Retail Sales Update

The latest sales tax figures from the California Board of Equalization show that Marin retail sales for the third quarter of 2009 were down 14% from the same period last year. Worst hit was San Rafael, which saw a 21% decline. Novato fared better, with a decline of 8%, while Corte Madera scored the best results, with 0% change from Q3 2008. Over California as a whole, retail sales were down 17%.

The chart above shows the annualized rate of change in retail sales. For the 12-months to September 30 sales fell to approximately $2.7 billion, approximately 18% below the peak of $3.3 billion achieved in 2007, and would have been even lower had it not been for the $100m+ impact of "cash for clunkers" auto sales in August.

Reports from malls and stores around the county suggest plenty of shopping activity over the holiday period. We'll see if this leads to a turnaround for retail sales in the new year.

Larkspur Landing / Marin Country Mart: landscape plans revealed

The plans for reviving Larkspur Landing Shopping Center (or as it will be known, Marin Country Mart) were revealed today in the North Bay Business Journal. The center's new owner, JS Rosenfield & Co. hopes to find retailers to occupy the 50,000 square feet of space that is

currently either vacant or occupied by non-retail uses.

Goodbye Fountain

The landscape plans approved last month by the City of Larkspur, include renewing the perimeter with $1 million worth of olive trees. In the plaza area, the plans call for removal of the fountain, to be replaced by a play structure and a fire pit.

Landscape improvements will help to freshen the center (although I think it's a mistake to lose the fountain) but the new owner will have to do some impressive leasing to turn the center around and make it relevant as a shopping destination.

Retail sales back on downward track after Cash for Clunkers blip

As reported in the San Francisco Business Times, California's Cities and Counties are losing millions of dollars because of falling sales tax revenues. As of October, consumers were stubbornly refusing to open their purses and wallets and flash the plastic at stores statewide.

The chart below tracks the annual change in the 1% retail sales distributed to the largest cities in Marin, using data from the California Board of Equalization. The distributions take place 1-2 months after the sales are made; so it looks like the September bump was largely caused by the one-off impact of August spending on "Cash for Clunkers". Distributions were up in the main car dealer locations: +40% in Novato and +14% in Corte Madera.

For Marin County in total, sales tax distributions in September were at the same level as in September 2008. That's an improvement over the year to August, where sales tax revenue averaged $2.2 million per month in 2009, compared with $2.7 million for the same period in 2008.

Come October however, and the sales tax distributions were back on the downward track, averaging -14% below October 2008 for the county as a whole. This is somewhat better than the May-August period this year, when the year-on-year sales decline ranged between -20% to -30%. It could be that retail conditions are improving, or it could be that some of the Clunkers payments carried over into the October numbers. The November figures will be out soon, at which time we will find out more. National indicators suggest an upward trend.

Commercial real estate finance

Today I went to the Fairmont Hotel in San Francisco, to listen to the speakers, sages and pundits at the Fisher Center's annual Real Estate and Economics Symposium.

The main economic take-away was that the recession is over, employment is not falling as fast and may soon start growing and the housing market has bottomed out.

Great news then: but not for commercial real estate, which has a whole different set of problems. CRE values are down 41% from the peak. RCA's Robert White estimated there's $1.8 trillion of real estate loans originated over the last 6 years where values have fallen more than 25%, effectively wiping out any equity holdings. The value drop hasn't led to many foreclosures yet because net operating income remains cushioned by long leases. Also, banks are choosing to "pretend and extend" while properties can still cover their debt service payments.

This won't continue for long. Around $800 billion of CRE debt will need to be refinanced over the next two years, and commercial vacancy rates are rising and rents still falling. While the banks' cost of capital is essentially zero, they are willing to extend the loans on any property that is cash flow positive, and only foreclose on the weaker under-performing assets. But zero percent Treasuries aren't sustainable. Once they rise (and Ken Rosen expects T-Bills to be at 2.1% by the end of 2010) the performance hurdle will also rise and that will result in many more foreclosures of commercial properties. Only then will the real CRE losses begin to be recognized.

And it'll also be a great time to buy.

The sad saga of Marinwood Plaza

The village of Marinwood is located midway between San Rafael and Novato. Marinwood Plaza, which is located just west of Highway 101, used to house a Bell Market, which served the neighborhoods of Marinwood and Lucas Valley.

