Six years ago, the battle over Target featured a hotly-contested debate over the future of the city of Davis and, in particular, its downtown. Last night the city’s Planning Commission met to discuss what would seem to be a small zoning change – lowering the size of the stores that can move into the adjacent pads.
Stewart Savage, who is the executive director of Davis Downtown (formerly the DDBA), made a pointed comment last night.
He said: “The Second Street Crossing has already had a significant impact on our downtown area.”
Mr. Savange added, “As you’ve noticed, there has been a decrease in retail downtown and there has been an increase in dining and entertainment, which is great, but we do feel that having a nice product mix downtown is essential for the success of our downtown area.”
However, there was contrast to the view of downtown businesses from that of city staff, who argued in their staff report, “At the time the Second Street Crossing project was being considered, the major significant issue that was identified was impact on the downtown.”
“The EIR for Second Street Crossing analyzed the potential for physical blight as a result of the project, and concluded that impacts would be less than significant. This did not mean that the project, and particularly the Target store, would not have impacts on individual stores or the downtown as a whole – just that physical blight would not occur to a significant level,” staff argued.
They admit that since Target has opened, many downtown merchants have struggled and a number have closed.
“Stores have been affected by Target and other competitors elsewhere in the region, internet shopping, and the downtown in the economy. Overall, downtown has continued to thrive and most vacant spaces have been filled or leased,” staff argues.
But the staff is not specific on what it means by “continued to thrive,” as Stewart Savage argues the problem is not that the downtown is not thriving, it is that it has shifted from retail to dining and entertainment.
This is the problem many have cited with the emergence of big-box development on the periphery, where it pulls business from the core.
Michael Bisch, on the Vanguard yesterday, made a couple of very poignant comments.
First he noted that there was a study that showed monthly shopping trips downtown have declined 9.09% since Target opened, and monthly shopping trips to neighborhood shopping centers have declined 21%. While there has been a study of the impact on downtown, there has been little analysis of the impact on neighborhood shopping centers.
Mr. Bisch notes, “Staff says no blight will result. Is that possible when shopping trips dive 21%? What will the impact be on the already approved Alhambra shopping center? What will the impact be on the primary community planning objective of fostering a compact community with greenbelts surrounded by open space? What will the impact be on our efforts to foster a sustainable community?”
Furthermore, he notes that the original Target shopping center project was a tricky proposition. He wrote, “It was an attempt to reduce sales tax leakage to other communities without cannibalizing the sales of existing Davis businesses.”
“I’m fairly confident that the project proponents have partially achieved their aim in capturing sales tax that would otherwise have benefitted other communities. But I’m also fairly confident that the project has cannibalized sales of existing Davis businesses,” he adds. “The issue is that no analysis has been done that I’m aware of to determine how much the community has gained from reduced sales tax leakage vs. the harm of cannibalized sales.”
The is a clear disconnect here between city staff, who seem to be arguing that there was no harm done by the original Target project and there will be no harm by these changes, and the merchants in the downtown who seem to believe Target has harmed them.
Alzada Knickerbocker, of The Avid Reader, similarly weighed in last night, arguing that the discussion in 2006 “resulted in very carefully structured parameters for the businesses coming to that site with the intention of striking a balance between garnering more sales tax and not cannibalizing our downtown and neighborhood retail.”
Mr. Bisch’s analysis already suggests that, at least with respect to the neighborhoods, this balance did not work.
Ms. Knickerbocker added that the request for the adjacent pads would “undo what was studied, debated and decided on this time with no study that I’m aware of, and virtually no community debate.”
“It’s to the developer’s benefit, but how about the rest of us?” she asked.
Another business owner, Sinisa Novakovic who runs Mishka’s Café, pointed out that this was not a little issue. Target was a big battle primarily because Davis wanted to preserve the downtown and not make the mistake of Woodland and other cities by overdeveloping on the periphery with big boxes.
Some will undoubtedly see this as the downtown businesses trying protect their own. But it is important to note that the city council always places preservation and, in fact, enhancement of the downtown at the very pinnacle of its stated goals.
And yet, we run the risk of depleting the downtown even more.
This economic downturn has been particularly brutal because of the large number of longstanding businesses that will not have survived it. The downtown is thriving in the sense that people go to eat as a destination for good food and decent entertainment. But the retail base is in deep trouble.
For me, the most profound intrigue in this is the disconnect between city staff – and namely one city staffer who has been on the hot seat in the eyes of many, Katherine Hess – and downtown business.
This is an issue that really needs to be resolved, and not by the planning commission but by the city council and the city manager.
—David M. Greenwald reporting
My comments are off the cuff, I did not do a study. But I would guess that the reduction of sales tax leakage is what would have been spent at another big box store a little farther away but, while you’re there, might as well do more of your shopping too. Hence the reduction especially in the neighborhood centers where items most similar to big box are. Downtown probably experiences less of an impact because one goes there for some ambiance that goes along with the shopping experience. The economic downturn drove home more clearly to many that we have too much STUFF anyway, so there is also less buying overall. In conclusion; the more similar to the small box feeling at second street crossing, the more it will take from downtown.
