29

13 TABLE 1 POPULATION CHARACTERISTICS THIRD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY 1990 Census (1) 2000 Census 2002 (Estimate) 2007 (Projection) % Change % Change Bay View Hunters Point Trade Area Total Population 27,899 33,170 34,694 38, % 14.93% % White 10.85% 9.62% 9.62% NA (11.39%) NA % Black 62.48% 48.00% 45.98% NA (23.18%) NA % Asian & Pac. Islander 21.81% 27.94% 29.11% NA 28.11% NA % Other 4.85% 10.37% 11.17% NA % NA Total % 95.93% 95.88% NA (4.07%) NA % Latino by Origin 9.49% 16.67% 17.65% NA 75.59% NA Total Households 8,646 9,153 9,627 10, % 13.32% Median Household Income (2) NA $37,146 $52,259 NA NA NA Per Capita Income $10,190 $14,200 $16,652 NA 39.35% NA City of San Francisco Total Population 723, , % % White 53.56% 49.70% (7.21%) % Black 10.92% 7.80% (28.56%) % Asian & Pac. Islander 29.13% 31.30% 7.46% % Other 6.39% 6.90% 7.98% Total % 95.70% (4.30%) % Latino by Origin 13.91% 14.10% 1.35% Total Households 305, , % Median Household Income $33,414 $55, % Per Capita Income $19,695 $34, % Notes: (1) 1990 Census data is provided as an aggregate of the BVHP census tracts forming a slightly larger area as compared to the area covered for the 2000 Census, 2002 estimates, and 2007 projections. (2) Claritas, Inc. supplied the 2002 estimate, based on projections from 1990 census data, for this particular demographic segment. CCG considers this estimate to be unreliable. Source: Conley Consulting Group, Claritas Inc., US Census report tables xls - T1 Population

14 TABLE 2 SOCIAL CHARACTERISTICS THIRD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY 1990 Census 2000 Census 2002 (Estimate) % Change % Change Bay View Hunters Point Trade Area Median Age (x) (x) 1.17% Population by Age 27,899 33,170 34, ,000 11,066 11, % 3.87% ,648 7,063 7, % 3.50% ,726 11,590 12, % 4.29% 65+ 3,525 3,451 3,612 (2.10%) 4.66% Households by Household Size 8,646 9,296 9, % 3.56% 1 person household 1,846 1,655 1,699 (10.35%) 2.67% 2-4 person household 4,886 5,178 5, % 2.68% 5+ person household 1,914 2,463 2, % 6.04% Male 46.96% 47.80% 47.80% 1.80% 0.00% Female 53.04% 52.20% 52.20% (1.59%) 0.00% Educational Attainment (age 25+) 16,888 19,553 20, % 5.89% No High School Diploma 6,112 7,127 7, % 3.42% High School Graduate (or GED) 4,655 4,665 5,762 (1) 0.21% 23.52% Some College 3,463 4,456 4, % (2.00%) College Degree or Higher 2,658 3,305 3, % (3.02%) Notes: (1) Claritas, Inc. supplied the 2002 estimate, based on projections from 1990 census data, for this particular demographic segment. CCG considers this estimate to be unreliable. Source: Conley Consulting Group, Claritas Inc., US Census report tables xls - T2 Social

15 TABLE 3 INCOME DISTRIBUTION THIRD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY Bay View Hunters Point Trade Area City of San Francisco 1990 Census 2000 Census % Change 1990 Census 2000 Census % Change Num. % Total Num. % Total Num. % Total Num. % Total Num. % Total Num. % Total Income Distribution Total Households 8, % 9, % 5.64% 0.00% 305, % 329, % 7.80% 0.00% less than $15,000 2, % 2, % (26.65%) (30.57%) 66, % 48, % (27.13%) (32.40%) $15,000 to $34,999 2, % 2, % (12.90%) (17.55%) 92, % 57, % (37.31%) (41.85%) $35,000 to $49,999 1, % 1, % (6.62%) (11.61%) 52, % 43, % (16.90%) (22.91%) $50,000 to $74,999 1, % 1, % 25.26% 18.57% 50, % 58, % 15.36% 7.01% $75, % 2, % % % 43, % 121, % % % Source: Conley Consulting Group, Claritas Inc., US Census report tables xls - T3 Income