However, the Bell Market closed several years ago, and the Plaza has been mostly vacant and decaying since then. Only a liquor store and dry cleaner somehow survived, and the cleaner is soon to relocate to Hamilton.

Attempts to renovate and relaunch the center have been well-documented, and a summary follows.

Marin County Supervisor Susan Adams viewed the Plaza as an opportunity to develop affordable housing, a view not shared by many local residents. The Marinwood Association is a neighborhood group that has been at the forefront of attempts to get the Marinwood Village off the ground.

Marin County adopted the Marinwood Plaza Master Plan in 2006, with 30,000 sq.ft of retail space and around 100 multifamily residential units, as detailed in the Conceptual Design Plan.

At the end of 2007, hopes were raised when Trammell Crow showed interest in redeveloping the center. The Pacific Sun posted this account of attempts to rebuild the Plaza in January 2008.

And throughout 2008, residents hoped that Trammell Crow would make it happen. But by 2009 it was clear the plan wouldn't work, and activity on the redevelopment stopped.

With a population of just 6,500, the local area just isn't big enough to support a full market, so it makes sense to plan any future redevelopment around residential units, with a smaller retail plaza of 5-6 units at the Miller Creek Road end of the site. Let's hope that another developer sees the opportunity to make this happen when the economy picks back up.

Marin retail news update

Mill Valley residents can cast their vote to help select a design consultant for the Miller Avenue Streetscape Plan. All fourteen proposals are on the City of MV website, and those with time on their hands can use the evaluation tool to select their favorite consultant.

Over in Corte Madera, The Village will be getting a not-so-glamorous new neighbor when The Home Consignment Center takes over the Lay-Z-Boy space at 801 Tamalpais Avenue.

Nearby, the Old Town Square will be losing one of it's most popular stores when Tamalpais Paint and Color moves to a location in East Corte Madera in January. The current building was offered for sale last year, at which point the paint store was "in the middle of their 10-year lease". Any local residents care to suggest what they would like to see in that space?

Good news for leopard-print throw rug fans: Z Gallerie (Town Center Corte Madera) has emerged from bankruptcy.

A new proposal was unveiled for the Hannah Ranch site in Novato. The development proposal includes a 116-room hotel and a small amount of office, retail and restaurant space, and was greeted with much more enthusiasm than the previous attempt to build a Home Depot at the site.

Paradise Foods opens (partly)

Took a quick look at the new Paradise Foods market, which quietly opened its doors last week at Pacheco Plaza. The "soft" opening was no doubt engineered to get their staff and systems fully functioning before the official grand opening, November 2.

The photos below show that the store has the wooden floors and shelving units that will look familiar to fans of the original Paradise Drive market. Also present are the deli counter with gourmet sandwiches at $6-$7, and the well-stocked meat and fish counters, which were getting the most attention from the small number of shoppers in the store.

Another hallmark of Paradise Foods is their range of prepared foods and meals, which are made on site. Lots of these to choose from, including salads, burritos, meat and rice dishes. prices range from $7 for a meal for one, through to $35 for a party-sized lasagna.

The Pacheco store is much bigger than the Corte Madera Store, so the aisles are wide, and there are open spaces at each side of the store and plenty of room around the checkouts. Some of the shelves are also empty, though we'll assume they'll be fully stocked by the time of the official opening next week.

As for Pacheco Plaza itself, the remodel is coming together, with nice landscaping and new shading that's brought the center into the 21st century. The photos I took last year look like they came from the 1970s. What they need now is a few more new specialty stores to breathe some new energy into the mix.

Oh, and is it too late to do something about that huge electricity pylon...?

Weekly news update

A few stories from around the County this week...

DeLano's in Tam Valley is to get its own Post Annex.

The Marin Store is a new on-line store promoting food, fashion, art etc created in Marin, or made by companies based in Marin.

Peet's proposed new outlet in Sausalito has to pass the "no chains" rule that blocks formula retailers from locating on the waterfront.

Restoration Hardware relaunched it's Corte Madera store last week with a cocktail reception. The store shall be know from here on as something like The Gallery at Restoration Hardware. To emphasize the point, they've hung curtains outside the entrance (see photo). The merchandising matches Resto's recent strategic decision to position themselves at higher price points, and the store has some impressively huge sofas, industrial chic tables and massive metal floor lamps. There's also a new children's section.