I think it’s clear that Target has failed to do what they said it would. I just walked downtown and saw yet another restaurant just opened where there was once retail.
I went downtown over the weekend and did a little shopping. I was astounded by the debris and garbage on the sidewalks. Gum everywhere. (Cobwebs even…really?) Some restaurants’ entrances were really dirty, which is a real turn off if one is looking for a place to stop and eat. The corner of 2nd and G and on down that street toward the Artery was notably bad. It demonstrated to me the lack of pride many of the merchants have in their businesses. What happened to the age-old practice of sweeping the sidewalk in front of their business each morning?
People want to shop in areas that are clean and inviting.
Where would people shop? What would you buy?
Ryan wrote:
> What happened to the age-old practice of sweeping
> the sidewalk in front of their business each morning?
As a kid I worked in retail and every Saturday I would get to the store early and sweep the sidewalk, the gutter and then wash the windows and wipe down the front door.
Yesterday I went in to the (downtown) Peete’s and noticed that they have all new signage inside and was thinking that chains have a real advantage in that they can spread the cost of design over many stores and places like the new (downtown) Panera have a fresh clean appearance while some local places (I don’t want to name any names) look so dirty that I would not want to eat there.
I’m a big reader, but today I get about 90% of my real books from Amazon used and I buy a lot of eBooks. Alzada Knickerbocker from The Avid Reader can complain about the Target mall, but Target has as much to do with her dropping sales as Target and the new mall had to do with the (downtown) Blockbuster and 49er video closing.
Geez, I hope this doesn’t turn into a debate over Target again. The debate is long since over and Target has long since opened. The debate now should be over whether the community is agreeable to replacing a voter-approved community/regional shopping center with a non-voter-approved neighborhood shopping center. Those are two very different things. And what are the implications of such a decision? And why has the community not been invited to such a discussion given the community previously decided that it wanted a community/regional shopping center at 2nd Street Crossing to reduce sales tax leakage? If the city has decided that it’s plans to reduce sales tax leakage have not panned out, shouldn’t it inform the community of such a determination before it creates some other kind of development at 2nd Street Crossing?
Frankly, I’m really surprised that this planning application isn’t generating a great deal more debate over the project merits. There was no end of debate about Target, a project long since completed, during the last council election. Yet a pending project is generating almost no debate. Surely the planning application has implications for community sustainability? Where are the sustainability activists? Surely, the planning application has implications for existing neighborhood shopping centers? Where are the neighborhood shopping center activists, tenants and landlords? Etc.
-Michael Bisch
My guess is most of these people have long since dropped out of the fight once Target was built. But you say it’s over, I don’t think it is exactly since there’s still a huge negative impact going on.
Clearly, the fight over Target is over. It makes no sense to debate the project all over again since Target is now open. It does make sense to study the implications of Target having opened since data has been gathered. We now know, for example, that monthly shopping trips to Downtown are down 9.09% (I find it absurd that some claim this drop is insignificant). We also now know that monthly shopping trips to neighborhood shopping centers are down a whopping 21%. To claim that Target has not had an adverse impact is ridiculous. Now perhaps there are positive impacts (reduced sales leakage and greater shopping selection) that outweigh the negatives. If that’s so, let the Target proponents present the evidence.
But really, what’s even more important is what are the projected impacts on the community of these proposed zoning amendments? City staff says they do not anticipate any negative impacts on the Downtown. They don’t mention existing neighborhood shopping centers at all unless I’m mistaken. Maybe city staff is correct, maybe they’re not, but who is critically examining these issues? The Planning Commission? I don’t see where this examination is happening. For example, did staff or the Planning Commission consider the study published earlier this year by UCD’s Institute of Transportation Studies?
-Michael Bisch
If you want to understand why the Downtown is dying, all you need do is look at the buildings. Many needed major upgrades and improvements years ago, but the owners of the properties have done little or nothing to make those changes. For years Davis has ‘protected’ the Downtown by blocking retail at other places around town, giving the property owners in the core region a virtual monopoly on retail rental space. This allowed for artificially higher rents, and more demands on the tenants to pay for improvement and upkeep. Property owners could have used those high rents to fund improvements to the properties, including redevelopment, but for the most part have not done so.
Just one example is the old Wenger’s building on the southwest corner of F and 3rd. This is a building that looked dated in the 70’s, and probably should have been rebuilt in the 80’s, yet this summer was the subject of a front page story in the Enterprise because it got a new paint job…woo hoo!.
The Downtown will live or die based solely on the status of the Downtown as a convenient and pleasant place to shop. This isn’t about Target. The problem is the failure to reinvest in our core infrastructure, from streets to buildings to parking.
Mark, I think it’s both. My opnion is that all infrastructure and real estate require periodic reinvestment. I have had a long running debate with some in the community who do not share this view. They insist that they like things just the way the are. On the other hand, I think you have a very difficult case to make that peripheral development doesn’t impact downtown.
-Michael Bisch
Michael Bisch: “On the other hand, I think you have a very difficult case to make that peripheral development doesn’t impact downtown.”