16 TABLE 4 HOUSING CHARACTERISTICS THIRD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY BVHP San Francisco 1990 Census Total Housing Units 9, ,471 Occupied Units 8, ,584 Owner Occupied 4, ,497 % Owner Occupied 53.09% 34.52% Renter Occupied 4, ,087 % Renter Occupied 46.91% 65.48% Median Value $202,668 $298,900 Median Rent Census Total Housing Units 9, ,527 Occupied Units 9, ,700 Owner Occupied 4, ,391 % Owner Occupied 51.36% 35.00% Renter Occupied 4, ,309 % Renter Occupied 48.64% 65.00% Median Value $253,900 $422,700 Median Rent % Change Total Housing Units 3.31% 5.50% Occupied Units 8.09% 7.89% Owner Occupied 4.56% 9.38% % Owner Occupied (3.27%) 1.38% Renter Occupied 12.10% 7.11% % Renter Occupied 3.70% (0.73%) Median Value 25.28% 41.42% Median Rent 20.80% 42.11% Source: Conley Consulting Group, Claritas Inc., US Census report tables xls - T4 Housing

17 2. Income The Trade Area median household income in 2000 was $37,146 according to the Census and estimated to be $52,259 for by Claritas. The median household income for the City was $55,221 in the 2000 Census. The 2000 Census per capita income for the Trade Area was $14,200, compared to $34,556 for the City as a whole. The Trade Area per capita income for 2002 is estimated at $16,652. Income distribution of Trade Area households in the 2000 Census is as follows: 24.0% are less than $15,000, 23.6% are between $15,000 and $34,999, 12.9% are between $35,000 and $49,999, 17.1% are between $50,000 and $74,999, and 22.4% are over $75,000. In comparison, the City s income distribution is as follows: 14.8% are less than $15,000, 17.5% are between $15,000 and $34,999, 13.3% are between $35,000 and $49,999, 17.7% are between $50,000 and $74,999, and 36.8% are over $75, Housing Tenure and Pricing The Trade Area served by Third Street has a higher homeownership rate than does the City as a whole, although the Trade Area home ownership rate has declined slightly in the last decade. In the 2000 Census, 51.4% of the occupied units were owner occupied, with the remaining 48.6% renter occupied. For the City as a whole, only 35% of the occupied housing units are owner occupied with the majority at 65% of the units renter occupied. Census data on housing costs reveal a differential value trend between the Trade Area and the City. In 2000, the median value of owner-occupied units in the Trade Area was $253,900, a 25.3% increase from its 1990 value. In San Francisco, the median value was $422,700, a 41.4% increase since Similarly, the median rent in the City rose at a much faster rate between 1990 and 2000 than in the Trade Area. The City s median rent rose from $653 per month in 1990 to $928 per month in 2000, a $42.1% increase. The Trade Area s median rent rose from $459 per month in 1990 to $554 per month in 2000, a $20.8% increase. Thus, in the last decade, housing price increases were less rapid in the Trade Area than in the City of San Francisco as a whole. B. Expenditure Potential CCG calculated the expenditure potential of Trade Area residents based on income characteristics and demonstrated retail expenditure patterns derived from an examination of reported sales tax collections in California. Per capita expenditure patterns in the Central Valley Region were used to estimate the expenditure potential of Trade Area residents in various categories (see Table 5). Although there are significant differences between Central Valley and Bayview residents, including the fact that the former devote a lower portion of their income to housing costs, spending patterns for this group are judged to be closer to Bayview residents than the much higher income residents of either the Bay Area as a whole or of San Francisco County. 1 See Table 1. This estimate by Claritas, Inc. is based on projections from 1990 census data and is considered by CCG to be unreliable. Conley Consulting Group Page rd Street Report-revised 4-29

18 C. Leakage Sales Leakage is a term that refers to the loss of sales from one district to neighboring one, as suggested when sales figures in a district are significantly less than the projected expenditure potential of its Trade Area. The expenditure potential of Trade Area residents was compared to sales tax collections data for Third Street, and, as demonstrated in Table 6, the expenditure potential of Trade Area residents currently exceeds sales on Third Street by roughly $160 million annually. This unsatisfied expenditure potential is assumed to be lost to other retail areas as leakage. D. Current Achieved Capture Share The extent to which Third Street retail captures the expenditure potential of Trade Area residents differs by retail category, as shown in Table 6. For Convenience Goods, including grocery, drug and liquor stores, Third Street merchants capture 22% of the potential expenditures. For Comparison Goods like those sold in apparel, general merchandise, home furnishings, and appliance stores, Third Street merchants capture 2% of the sales potential. CCG estimates that 24% of the potential expenditures are captured by Third Street merchants in the category of Eating & Drinking. For restaurants and other eating and drinking outlets however, residents' expenditure potential is supplemented by the daytime purchases from employees of local businesses. Still, CCG estimates that 48.7%, or less than half of the available expenditure potential from Trade Area residents and employees, is captured by Third Street merchants in the category of Eating & Drinking. In all, CCG estimates that less than 13% of local expenditure potential is captured by Third Street businesses. Conley Consulting Group Page rd Street Report-revised 4-29