Finally, as the opening of the new Paradise Foods at Pacheco Plaza draws near (planned for November 2), I couldn't help but notice a very candid quote in the IJ from the owner, David Gilmore, who said of the new store, "I had been kind of talked into doing this at the start". And while he "feels really good about it now", let's hope the people of Novato feel good about paying top dollar for the store's premium product.

Coming soon... Marin Country Mart

Marin Country Mart is set to become the new name for the Larkspur Landing Shopping Center. While not much more than the logo has been made public to date, BVN Architects (Ferry Building, Oxbow Market) have been quietly working on plans for refurbishing the mall, which was purchased by JS Rosenfield in January this year.

The LA Times last week carried an article about Rosenfield and his retail philosophy, which is based around the Brentwood Country Mart:

Built to woo shoppers in a more rural Brentwood neighborhood after World War II, the red wooden structures evoke a country marketplace with stores and stalls that ramble around a courtyard. Along narrow walkways, doors open horse-stall style, offering views inside the smudged shoe repair stand, tiny post office and other shops.

But make no mistake, the Brentwood Country Mart is filet mignon masquerading as meatloaf. A posh Beverly Hills restaurant runs the humble-looking taco stand. Wealthy locals and a sprinkling of celebrities come here to hang out, maybe get a haircut or shop at 20-odd stores that sell merchandise such as mouth-blown Italian vases and hand-painted furniture.

Bring it on. If there's one thing we're short of in Marin, it's hand-painted furniture.

Kohl's arrives in Marin

It's not every week we see a new department store in Marin, so the arrival of Kohl's at Northgate has to count as a major retail event. The owners of Northgate had some good fortune when Mervyns went into bankruptcy last year and closed all their stores. What could have been a problem turned out to be a bonus when Kohl's snapped up the Northgate anchor store, along with many others across California. And the timing was perfect, with Northgate embarking on a major renovation that is heading for completion at the end of this year.

Externally, the main change, aside from the new name and a lick of paint, is that the Kohl's box is now separated from the rest of the center. The internal mall that used to connect to the old Mervyn's has gone, replaced by what will eventually be an outdoor "Oak Plaza", with roadside restaurants and stores. You can see the tree in the photos below, plus the new units attached to Kohl's, which will include Panera Bread and Roadside BBQ.

Inside, the transformation is more dramatic. There are no structural changes to the Mervyn's box, and the floor plan is a simple racetrack layout, with a pair of escalators in the center to move between the two levels. But the internal furnishings and displays are all new and the presentation of the merchandise is very well done. It looks, feels and smells like a new store.

The store is not very large, so apparel takes up the majority of the space. The lower level is mostly clothing, with a jewelry/accessory section. A lot of the upper level is taken by kids clothing, together with shoes and a home/bath section.

Most department stores place checkouts throughout the store, but here the checkouts are all located together close to the main entrance, which is more like a Target or other discount store.

The customer service desk is on the upper level (pictured below).

Kohl's branding strategy includes the usual mix of own-brands, industry favorites and exclusive designers. A lot of the merchandise carries one of Kohl's own store brands; I saw names like Sonoma Life and Croft & Barrow. Nike, Fila, Levis and Lee jeans are heavily promoted. The exclusive brands include Dana Buchman and Simply Vera Wang. I also noted Tony Hawk skatewear, Elle clothing, Chaps and Lauren Conrad.

Overall, first impressions of Kohl's were very positive. The staff are clearly motivated, and there are plenty of them. The merchandise looks good and the prices look competitive. The whole experience is completely different to the sad state that Mervyn's had reached towards the end. It is also clearly superior to the Sears and Macy's stores at Northgate, and hopefully it will spur those stores, particularly Sears, to make improvements.

Friday news update

Walgreens is poised to take over the space vacated by Pier 1 Imports at Northgate One in Terra Linda. The move is likely to be less controversial than the proposed new Walgreens in Novato, which will be built on the Mission Lodge Hotel site at Diablo Avenue and Redwood Blvd.

A big disappointment to the well-dressed man around Mill Valley is the closure of Wilkes Bashford.