There is no doubt that development in other parts of town will impact the downtown. The Downtown however has had 30+ years of artificial protection and did nothing with the advantage. The communities ‘investment’ (higher prices, fewer options) in the core was squandered by the land owners’ failure to keep their properties up to date. I see no reason to continue this failed practice.
If I were a non-entertainment business owner leasing property in the core, I would be looking to move.
For those that don’t get out of downtown much I rode my bike past Target today and the parking lot did not have a lot of cars in it. There were multiple for lease signs across the street from Target at the (half empty looking) mixed use center next to the new Chase branch so it it not like business is booming over in the second street crossing area.
I also noticed the strange guy that used to fill pots with dirt and tie neon ribbon on things at the corner of 2nd & L by the PG&E yard. It seems like he moved down 2nd street by Target soon after it opened. I’m (seriously) wondering if anyone knows why he moved down the street (did someone make him move) and why the city let’s a semi-crazy guy make a mess on the side of a busy street year after year?
And as u mentioned in an earlier post, I remember the Planning Commision putting a limit on the % food square footage for Target. It WOUKD be interesting to see if they have maintained that since now you seem to be able to get meat, produce, frozen food etc at Target. Who can we ask?
SouthofDavis: That is George Swazo. The garden he maintained across from the PG&E yard for several years was removed abruptly, probably by Southern Pacific when they used the spot for construction supplies. So he moved down Second Street. He’s not crazy or semi-crazy, he’s just homeless and just about blind.
Many folks consider George a positive, colorful asset to the community. Get creative, live a little.
Also I would like to add that continued investment in properties does not need be extravagant or expensive. Cleanliness goes a very long way and a little fresh pain/finish does a lot too. Of course structural maintenance is imperative. But knock it down, haul it away and build a new one is rarely a responsible or necessary act.
Move Davis Ace on the periphery and do something with the entire shabby G and 3rd street area.
Put something like this in its place: [url]http://www.bridgeandtunnelclub.com/bigmap/outoftown/california/napacounty/napa/oxbowpublicmarket/index.htm[/url]
This is the front of the market…
[img]http://www.cscdc.org/miscjeff/oxbow.jpg[/img]
along with a small footprint Macy’s somewhere downtown like this one in Kailua Oahu:
[img]http://www.cscdc.org/miscjeff/macys.jpg[/img]
…which is right next door to a:
[img]http://www.cscdc.org/miscjeff/wfoods.jpg[/img]
I agree completely with Mark. The downtown is suffering from a lack of redevelopment that is due to landlords being protected from competition for the last three decades. The Oxbow Market in Napa would be a fantastic venue. We would also support a small footprint department store in the downtown. The two would help draw in more traffic that would help the other merchants.
However, the downtown is too small. We should be changing the zoning to expand retail into existing residential.
We need a downtown hotel like the Andaz: [url]http://napa.andaz.hyatt.com/hyatt/hotels-napa-andaz/index.jsp?null[/url]
[img]http://www.cscdc.org/miscjeff/andaz.jpg[/img]
We should be be building more office space downtown.
We should be exploiting our UCD connection with the wine industry, and encouraging more wine bars and wine tasting venues.
We should be doing more peripheral retail on 113 for utility shopping for our citizens… our downtown cannot be a full-service retail in a city this size.
Some interesting ideas, but without RDA, I don’t see where the money comes from.
David, you didn’t get any RDA money to buy your home did you?
In general, I am concerned about the changes at Second Street Crossing.
The next impact on our downtown I worry about is the impact of Whole Foods on so many downtown business establishments.
We are about one month away from them opening.
Certainly, it will impact negatively the Davis Food Co-op.
I expect it will curtail the lunch business of a lot of restaurants.
And I wonder about the parking spillover and traffic build up in that area. With the parking and traffic light situation I will begin to avoid driving that direction to go to South Davis or to the freeway.
I expect Whole Foods will reduce traffic to downtown (too packed with cars to go to parts of the downtown)while also cutting down on trips to neighborhood shopping centers.
Whole Foods is probably the final nail in Westlake Market so that Neighborhood Shopping Center loses its only major traffic generator.
David Thompson
Mark,
Nope. But the money came from different government sources.
“Nope. But the money came from different government sources.”
The property owners already received their money from other sources, in this case through the protection racket that the City has been running.
In my view, without a major change in the way downtown is accessed and without new businesses (like Target) where common people do most of their shopping, downtown is destined to be dominated specialty retail, dining and various professional and financial services. There is not going to be a department store or 5 & 10 that is going to locate in downtown. And there is nothing wrong with that. Given the large student population and professional population from UCD, the model I described can be a very viable and vibrant downtown (and not an uncommon model). Regardless significant renovation by landlords (who have earned excess rents)is still required for this model to survive.
I know this isn’t what some of you want for Davis downtown, but the status quo will not survive. In the end, Davis consumers will decide how and where they shop. They don’t live on an island – consumers have viable options for shopping in Dixon, Woodland and Sacramento, all of which provide them with the prices and alternatives they seek.