19 TABLE 5 TRADE AREA RESIDENT EXPENDITURE POTENTIAL RD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY Total Estimated 2002 Population Estimated 2002 Per Capita Income 34,694 $16,652 % of Per Capita Estimated Total Bay View Hunters Point Trade Area PCI (1) Retail Sales Expend. Potential Convenience Goods Food Stores Selling Liquor (2) (35% taxable) 6.1% $1,019 $35,345,987 All Other Food Stores (2) (35% taxable) 4.3% $720 $24,987,465 Drug Stores (2) (80% taxable) 1.1% $176 $6,097,940 Liquor Stores 0.4% $61 $2,116,866 Convenience Goods Subtotal 11.9% $1,976 $68,548,258 Comparison Goods Apparel 1.4% $228 $7,911,341 General Merchandise (except drugs) 8.2% $1,360 $47,198,389 Home Furnishings & Household Appliances 1.5% $248 $8,616,973 Specialty Retail 4.6% $772 $26,777,490 Comparison Goods Subtotal 15.7% $2,609 $90,504,193 Eating & Drinking 4.6% $759 $26,326,554 Total Selected Retail Expenditure Potential 32.1% $5,343 $185,379,006 Notes: (1) Based on the sales pattern in the Central Valley region, which most closely resembles the Trade Area's demographics and income levels (per capita income) in comparison with other Bay Area and Northern California regions. (2) %PCI is adjusted updwards to represent total expenditures. Non-adjusted %PCI calculations were based on taxable sales. Taxable sales for drugstores are assumed to represent an estimated 80% of total and taxable sales for food stores are estimated at 35% of total sales. Source: Conley Consulting Group report tables xls; T5 Potential

20 TABLE 6 ESTIMATED RESIDENT UNMET DEMAND RD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY Bay View Hunters Point Trade Area Estimated Total Retail % Sales by Total Retail Current Estimated Target New Available Sales in Trade Area Sales by Capture Unmet Sales Volume Retail Expenditure Trade Area Residents Trade Area Share Demand To support new Supportable Potential Residents Stores ($/SF) Convenience Goods Food Stores Selling Liquor (1) (35% taxable) $35,345,987 $6,432,511 85% $5,467,635 15% $29,878,352 All Other Food Stores (1) (35% taxable) $24,987,465 $6,743,091 85% $5,731,628 23% $19,255,838 Drug Stores (1) (80% taxable) $6,097,940 $4,139,479 85% $3,518,557 58% $2,579,382 Liquor Stores $2,116,866 $472,023 85% $401,220 19% $1,715,647 Convenience Goods Subtotal $68,548,258 $17,787,105 85% $15,119,039 22% $53,429,219 $ ,573 SF Comparison Goods Apparel $7,911,341 $74,996 85% $63,747 1% $7,847,595 General Merchandise (except drugs) $47,198,389 $29,764 85% $25,299 0% $47,173,090 Home Furnishings & Household Appliances $8,616,973 $134,083 85% $113,971 1% $8,503,002 Specialty Retail $26,777,490 $2,377,534 85% $2,020,904 8% $24,756,586 Comparison Goods Subtotal $90,504,193 $2,616,377 85% $2,223,920 2% $88,280,273 $ ,268 SF Eating & Drinking (2) $26,326,554 $12,557,492 50% $6,278,746 24% $20,047,808 $350 57,279 SF Total Selected Retail Expenditure Potential $185,379,006 $32,960,975 72% $23,621,706 13% $161,757,300 $ ,120 SF Notes: (1) Total Retail Sales are adjusted to represent total sales from tax collections data. Taxable sales for drugstores are assumed to represent an estimated 80% of total salesand taxable sales for food stores are estimated at 35% of total sales. (2) based on stakeholder interviews. Source: Conley Consulting Group report tables xls; T6 Leakage