Social media is finally catching on with Marin's shopping malls. The Town Center at Corte Madera now has a Twitter page, as does The Village. Also on Twitter are Andy's Market and Northgate, which also has a Facebook page.

But the big news event of the week was the arrival of Kohl's department store, which opened at Northgate this Wednesday. A full report will be coming soon.

999 Grant is back on the market.

News from the Novato Advance that Catlin properties has given up on it's proposed mixed use development at 999 Grant Avenue in Novato and has put the planned project up for sale.

Occupying a prime site at the intersection of Grant Ave and Redwood Blvd, the developers failed to attract any interest for the 10,000 sq.ft of retail space, which was initially offered at $4 per sq.ft - which is almost twice the going rate for retail space in the area.

Weekly news roundup

In San Rafael there is a public hearing tonight (9-21) at 8.00pm where the City Council will be discussing the proposed Mi Pueblo grocery store at 330 Bellam Blvd.

If you want to have your say on the revised plans for the relocation of Corbett's ACE Hardware store to 800 Magnolia in Larkspur, there's a Planning Commission hearing September 22nd.

In Novato, All Star party rentals has relocated from Grant Avenue to Olive Avenue. Meanwhile, eleven stores on Grant Avenue have signed up for Novato Redevelopment Agency's Grant Avenue Facade Development Program. The program provides up to half the cost of improvements to the building's exterior.

The renovation of Northgate continues on schedule, with the grand opening of Kohl's planned for Sept 30th. In case you missed it, the latest announcement of new stores to take space in the mall includes a 2-level, 28,000 sq.ft Forever 21, and new-to-Marin fashion stores Hot Topic (think Twilight T-shirts) and North Bay shoe retailer Sole Desire.

Marin retail sector shrinks below 2002/03 levels

Retail sales in Marin are now lower than they were during the last economic slowdown. In 2002-03, following the tech crash, the annual value of taxable retail sales in the county fell to $2.85 billion. In the following five years, the economy recovered and sales increased to a peak of $3.3bn at the beginning of 2007. Today, just two years later, that gain has been reversed, and retail sales are heading fast towards levels not seen since the 1990s.

The chart above shows trailing 12-months taxable retail sales and the average annual % change for Marin County. The estimate is based on data released by the California State Board of Equalization, which tracks the 1% of taxable retail sales that are distributed to local cities and counties where the retail sales are originated. Trailing 12-months sales are now -14% down from the previous year, with most of this impact occuring in the last few months: June 2009 distributions were -29.8% lower than June 2008, -18.2% lower for July 2009 and -24.1% lower for August 2009.

Marin’s experience matches the US trend. Retail sales data released by the US Census Bureau today show that retail sales dropped sharply earlier this year, although the 5.3% y-o-y decline in sales for August may be an indicator that the worst is over.

Several of Marin’s cities will be hoping that sales don’t fall much farther because retail sales tax provides a large slice of their income. In August 2009, the 1% sales tax distributed to the City of San Rafael was down 28% or $350,000 from August 2008; Novato declined by 22.4% ($125,000), and Corte Madera was down 19.4% ($78,000).

Gap is 40... but sales are down.

Congratulations to Gap on its 4oth birthday tomorrow.

"On August 21, 1969, Don and Doris Fisher opened a shop in San Francisco called Gap that sold jeans and records. Now Gap is one of the most iconic brands of our time and jeans have become the foundation of everyone’s wardrobe,” said Marka Hansen, president of Gap North America.

To celebrate, there will be simultaneous acoustic performances at 700 Gap stores across the country on the evening of Thursday, August 20 (tonight), including the store at The Village at Corte Madera.

Unfortunately, there is still no end in sight for Gap's deteriorating sales performance. The retailer has now recorded negative sales growth for a staggering 20 quarters. That the company has managed to survive for so long on such poor results is due to its huge $2 billion cash reserves, plus cost cutting and inventory management that has helped to maintain profit levels.

The downside of Gap's cost cutting is the impact it has on merchandising. The group's stores are struggling to remain relevant in the face of strong competition from the likes of American Apparel and Abercrombie & Fitch.

Meanwhile, merchandise quality at Banana Republic is noticeably poorer. Right now I'm wearing shoes I bought from BR three years ago. They're Italian made and excellent quality. Similar shoes for sale today at BR are poorer quality stock made in China or India and selling for the same price. The result is improved margins for Gap in the short term, but bad news for long term customer retention.