[i]Certainly, it will impact negatively the Davis Food Co-op. [/i]
David – why do you think that Whole Foods will negatively impact on the Co-op? That will be interesting, since many (or maybe most) who shop at the co-op are owners, get a discount and are intensely interested in preserving all things local.
Because of the proximity and the fact that Whole Foods caters to a similar demographic. If I were on the board of the Coop I’d be urging them to plan for the possibility of as much as a 10 – 20% loss in business. Co-op shoppers are very loyal, but they’ll still lose some business. Any new neighborhood grocery store has some impact on the others.
Dear Adam:
Whole Foods has a following just like Trader Joe’s and while many are loyal co-op shoppers there is a large enough population in Davis that shares their grocery shopping among an array of stores.
Adding Whole Foods just lessened the amount of shared market per store used. DFC will be one of them.
It does not take that many people spending $15 per trip at Whole Foods and not at the Co-op to substantially reduce the Co-op’s volume and margins.
The Co-op will weather the storm but Whole Foods will have a negative effect upon the Co-op and the question will be how much and for how long.
I expect that Whole Foods will plan on taking around $20 million dollars of sales from the existing Davis market. Those sales have to come from the existing sales at existing stores. I expect dollar wise the Nugget may be impacted more than the Co-op.
However, none of us will eat more just because there is another grocery store.
I suspect that numerous downtown restaurants will be impacted because Whole Foods puts a lot of emphasis on “Grab and Go” items.
So I ask that people remain loyal to the Davis Food Co-op for all that it has done over the years and what it does for so many locally. Whole Foods will never match the co-ops contribution to our community.
David Thompson, having served at least 16 years as a DFC board member
So, I have a few questions.
How do other communities deal with adding new retail that might “negatively impact” existing retail? Reading the claims of some on this blog, you would think there would just be a trail of shuddered empty buildings unless we hault all competition.
How does existing retail deal with those possible negative impacts from new retail? Might they be encouraged to improve their products, their service, their prices, their facility? Might they even benefit from the extra shoppers attracted to a more dynamic and excitng retail environment? How do all those retail food establishments in a food court survive?
At what point is our blocking of new retail, due to concerns over possible negative impacts to existing retail, detrimental to our overall retail-related well being?
[i]How do other communities deal with adding new retail that might “negatively impact” existing retail? [/i]
Look at Woodland and Vacaville. They have high retail vacancy rates as a consequence of their planning decisions. Essentially each new retail area cannibalizes the old ones, leading to blight.
[i]you would think there would just be a trail of shuddered empty buildings [/i]
Yes, there is. Go walk through the County Fair Mall in Woodland. Or do a quick count on the number of retail stores in downtown Woodland or Vacaville compared to Davis.
But we’ve had this conversation before.
“How do other communities deal with adding new retail that might “negatively impact” existing retail? Reading the claims of some on this blog, you would think there would just be a trail of shuddered empty buildings unless we hault all competition.”
As Don notes, that’s actually what has happened.
Mark: But I think you are missing a key point here. Who has the capital at this time to tear down city blocks and rebuild it? There is a reason that the state created the tax increment/ RDA to begin with.
David Greenwald: “Mark: But I think you are missing a key point here. Who has the capital at this time to tear down city blocks and rebuild it?”
No David, you are missing the key point. Despite years of preferential treatment, the property owners downtown have failed to maintain their properties (with a few notable exceptions), yet they are on the forefront whining about the impact of Target. We have gotten nothing in exchange for years of artificially higher prices and lower selection due to the monopoly on retail space in town. They don’t need RDA money to improve their buildings, nor do they need to raze whole blocks at a time. They only need to reinvest the money the community has given them, one building at a time.
“Whole Foods is probably the final nail in Westlake Market so that Neighborhood Shopping Center loses its only major traffic generator. “
Maybe, maybe not, but if Westlake Market goes under and the adjacent shopping center declines, the people of West Davis, Stonegate and Village Homes have only themselves to blame. Saving the Westlake Shopping Center would be a done deal if only the people of West Davis would allow West Village access to Russell Blvd.
Mr.Toad wrote:
> if Westlake Market goes under and the adjacent shopping
> center declines, the people of West Davis, Stonegate and
> Village Homes have only themselves to blame. Saving the
> Westlake Shopping Center would be a done deal if only the
> people of West Davis would allow West Village access to
> Russell Blvd.
Just like the Downtown business owners should be working to widen the Richards railroad undercrossing to make it easier for people to get in and out of Downtown Davis. The mess at Richards not only makes it harder for South Davis residents to get in to downtown but many North Davis residents get off the freeway at Mace or 113 to avoid the mess at Richards.
Anyone that knows anything about retail success knows that you need a high car count to get high sales and the Downtown merchants should spend more time making it easier to drive through (and park) in Downtown Davis than fighting the square footage of retail pads at a center more than two miles away.
Downtown business owners among others tried to widen Richards years ago but Davis voted it down.
Mark: Couldn’t disagree with you more.