21 Retail Supply and Performance

22 IV. Third Street Retail Supply and Performance A. Current Inventory 1. Retail Outlets by Type The majority of the existing retail uses along the Third Street Corridor are small storefronts located on the ground floor of older, mixed-use residential buildings. There are a few strip retail structures, stand-alone retail buildings, and relatively newer developments (estimated to date from the late 1980s or early 1990s). A handful of national retailers, primarily fast food and drug stores (e.g., McDonalds and Walgreens), have opened within the last five years, introducing nodes of increased sales activity in the Corridor. However, most of the merchants on Third Street are small mom-and-poptype merchants with little representation from national or regional chains. Based on CCG fieldwork, the composition of the retail inventory is summarized in Table 7 and Figure 1, and detailed in Appendix A. 2. Geographic Distribution of Outlets The Third Street Corridor can be segmented into three sub-areas: the North Corridor, which spans from Cesar Chavez to Jerrold Avenue, the Central Corridor, spanning from Jerrold Avenue to Shafter Avenue, and the South Corridor, which spans from Shafter Avenue to Jamestown Avenue. These sub-areas have distinct identities and function in the Corridor s economy in terms of business and housing composition, residents, employees, and resulting commerce activity. The retail in each sub-area has distinct characteristics reflecting these differences. Retail along the North Corridor is situated amongst industrial buildings and businesses and draws support from the area s employees. Retail stores in the area are primarily small restaurants and eateries operating amidst large industrial, manufacturing, and service businesses. In addition, the Bayview Plaza shopping center is located in the North Corridor, adding national retailers to the area that serves the neighborhood as well as the office tenants occupying the Class B commercial space in the plaza. The Central Corridor is characterized by high-density apartments and attached lowquality single-family homes, situated above small, ground-floor retail storefronts. The retail inventory is primarily neighborhood-serving specialty retail, food and liquor stores, restaurants, personal care shops such as beauty salons and barber shops, and an abundance of community-oriented business/personal service offices. It should be noted that the Central Corridor houses a large majority of the liquor stores and the smaller food markets that sell liquor. Retail in the South Corridor is less dense than in the Central Corridor. The South Corridor has a greater portion of apartments and attached single-family homes which sit above garages that front on the street. Residential uses along the South Corridor and adjacent streets are among the higher-end housing in the Bayview area. Like the Conley Consulting Group Page rd Street Report-revised 4-29

23 Central Corridor, retail is primarily mixed with residential uses and other neighborhoodserving uses. However, unlike the Central Corridor, the South Corridor has a larger variety of retail stores, including apparel, general merchandise, hardware and household appliance/furnishing stores, in addition to restaurants, food markets/liquor stores, specialty retail, and business/personal services. It should be noted that a vast majority of the Comparison Goods available along Third Street can be purchased in the South Corridor. There are also fewer options for purchasing liquor in this area as compared to the Central Corridor. However, the South Corridor has a relatively large number of eating places that serve liquor (e.g. bars and seemingly defunct night entertainment establishments). Retail in this sub-area has the potential to capture customers from traffic generated by sporting events at 3Com Park, more specifically 49ers games. Table 7 shows the geographic distribution of retail outlets among the three Corridor subareas. Conley Consulting Group Page rd Street Report-revised 4-29

24 TABLE 7 GROUND-FLOOR RETAIL INVENTORY by SUB-AREA 3 RD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY Retail North Central South Category Corridor Corridor Corridor Total Family Apparel General Merchandise Gifts, Art Goods, and Novelties Jewelry Other Specialties All Other Food Stores Packaged Liquor Stores Eating Places: No Alcoholic Beverages Household and Home Furnishings Second-hand Merchandise Food Stores Selling All Types of Liquor Eating Places: Beer and Wine Eating and Drinking: All Types of Liquor Lumber and Building Materials Hardware Stores Automotive Supplies and Parts Service Stations Business and Personal All Other Outlets Vacant Total Outlets Source: Conley Consulting Group Survey performed Fall Conley Consulting Group Page rd Street Report-revised 4-29