Novato DeLano's to close

The Novato Grocery War claimed it's first victim yesterday, with news of the closure of DeLano's at Novato Square. DeLano's was always the weakest of the incumbent grocers in Novato, so no major surprise that the store was getting hit by the slowdown in consumer spending and the new competition from the Hamilton Safeway , Trader Joe's at The Village and Grocery Outlet.

Despite the DeLano's exit, there are more battles ahead for Novato's markets, with Whole Foods and Paradise Foods scheduled to open within the next few months. I wouldn't be surprised to see either of these stores postponing their opening given the current state of the economy, and in particular a lot of negative press about the viability and impact of the Whole Foods / Millworks development, which has switched from condos to apartments after only 2 of the 124 units were sold.

But if the stores open as planned, the underlying problem will remain - that with these new stores, Novato will have too much grocery space for its population, and the grocery war will surely claim another victim.

Trader Joe's Larkspur to open Friday

Get out your Hawaiian shirts and head down to Cost Plus Plaza for the grand opening of Trader Joe's new store this Friday.

Trader Joe's is privately owned by the German group that also owns Aldi, and is notoriously reluctant to disclose information about its operations. This is something that has earned the wrath of organizations like Greenpeace, which set up the spoof Traitor Joe's website to highlight their concerns about the company's seafood purchases.

Miller Avenue: vacant store update

An update on the retail space available to lease on Miller Avenue. There are usually one or two units on the market as part of the normal cycle of business openings and closures. At the moment there are a few extra vacant spaces, with several businesses being hit by the recession and there being few start-ups to replace them.

First, the fast food joint previously occupied by Jack in the Box has been sitting vacant for a long time. The chairs are out, the sun shades are up, but nobody's home.

Ciao Bella we previously mentioned. Disappearing under ivy on the east side of the Avenue. The store is close to the new new Tam Commons development, so might benefit from new activity in this area.

Opposite Whole Foods are two adjacent units in a prime location, but previously occupied by retailers with marginal business models: Lolipop candy store and Gourmet Garden To Go, a provider of take-out entrees.

Further north on the west side are two larger units whose long-time businesses closed in recent months. One was the auto parts store at 360.

The other was previously the toy store at 352. Now being fitted out by a new business venture called Once Around, which will be a craft/gift shop when it opens in the fall. You can follow their progress on their website as they get ready to open.

Finally, the unit previously occupied by the electric vehicle showroom now stands vacant. Concept maybe a year or two ahead of its time?

Smith & Hawken to liquidate

News today that Smith & Hawken, the chain of garden & outdoor stores that started out in Mill Valley in 1979, is to liquidate, closing all 58 stores by the end of the year. It's a double blow for Marin, with 70 jobs lost at the company's head office in Novato, and another 30 at the store in Strawberry Village.

Miller Avenue, Part 2

This is Part 2 of our look at Miller Avenue in Mill Valley. Let's start with Whole Foods, which is the main anchor store that draws a lot of shoppers to the area. How important WF is for the viability of Miller Avenue may be tested in the future if the company decides to shutter the store after opening its new MV location at the Alto Center next year. The Miller Ave store is the smallest Whole Foods store in the nation, but is believed to have one of the highest sales intensities (sales per square foot). The combined size of the old and new Mill Valley stores will be less than 40,000 sq.ft, which is the typical size of most new WF stores (such as the one in Novato), so I would expect that while it is not very efficient to operate two stores in the same market, there are enough dollars in southern Marin to keep both stores running profitably.
To the south of WF is the coolest furniture store in Marin: Design Within Reach.


Directly opposite Whole Foods, at 401 Miller is a commercial block that includes the Marin Theatre Company, Cactus Cafe, Jolly King Liquors, and to the rear, the unbeatable Mama's Royal Cafe.



Hidden away behind the Theatre Company is a small retail center that includes a General Hardware store, a small Sloat Garden Center, a deli and a nail salon. There's also the pet grooming store with the unforgettable name: Doggie Style.



It's a ramshackle little center that is earmarked for removal by the Miller Avenue Precise Plan. If that ever happens, it's unlikely that stores like General Hardware and the garden center would find alternative affordable sites in the Miller Avenue area.