Who has money right now for one thing? You say, “They only need to reinvest the money the community has given them, one building at a time.” What money? Most people are living on the margins right now and some are just trying to hold on.
David’s right, there was a reason that the government created RDA in the first place and most of it had to with the fact that there was often no economic incentive to do what you suggest.
[i]How do other communities deal with adding new retail that might “negatively impact” existing retail?
Don: Look at Woodland and Vacaville. They have high retail vacancy rates as a consequence of their planning decisions. Essentially each new retail area cannibalizes the old ones, leading to blight.[/i]
For every example you can provide, I can provide many more examples where communities have expanded retail without this doom and gloom result you seem stuck on.
Here is the problem in a nutshell. There is a big world out there with more attractive and exciting retail. Davis is stuck in a weird 1970’s time-warp driven by a sense of entitlement of protection provided by community NIMBYs and statists cooperating with political central planners.
Eight years ago the Federal government changed the SBA small business loan program my company provides to open statewide competition. All 200 of our peer Certified Development Company (CDC) organizations throughout the nation had defined territories. Business before 2004 was a much more relaxing time. The founder of this company was very comfortable in this non-competitive environment; she managed the company with a tendency toward compliance and detailed perfection, and established a reputation as being the most compliant and operationally detailed CDC in the country. She hired me and then retired in part because the changes to the industry after competition. Today we are in a constant dog-fight with other CDCs in the state. There are now over 300 of them, and California has attracted a larger share of this growth because 30% of the national loan volume is here. The next effect has been a tremendous increase in service quality for the customer. The customer can use any CDC certified to do business in the state. We cannot price the SBA products differently, so the only way we can win business is to find out what the customer wants and do the best to provide it.
I understand the cognitive and emotional difficulty any business owner faces dealing with competition. The trick is to make that the new normal. Specifically, it is this realization that sustaining a viable operation is a constant struggle. What business owner wouldn’t like to gravitate to a protected status where we can relax a bit? The problem is that it trains us to relax at our long-term peril. We frankly become a bit lazy. Our micro “normal” business approach grows less and less competitive so it becomes more and more difficult to transition to the macro normal. So, we demand even greater protection from having to accept that transition.
That is the retail time-warp we are in. Residents of the downtown area like the little village market look and feel of the downtown. They do not want it to change. Downtown merchants don’t want competition so they don’t have to change. Downtown landlords don’t want expanded retail development so it remains a sellers’ market and they can keep rents high without having to invest in property TIs and redevelopment.
Competition is never easy, but for a business owner, once you get used to it and get good at it, it is actually makes the job more invigoration and exciting. There is never a dull moment. You have to keep reinventing your business and yourself. There is tremendous satisfaction when a business can survive and thrive in a competitive industry or environment. There should be no argument against competition, because the lack of competition is simply a Darwinist-proved path to decline.
Now, the competition needs to be fair. Is Target fair? I think so mostly because the downtown currently does not compete with a large percentage of the products sold. If the downtown has suffered a 9% decline in business traffic as Don and DT Businessman claim, then much of that probably has to do with Target being a more attractive retail destination and our downtown merchants and landlords still stubbornly refusing to recognize that a competitive response is in order.
“For every example you can provide, I can provide many more examples where communities have expanded retail without this doom and gloom result you seem stuck on.”
Jeff: You realize taking your language at face value, there would be as many examples of failure as success. Is that really what you are stating?
But for the sake of discussion, Why don’t we start with one example?
David – here are four. To the right I have included the retail sales per capita rounded to the nearest thousand compared to the $8,000 that Davis gets.
Palo Alto – $27,000
Napa – $15,000
Chico – $20,000
Merced – $14,000
(Merced is an example of a city doing the type of downtown revitalization that Davis should be doing)
G.I. “[i]Who has money right now for one thing? You say, “They only need to reinvest the money the community has given them, one building at a time.” What money? Most people are living on the margins right now and some are just trying to hold on[/i].”
I agree that many business owners downtown are barely hanging on, but that is not true of the property owners. Most of them have held their land for decades, and have benefited from years of protection from competition allowing for excessively high rents.
[img]http://davismerchants.org/vanguard/davisrevenues.png[/img][img]http://davismerchants.org/vanguard/woodlandrevenues.png[/img]
Again, we’ve had this discussion before as well. Davis isn’t going to increase its sales tax per capita much for a variety of reasons we’ve already talked about. Woodland has mostly just shifted their sales tax from the downtown to the mall to the periphery. Davis and Woodland are essentially one retail region. Woodland provides all the big box retail, Davis has a charming downtown. And our planning process and general plan attempt to keep neighborhood shopping options healthy.
Mark: I think the rents are actually higher in some of the neighborhood shopping centers! Michael would know.