25 B. Sales Performance 1. Sales Trends by Category Based on sales tax collections data provided by SFRA, annual sales tax collections from businesses along the Third Street Corridor have increased by 8.04% between fiscal year 1997/98 and 2001/02, from $385,696 to $416,704 (see Table 8). Based on sales tax collections data, total taxable sales for the Third Street Corridor during fiscal year 2001/02 are estimated at $41.67 million. In fiscal year 2001/02, eating and drinking establishments generated strong retail sales, accounting for approximately $8.95 million or 21.5% of the total estimated taxable sales in the Trade Area. Next to Eating and Drinking, retail sales were highest for Convenience Goods, followed by Automotive Service and Supply, reporting sales of $8.6 million and $5.5 million in sales, respectively. Comparison Goods (including apparel and accessories, general merchandise, furniture and furnishings, and specialty retail goods such as jewelry, gifts, and novelties, etc.) contributed a small portion of corridor sales at 5.7%, or $2.4 million in sales. Non-Retail Stores, mainly Business and Personal Service companies, reported the largest contributions to overall sales tax collections at 38.08%, or $15.9 million. In fiscal year 1997/98, the same retail categories Eating and Drinking, Convenience Goods, and Automotive Service and Supply were the leaders in retail sales within the Trade Area. At that time however, Convenience Goods generated more sales than Eating and Drinking, followed by Automotive Service and Supply (24.3%, 18.9%, and 10%, respectively). Comparison Goods still contributed a small portion of corridor sales at approximately 6% and Non-Retail Stores generated 40% of taxable sales. For Convenience Goods, retail sales decreased by 8% between fiscal year 1997/98 and 2001/02, a decrease caused by a significant decline in sales for all food stores. A large decline in Convenience Goods sales was offset by increased performance in the categories of Drug Stores and Packaged Liquor Stores. Sales in drug stores increased steadily between fiscal year 1997/98 and 2001/02, as larger national retailers, such as Walgreens, had an increasing presence along the Corridor. Sales in packaged liquor stores increased by an alarming 215%. During the same time period, significant sales increases occurred in the Automotive Service and Supply and Building Materials categories (42% and 28%, respectively), which can be attributed to an increase in industrial business activity in the northern section of the Third Street Corridor. Sales activity for the Eating and Drinking category increased by 23%, an increase that is also likely associated with the increased industrial business activity in the area. Overall, retail sales trends over the past five fiscal years show pockets of improvement caused by the significant impact of a few national retailers new to the Corridor and increased business activity in the industrial area that has had a positive influence on nearby retailers. Outside of those isolated areas of improvement, sales activity along the Central and Southern Corridor has been in steady decline, as small neighborhoodserving and/or local retailers become less viable. Conley Consulting Group Page rd Street Report-revised 4-29

26 2. Sales Trends Compared to City-Wide Trends Based on data provided by the SFRA, CCG compared sales tax collection trends for the Third Street Corridor to trends for the City as a whole (see Tables 8 and 9). On Third Street the sales trends for stores selling Convenience Goods, like food markets, drug stores, and package liquor stores were mixed. Overall, there was an 8% decline in sales in this category between 1997/98 and 2001/02. In contrast, in the same period for the City as a whole, sales rose by roughly 13%. For Comparison Goods, including apparel, general merchandise, home furnishings and appliances, and specialty stores, sales at Third Street retailers had just over a 4% growth rate, while City-wide sales grew by less than 3.7%. C. Proposed Development According to City Planning records, by the year 2020 proposed development in the Trade area would result in addition of 2870 new households and 6219 new jobs. This includes nearly 3300 new jobs generated by the proposed stadium and shopping mall at Candlestick Park, which is currently an inactive development proposal. Planned residential development includes more than 1800 units planned as part of the redevelopment of the Hunters Point Shipyard. If the substantial amount of new residential units are developed in the Bayview Hunters Point area as projected, the total expenditure potential available to Third Street retail outlets will likely increase by more than $67 million (see Table 12, after Section V). Conley Consulting Group Page rd Street Report-revised 4-29

27 FIGURE 1 GROUND FLOOR RETAIL INVENTORY - SUMMARY 3RD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY Retail Retail No. of Category Code Outlets Family Apparel 03 3 General Merchandise 05 5 Gifts, Art Goods, and Novelties 11 2 Jewelry 17 1 Other Specialties All Other Food Stores 20 4 Packaged Liquor Stores 22 4 Eating Places: No Alcoholic Beverages Household and Home 30 5 Furnishings Second-hand Merchandise 32 1 Food Stores Sellings All Types 34 7 of Liquor Eating Places: Beer and Wine Eating and Drinking: All Types 36 8 of Liquor Lumber and Building Materials 50 1 Hardware Stores 51 4 Automotive Supplies and Parts 61 7 Service Stations 62 2 Business and Personal All Other Outlets Vacant Family Apparel 2% All Other Outlets 8% Business and Personal 32% Vacant 8% Service Stations 1% Automotive Supplies and Parts 4% Hardware Stores 2% General Merchandise 3% Gifts, Art Goods, and Novelties 1% Jewelry 1% All Other Food Stores 2% Packaged Liquor Stores 2% Eating Places: No Alcoholic Beverages 8% Other Specialties 9% Food Stores Sellings All Types of Liquor 4% Eating Places: Beer and Wine 7% Household and Home Furnishings 3% Second-hand Merchandise 1% Eating and Drinking: All Types of Liquor 4% Lumber and Building Materials 1% Family Apparel General Merchandise Gifts, Art Goods, and Novelties Jewelry Other Specialties All Other Food Stores Packaged Liquor Stores Eating Places: No Alcoholic Beverages Household and Home Furnishings Second-hand Merchandise Food Stores Sellings All Types of Liquor Eating Places: Beer and Wine Eating and Drinking: All Types of Liquor Lumber and Building Materials Hardware Stores Automotive Supplies and Parts Service Stations Business and Personal All Other Outlets Vacant Total Outlets 184 Source: Conley Consulting Group report tables xls

28 TABLE 8 SALES TAX COLLECTIONS FY 1997/98 - FY 2001/02 THIRD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY (1) FY 1997/98 FY 1998/99 FY 1999/2000 FY 2000/01 FY 2001/02 Total % Change 1997/ /02 Convenience Goods Food Stores Selling Liquor $26,926 $22,986 $24,493 $22,514 $17,674 (34.36%) All Other Food Stores $37,591 $30,732 $22,198 $23,601 $25,532 (32.08%) Drug Stores $25,953 $27,290 $30,273 $33,116 $32, % Packaged Liquor Stores $3,154 $3,166 $3,112 $4,720 $9, % Subtotal Convenience Goods $93,624 $84,174 $80,076 $83,951 $86,132 (8.00%) Comparison Goods Apparel $447 $416 $406 $750 $ % General Merchandise (except Drug Stores) $305 $179 $216 $298 $ % Home Furnishings and Appliances $0 $0 $604 $1,341 $386 (x) Specialty $22,285 $22,176 $29,494 $23,775 $22, % Subtotal Convenience Goods $23,037 $22,771 $30,720 $26,164 $24, % Eating & Drinking $72,809 $94,293 $117,244 $125,575 $89, % Subtotal Retail Stores $189,470 $201,238 $228,040 $235,689 $199, % % Change (X) 6.21% 13.32% 3.35% (15.29%) % Total 49.12% 51.55% 49.96% 49.79% 47.91% Building Materials $2,893 $2,808 $2,833 $3,389 $3, % Automotive Service & Supply $38,490 $39,896 $51,096 $58,853 $54, % Business and Personal $5,610 $4,995 $3,538 $2,612 $2,188 (61.00%) All Other Outlets $149,233 $141,404 $170,949 $172,776 $156, % TOTAL $385,696 $390,341 $456,455 $473,320 $416, % Notes (1) The fiscal year includes the 2nd, 3rd, and 4th quarters from one calendar year, and the 1st quarter of the following calendar year Source: Conley Consulting Group, San Francisco Redevelopment Agency report tables xls - T8 Sales