Jeff and Mark, there’s no doubt that a number of downtown property owners have not sufficiently reinvested in their properties, from an aesthetic, functionality, or economic perspective (I notice that you spare the existing neighborhood shopping center owners your criticism). There are also a number of downtown property owners and tenants who do not properly maintain, clean, and landscape their properties. Keep in mind, the biggest downtown property owner by a wide margin is the city. That all said, the two of you are massively oversimplifying a very complex challenge (and my guess is that you know it). Reinvesting and revitalizing in an urban environment with a very diverse ownership of hundreds of small properties is no easy matter. Only one of the challenges is how to justify the cost of a teardown or significant upgrade given the rather low level of current or foreseeable economic activity. The risk/reward ratio is out of kilter; the regulatory and political risks are unacceptable. The 2nd greatest challenge is how to provide cost effective auto parking to support new construction, expansion, or significantly upgraded properties. The City Council PUNTED on this question when they reversed their long standing position on the 3/4/E/F retail/parking project and the community is paying the price.
At David Thompson, you might note that when Whole Foods announced their opening last October, the Mayor expressed his concern in the media over the impact on Downtown parking and circulation. Ironically, the Mayor’s comments came one week after the Council decided we didn’t have a need to expand Downtown parking capacity. The elapse of ONE week and the addition of ONE downtown tenant caused the Mayor to revise his opinion (not much foresight there). Furthermore, it’s been a year since the Whole Foods parking/circulation concerns were raised. What significant action has been taken to address this concern?
“That is the retail time-warp we are in. Residents of the downtown area like the little village market look and feel of the downtown. They do not want it to change. Downtown merchants don’t want competition so they don’t have to change. Downtown landlords don’t want expanded retail development so it remains a sellers’ market and they can keep rents high without having to invest in property TIs and redevelopment.” Jeff, I would be in agreement with you if you prefaced your comments with “some”. The Davis Downtown board position is the exact opposite of what you represent here. It is the City Council who have stymied efforts to increase the amount of attractive, retail-quality space Downtown. It is the City Council who have stymied efforts to add more infrastructure to create a compelling Downtown shopping experience. Again, the city owns the infrastructure and is the largest property owner.
-Michael Bisch
Jeff, the rents are neither high nor low Downtown. They’re reflective of the amount of economic activity being generated. As Don points out, the rents at the better performing shopping centers are substantially higher than Downtown because there is more economic activity occuring in those shopping centers. I have no doubt that the future smaller tenants at the Target pads will be paying higher rents than the typical Downtown tenant because Target generates a lot of traffic and there is an overabundance of parking. If the city forced Target customers to circle the area 3 or 4 times, converted the Target parking lot to paid parking, issued parking tickets to them, and forced them to park out of sight of Target, then the Target rents might come down.
-Michael Bisch
Don, good spin. I used four city examples that did not include Woodland, and you responded with Woodland as your example.
Nevertheless, I have to ask what is the net effect of being so reliant on property tax revenue as our main funding mechanism? I assume that the difference between Davis and Woodland’s property tax is explainable by the artificial inflation of Davis real estate values from our no-growth approach.
Note that there are plenty of downsides to this approach including the difficulty for low income people to afford housing, and a problem for business owners being able to attract new employees due to the high housing cost and limited shopping choices.
I would also point out that Davis has greater lost retail tax revenue (opportunity costs) given our student population and our higher resident income levels when compared to Woodland. We also have pretty much nowhere to go but up since we currently have so many fewer shopping options than Woodland.
My main point was that Woodland has done much of what you seem to want Davis to do, and yet hasn’t achieved that much higher a sales tax revenue for it. They have created a lot of vacant retail space. And Woodland is providing a fair bit of the retail you seem to want in Davis. I suggest Davis focus on its strengths and not try to copy other cities. Ask people who are visiting what they like about Davis. It is funky, charming, cute, etc.
We’re more reliant on property tax, they’re more reliant on sales tax. Our sales tax is more reliant on auto sales. There are obvious advantages and disadvantages to both. As to lost retail options: I think the retailers that locate here are appropriate to the demographics. Forever 21 and TJ Maxx are good examples. Regular department stores don’t seem to be able to make it.
Jeff, the main point you’re missing is the zoning amendment would not achieve any of the objectives that you’re espousing. Keeping the zoning as is would.
-Michael Bisch
[i]Jeff, the rents are neither high nor low Downtown. They’re reflective of the amount of economic activity being generated.[/i]
I know the owner of the old Davis Creamery was paying more than twice the rent as he is now in his new downtown location; so in this case you are certainly correct. However, that initial lease was established before the Great Recession. The landlord was just a jerk not renegotiating the lease after the economy tanked. I bet Mr. Pickles got a better deal after the space was unoccupied for over a year.
Throughout most of California, commercial real estate values have plummeted 35%-50% in most areas. Lease costs have also plummeted as the supply of empty properties have increased. I think it is fair to say that Davis commercial property landlords have been insulated from that due to the low supply of retail property alternatives in Davis. Think about it this way… the rents have maybe not increased as much over the last four years, but retail sales has decreased due to the recession, and the rents are taking a larger percentage of cash flow for many Davis merchants.
In addition, the low supply has allowed landlords to put off the level of tenant improvements that would otherwise be needed in a more competitive commercial property market.
I certainly agree with your point about redevelopment being more difficult than Mark and I have tackled in our posts… especially without RDA still being an option (thank you Gov.’ Moonbeam!).