29 TABLE 9 CITY-WIDE SALES TAX COLLECTIONS FY 1997/98 - FY 2001/02 THIRD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY (1) FY 1997/98 FY 1998/99 FY 1999/2000 FY 2000/01 FY 2001/02 Total % Change 1997/ /02 Convenience Goods Food Stores Selling Liquor $2,878,828 $2,951,881 $3,071,194 $3,227,887 $3,173, % All Other Food Stores $971,312 $968,896 $990,764 $1,418,937 $1,024, % Drug Stores $1,659,465 $1,733,102 $1,909,332 $2,041,435 $2,004, % Packaged Liquor Stores $721,297 $727,695 $800,835 $851,244 $836, % Subtotal Convenience Goods $6,230,902 $6,381,574 $6,772,125 $7,539,503 $7,039, % Comparison Goods Apparel $7,507,987 $7,739,284 $8,383,228 $8,918,166 $8,263, % General Merchandise (except Drug Stores) $8,231,021 $7,833,641 $8,842,967 $8,936,583 $8,022,067 (2.54%) Home Furnishings and Appliances $3,872,046 $4,350,732 $5,204,178 $5,090,075 $3,190,369 (17.61%) Specialty $16,859,240 $17,196,946 $19,498,927 $21,527,121 $18,327, % Subtotal Convenience Goods $36,470,294 $37,120,603 $41,929,300 $44,471,945 $37,803, % Eating & Drinking $15,446,810 $16,400,705 $18,008,900 $20,221,516 $18,816, % Subtotal Retail Stores $58,148,006 $59,902,882 $66,710,325 $72,232,964 $63,659, % % Change (X) 3.02% 11.36% 8.28% (11.87%) % Total 60.35% 60.15% 61.36% 61.34% 63.01% Building Materials $2,983,276 $3,162,822 $3,513,696 $3,701,713 $3,310, % Automotive Service & Supply $8,328,925 $7,194,096 $8,111,758 $9,694,722 $8,808, % Business and Personal $6,689,651 $7,777,246 $7,111,554 $8,023,260 $6,686,639 (0.05%) All Other Outlets $20,205,118 $21,553,023 $23,268,603 $24,102,033 $18,561,103 (8.14%) TOTAL $96,354,976 $99,590,069 $108,715,936 $117,754,692 $101,026, % Notes (1) The fiscal year includes the 2nd, 3rd, and 4th quarters from one calendar year, and the 1st quarter of the following calendar year Source: Conley Consulting Group, San Francisco Redevelopment Agency report tables xls - T9 SF Sales

30 Third Street Retail Potential

31 V. Third Street Retail Potential A. Current Leakage and Retail Development Potential 1. Theoretical Leakage Currently, more than $160 million in expenditure potential from Trade Area residents is not captured by Third Street businesses and assumed to be lost to other areas as leakage. Approximately 27% of the leakage is in the category of Convenience Goods, including food stores, drug stores, and liquor stores. This leakage would support an additional 133,500 SF of retail store space. Half of the leakage is in the category of Comparison Goods, including lost expenditure potential for goods sold at department, apparel, and specialty stores. This leakage which, as described above, is likely to be more difficult to recapture would support an additional 294,000 SF of store space. Sales at eating and drinking outlets also fall short of the potential demand, with an estimated $20 million in leakage for this category, which could support between 50,000 and 60,000 SF of additional retail space. In theory, if all of this retail support potential could be captured by Third Street merchants, the recaptured leakage could support an additional 485,000 SF of retail space (see Table 6). 2. Maximum Recapturable Leakage However, a certain amount of the leakage could likely never be captured by Third Street stores. The FoodsCo and Walgreens Stores located adjacent to Third Street on Williams will likely continue to capture a significant share of the potential support from the Trade Area. Also, Trade Area residents are likely to continue to patronize general merchandise stores like Macy s that are located outside of the Trade area. Table 10 provides an estimate of the maximum share of retail expenditure potential that is likely to be captured by Third Street retail stores. The maximum current recapturable leakage is estimated at over $124 million in sales. That sales potential, if captured by Third Street retailers, would support an additional 301,000 SF of new retail space (see Table 11). Again, it must be noted, that without a focused implementation strategy to change shopper patronage patterns, it is unlikely that the maximum recapturable leakage will be satisfied by Third Street retailers, especially for Comparison Goods outlets. B. Future Retail Potential Planned residential development in the Trade Area will further increase the expenditure potential available to Third Street merchants. In this analysis we have assumed that the planned residential development in the Trade Area, including the Hunters Point Shipyard, occurs by 2020 and that the new units, on average, are priced to be affordable to households earning 80% of the area median income, which is within the definition of moderate- to low-income households. The income level and size of these households are based on interviews with housing developers active in the BVHP area, who report that households seeking new units in the area are both more affluent and smaller than existing Trade Area households. Conley Consulting Group Page rd Street Report-revised 4-29