There is a kinda’ damned if we do, damned if we don’t situation here. If we had more unoccupied business downtown, there would be greater motivation and cooperation to tear the old stuff down, and do a larger revitalization. It seems though we are happy just barely keeping our heads below water.
[i]Jeff, the main point you’re missing is the zoning amendment would not achieve any of the objectives that you’re espousing. Keeping the zoning as is would. [/i]
Michael – Assuming we could build up and build parking… something I think many residents in the downtown area would fight tooth and nail as we have already seen.
[i]Regular department stores don’t seem to be able to make it[/i]
Don, I don’t know what you are basing this on. Every department store that has even been in Davis has been successful (and I can only think of one). It has been the parent company that has failed or pulled out.
Woodland is not a valid comparison.
Try Palo Alto for example.
Michael: The problems with retail development in Davis are long standing and as a consequence, complex. We won’t solve them with easy fixes nor can we expect to dig ourselves out of the hole we are in in the short term. We cannot however expect to dig ourselves out at all if we continue with the same failed approach that we have been using to date.
I agree that the problem starts and stops with the City Council, but over the years (and I am talking 30-50 here) that Council, at least in regards to retail development, has simply been responding to the demands of the major beneficiaries of our protectionist practices, the downtown landlords. We cannot expect retail to grow throughout the town as long as we maintain the uncompetitive approach that has been in place here for generations.
Michael Bisch: “[i](I notice that you spare the existing neighborhood shopping center owners your criticism).[/i]”
The center closest to my home is the Davis Manor center on 8th street. Structurally it is quite similar to the way it was in the 70’s, but has undergone at least three significant facelifts in the time since (which is more than I can say for many of the buildings downtown). The major problem this center has experienced over the years has been the restrictions put in place by the City on the types of stores that are allowed, and in the case of grocery, required. As a consequence of this shortsighted planning requirement the anchor store of the complex sat empty for nearly a decade, hurting all the other businesses in the complex and the neighborhood as well. This is what I was referring to a few days back on another thread when I commented on the restrictions put in place by the City on retail development at the neighborhood centers. The protectionist program focused on the downtown have harmed retail development throughout the City.
When I look downtown I see a number of buildings that are functionally unchanged since my youth. You commented that it is hard to do anything major with the multitude of land owners in the area. Jeff and others have called out the east side of G street between 2nd and 4th as a prime example of an area needing to be improved. How many property owners are we talking about there? Why not focus on the areas where ownership is consolidated in a few hands, especially when the City also owns property in the same area. You further commented that the City is the major property owner, but as we all know the City is not in position to pay for redevelopment. Why is it necessary for the City to fund the project? Why not sell the properties to developers who will implement the redevelopment plan? David commented that we can’t do anything without the RDA. In my mind, the RDA was a crutch before, and is simply an excuse now. Of the buildings that have been renovated downtown in the past 10 years, how many of the projects were funded with RDA money? Individual property owners, or small groups of owners working together, can do a great deal if they choose to, or if they are encouraged to do so by the City Council. What I see is a group more inclined to whine about the competition and expect the City Council to continue putting money in their pockets.
We need to stop looking for excuses for why we can’t do something, and start demanding better, of ourselves, the City, and the property owners downtown. The first step is to stop the protectionist approach to retail development.
Mark and Jeff, you’re both pointing your fingers at the wrong culprits. For every 1 or 2 Downtown business or landlords that are actively fighting against change, 10 or 12 are demanding change. You are echoing Davis Downtown board positions, thank you! It would then be helpful when we go before the council with policies and project proposals for you to support us because there are plenty OUTSIDE the Downtown who oppose us. The problem is not a business one, it’s a political one. For example, I can’t help but laugh when you suggest the city could sell one of their parcels to a developer instead of the city developing it themselves. Hello?! That is exactly what Davis Downtown has been advocating for these past 3 years. As for the the East side of G Street, there are 3 property owners there and 3 tenants on long term leases. How do you propose to make them go away? One of the main redevelopment tools that an RDA had was eminent domain. That tool no longer exists and there was no way any Davis City Council would have used it in any significant way when it did exist.
Jeff, you’re still missing the point of the Targe pads zoning amendment. TJ Maxx is not effected by the amendment. The amendments are targeted at neighborhood shopping center type tenants. How does a Subway located at 2nd Street Crossing address your sales tax leakage or more shopping options issues anymore than a Subway located at Davis Manor, 5th Street Plaza, or the Mace Shopping Center? The amendments that the developer are suggesting aggravate your issue, they don’t alleviate them. If want to reduce sales tax leakage and create more shopping options, you need to develop larger pads, not reduce the size of the spaces.
-Michael Bisch
I should also add, the way to create competition for Downtown retail landlords is to create additional attractive, contemporary, retail-quality space downtown. The existing landlords would have to either update their properties or reduce their rent to compete (reducing rent is not an effective response as it results in a downward spiral). There needs to be a balance between what is happening on the periphery and what is happening Downtown. There has been much more new development on the periphery than in the Downtown these past 10 – 20 years. We’ve been promoting peripheral growth and putting up barriers to Downtown growth. I had hoped this battle had been won this past council election. We shall see.