32 The addition of 28,070 housing units would result in an addition of roughly 8,600 new residents in the Trade Area. CCG projects that new residents would have per capita income of $24,267, compared to the current estimated per capita income of $16,652 (see Table 12). Theoretically, these new residents could support an additional $67 million of retail spending. If all of this new expenditure potential could be captured on Third Street, 199,000 SF of additional retail store space (beyond the 301,000 SF reported in Table 11) could be supported. If, as is more likely, only a portion of the expenditure potential is captured by stores on Third Street, this new residential support base would support up to an incremental 132,000 SF more than the 301,000 SF reported in Table 11, for a total of 433,000 SF of new retail space (see Tables 13 and 14). This analysis does not assume any retail development in the Shipyard or the Stadium Mall project. Both of these projects are currently in the planning stage, and the retail components of these projects have been preliminarily identified but are not defined in detail adequate enough to include in this analysis. However, major new retail development in these areas could potentially divert retail potential from Third Street and affect the conclusions of this analysis. Additionally, the proposed Home Depot development on Bayshore Boulevard is not anticipated to induce shoppers from outside of the Bayview neighborhood to patronize Third Street. In the past, Whole Earth Access and Goodman s Lumber patrons from outside of the neighborhood did not patronize Third Street.. Conley Consulting Group Page rd Street Report-revised 4-29

33 TABLE 10 MAXIMUM RESIDENT RETAIL EXPENDITURE AVAILABLE FOR CAPTURE RD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY Estimated Total Est. % (1) Est. Avail. Bay View Hunters Point Trade Area Expend. Potential Avail. Expend. Pot. Convenience Goods Food Stores Selling Liquor $35,345, % $21,207,592 All Other Food Stores $24,987, % $21,239,345 Drug Stores $6,097, % $3,658,764 Liquor Stores $2,116, % $1,799,336 Convenience Goods Subtotal $68,548, % $47,905,038 Comparison Goods Apparel $7,911, % $4,746,805 General Merchandise (except drugs) $47,198, % $28,319,034 Home Furnishings & Household Appliances $8,616, % $5,170,184 Specialty Retail $26,777, % $16,066,494 Comparison Goods Subtotal $90,504, % $54,302,516 Eating & Drinking $26,326, % $22,377,571 Total Selected Retail Expenditure Potential $185,379, % $124,585,125 Notes: (1) Subject to adjustment based on future retail development scenarios. Given current retail supply on Third Street and adjacent retail (FoodsCo, Walgreen's) located off of Third, for Convenience Goods less than 100% of potential is likely to be available to Third Street stores. Source: Conley Consulting Group report tables xls; T10 Capture 02

34 TABLE 11 ESTIMATED RESIDENT UNMET DEMAND RD STREET RETAIL MARKET ANALYSIS SAN FRANCISCO REDEVELOPMENT AGENCY Bay View Hunters Point Trade Area Estimated Total Retail % Sales by Total Retail Current Estimated Target Maximum Available Sales in Trade Area Sales by Capture Unmet Sales Volume New Expenditure Trade Area Residents Trade Area Share Demand To support new Retail Potential Residents Stores ($/SF) Supportable Convenience Goods Food Stores Selling Liquor (1) (35% taxable) $21,207,592 $6,432,511 85% $5,467,635 26% $15,739,957 All Other Food Stores (1) (35% taxable) $21,239,345 $6,743,091 85% $5,731,628 27% $15,507,718 Drug Stores (1) (80% taxable) $3,658,764 $4,139,479 85% $3,518,557 96% $140,206 Liquor Stores $1,799,336 $472,023 85% $401,220 22% $1,398,117 Convenience Goods Subtotal $47,905,038 $17,787,105 85% $15,119,039 32% $32,785,998 $400 81,965 SF Comparison Goods Apparel $4,746,805 $74,996 85% $63,747 1% $4,683,058 General Merchandise (except drugs) $28,319,034 $29,764 85% $25,299 0% $28,293,734 Home Furnishings & Household Appliances $5,170,184 $134,083 85% $113,971 2% $5,056,213 Specialty Retail $16,066,494 $2,377,534 85% $2,020,904 13% $14,045,590 Comparison Goods Subtotal $54,302,516 $2,616,377 85% $2,223,920 4% $52,078,596 $ ,595 SF Eating & Drinking (2) $22,377,571 $12,557,492 50% $6,278,746 28% $16,098,825 $350 45,997 SF Total Selected Retail Expenditure Potential $124,585,125 $32,960,975 72% $23,621,706 19% $100,963,419 $ ,557 SF Notes: (1) Total Retail Sales are adjusted to represent total sales from tax collections data. Taxable sales for drugstores are assumed to represent an estimated 80% of total sales and taxable sales for food stores are estimated at 35% of total sales. (2) Based on stakeholder interviews. Source: Conley Consulting Group report tables xls; T11 Leakage 02