-Michael Bisch
Michael: I am NOT blaming downtown business owners. I have been very careful to focus my comments on the property owners, the City Council (and the actions of the City’s staff)and in past tirades, the vocal ‘we say no to any change’ crowd. My major beef of late is with long-term (20+ years) property owners who have: 1. consistently whined about competition from Target (and any other development outside the downtown), and 2. Have done absolutely nothing to improve their own properties.
Tenants can be accommodated through adjustments to the lease, use of temporary space, and incorporating TIs into the cost of the redevelopment. Existing tenants are a complication, but shouldn’t be used as an excuse. Multiple owners can be a challenge depending on how well they work together, but this is just one place where I think we should be more demanding of what we expect from the owners if we are going to gift them with preferential treatment.
Yes, Mark. As I’ve pointed out, the way to encourage Downtown landlords to improve their properties is to develop yet more space Downtown. This was one of the primary arguments made in favor of the 3/4/E/F retail/parking project. What the politicians have done is the exact opposite. They’ve discouraged further development downtown. It’s the politicians who have promoted the quaint (some call it shabby) downtown. The improvements that have occurred downtown in the past 10 years have been inspite of the political impediments. Fortunately, we had an election last June where all 3 new council members campaigned on Downtown progress, not Downtown frozen in time. We shall see whether they act on their campaign promises.
Mark, what you’re saying about buying tenants out of their leases makes no sense. I’ve already explained to that the risk/reward equation is currently out of kilter for downtown development (even if you had an answer for the non-existent parking to support a new development). Your reponse is to add the expense of lease buyouts and tenant relocation on top of an equation that results in a negative number? Is that the double-negative approach to investing? 🙂
-Michael Bisch
Nice to read the lively discussion about business challenges.
This town has taken a beating since 2007, or over 5 years now. We are all tired of it.
But: I am optomistic that the business outlook will improve soon. The Presidential election is around the corner; the Republicans will hopefully try to work with Obama once they know they are stuck for 4 years, like they did with Clinton; the Fed is working to keep interest rates low; the real estate market is improving. I think when it turns, it will be fast.
Most of my clients are aircraft owners, repair shops, pilots, mechanics, controllers, insurers, or victims of accidents, and the general aviation industry is looking up. Real Estate professionals and banking and insurance powers aviation, and things are improving in that sector.
Jeff: thanks for the comments on the CDC changes. I always thought I had to go to a certain CDC in Sacramento for SBA matters, so I will keep you all in mind if I want to look into SBA funding again.
Mike: I think when you built your building it was back when CDCs had territories… and even though our office was located in Davis, it was not our territory.
However, today you can see any CDC that does business in CA. Come see me if you need small business real estate financing and we will take good care of you.
That goes for anyone else reading this!
But, Mike I don’t think I would be so quick to count Mr. Romney out at this point. Especially given the foreign policy meltdowns happening all around the Arab world. Also, we have those debates where the media will have a much more difficult time protecting Mr. Obama from the tough questions.
The good news for me and for small business is that Mr. Romney supports the SBA.
I’m pretty sure Obama supports the SBA, too. At least this guy seems to think so: [url]http://www.huffingtonpost.com/stewart-j-lawrence/obama-small-business_b_1881866.html[/url] I’m not aware of any party or president that doesn’t ‘support the SBA’.
“[i]The major problem this center [Davis Manor] has experienced over the years has been the restrictions put in place by the City on the types of stores that are allowed, and in the case of grocery, required.[/i]”
Well, I think location is the biggest problem. But just one or two signs on Pole Line would be nice, to let passing motorists know there are shopping options there.
Yes, Obama supports the SBA. For example, he appointed the head of SBA to a cabinet position. In one of his earlier speeches on small business, he mentioned our program and some detailed points. He had my entire industry in a tizzy because Bush thought 504 was an over cleaner (or something like that).
The GOP has had a history of responding to the banking industry that has wanted the government to stop most of the agency direct lending programs. However, most of the SBA programs, like the 504 that we lend, require participation with banks. Because of this and because of the banking credit crunch over the last four years, there is much more bipartisan support for the SBA. But not for all the direct lending programs from other agencies (almost all Federal agencies have direct lending programs that taxpayers pay for).
The SBA 504 program is run as a true public-private partnership, and has been zero subsidy since 1997 (the program pays for itself with no taxpayer money). I would like to see this model replicated for a lot of other government services. For example, education… but at the state level.
How odd to suggest moving/removing Davis ACE, probably the most successful downtown business. It also, I expect, acts as an anchor of sorts. And 5th St. Crossing, now there is a good reinvestment.
Also, glad to see no mention of demolition for west side of G St. since most if not all of those are historic buildings. They should be maintained, restored, adapted.
Oh, and regarding getting more cars into the downtown, where are they supposed to go once they are on downtown streets? The area does not expand because more cars have entered.