Monday, June 29, 2009

Miller Avenue in Mill Valley

Miller Avenue is the long boulevard that leads into Mill Valley from the south. It's a historic street that follows the path of the original railroad and contains a mix of uses, including many retail stores that serve the local neighborhoods of Sycamore Park and Homestead Valley. The area's history is covered in detail in this excellent piece by Matthew Stafford in the Pacific Sun.
In recent years Miller Avenue has made the news through the preparation of the Miller Avenue Precise Plan (MAPP), which is the City of Mill Valley's attempt to beautify and enable limited development in the area, make more efficient use of the commercial spaces and add affordable housing. This being southern Marin, the MAPP caused quite a stir, particularly among those that want to retain the small town atmosphere in the neighborhood. A local group called the Friends of Mill Valley were very active in the debate and produced an alternative MAPP, pointing out that the City's proposal could result in a lot more development than was anticipated, with resulting impacts on traffic and local services. With no final resolution on the Plan, the City has focused on developing a Streetscape Plan for the Avenue.
One new project that is typical of the kind of development envisioned for Miller Avenue is Tamalpais Commons. This is a mixed use development at the southern end of the Avenue's commercial area, which includes street level retail uses, upper level residential apartments and a separate block of 12 townhouses.

The commercial part of Miller Avenue starts at the southern end with a mid-sized Safeway supermarket. The area immediately north of Safeway is sparsely developed and is one of the main areas of focus for increased density by MAPP. A solitary Taco Bell / KFC stands on the west of the road. On the east side there's a medical center, Wells Fargo, the Tam Commons site, Grilly's mexican diner and Malugani TiresMy favorite building is the Caletti Construction building, which looks like a huge pile of sticks.

Other stores along this part of the commercial strip, south of Whole Foods, include the Art & Paper store and Cafe of Life Chiropractic.
It's not easy to make a living on this part of the strip - ask Ciao Bella, gradually succumbing to the ivy.
I'll put up some more photos in Part 2 of the Miller Avenue story, later this week.

Tuesday, June 23, 2009

Whole Foods unveils Mill Valley store plans

Now that Trader Joe's has started to fit out its new Larkspur store, the much-delayed development of the new Whole Foods store in Mill Valley is lurching another step forward with a public meeting to review the store's exterior design plans, at the Mill Valley Zoning Administrator (3pm Wednesday).

When it opens, the Whole Foods store will look very different to the Albertsons store it is replacing. According to the staff report, the plans for the exterior include a new brick facade and wooden pillars, with the intent to resemble a farmers market.
Green features will include a 400 sqft recycling/composting stucture at the rear of the store. The renovation will be designed to LEED Silver level, as required by the City.
The traffic study projects that the new Whole Foods will generate approximately twice the number of visits as the old Albertsons, with an estimated 5,890 average daily vehicle trips to the store, compared with 2,945 for Albertsons. However, the report claims that this will have a "less than significant" impact on traffic in the local area, and that the existing car parking and traffic intersections can adequately cope with the increase. Hmm... My guess is that anyone who regularly passes through the Blithedale/Camino Alto intersection might beg to differ.
After gaining approval for the exterior design, permits can then be issued for the building work to commence, with an opening date in early 2010.
UPDATE: additional reporting from the Mill Valley Herald, IJ and More Marin.

Thursday, June 18, 2009

More pain ahead for retail real estate

News for retailers - and especially retail real estate - continues to get worse. The rotten housing market and rising employment are pushing consumer spending down. Retailers are shuttering stores and heading to the bankruptcy court in record numbers. This week it was JJill, Eddie Bauer and RUEHL. Which retailers will it be next week? And there's a tidal wave of commercial real estate loans due for maturity in the next two years.

Seeking Alpha sums up the pain with an article about how to profit from the fallout. The unhappy answer is: go short on mall REITs.

Now the good news: Trader Joe's will open August in Larkspur! Yay!

Thursday, June 11, 2009

RREEF's retail outlook is too dismal

RREEF yesterday published a dismal view of the outlook for retail real estate. “Done Shopping: Structural Shifts in the US Retail Sector” concludes that the retail sector is going through profound structural changes that will result in lower rates of growth in retail spending in the future, which will translate into fewer stores and more failed retail centers: up to 10% of shopping centers may be forced to close.

Whilst the cyclical impact of the recession is causing pain throughout the sector, with store and mall closures in abundance, the report identifies longer term structural changes that will have a lasting effect, causing retail spending to grow at only half the rate that it achieved over the previous cycle.

RREEF’s main argument is that consumer spending in recent years was boosted by the housing boom and stock market rally, and without these factors spending will expand at only half the rate. The problem is that the data doesn’t show any evidence of such a boost:
real retail spending including motor vehicles actually grew at about the same rate during the housing bubble as during the preceding four decades”.
I guess what RREEF is implying is that retail growth over 2002-2008 should have been below the historic trend rate, but the housing and stock market booms kept the growth rate artificially inflated. So when the recovery occurs without these factors, retail spending will reset at a lower rate.

The report claims that the key structural changes that will impact retail sales growth are demographic. As the baby-boomer generation moves into retirement, boomers will cut back on retail spending. Census data shows retiree age groups tend to spend less than pre-retirees. That may be true historically, but this is the baby boomers we’re talking about. They are wealthier than previous generations of retirees; many will be retiring with generous pension plans, mortgages paid off, kids left home, medical plans in place and plenty of leisure time. I’ve heard a lot of talk about the great opportunities that will be provided by the huge baby boomer retirement market. I don’t buy the RREEF line that
“as they age, baby boomers will have decreased needs for retail goods and will be conserving more cash as they retire.”
I think they’re more likely to take their spending habits with them into retirement.

RREEF also concludes that that population growth will be regionally focused and will be biased towards ethnic groups, and these ethnic groups tend to live in different locations and have different shopping habits. This is certainly an ongoing trend, but this is nothing new and nothing that retailers and retail real estate owners aren’t already fully aware of. And at the macro level, unless this trend has a negative impact on household income growth, I don’t see it impacting retail spending growth.

Overall, I disagree with RREEF’s pessimistic view. The data shows that retail growth didn't accellerate during the housing boom, and there's no evidence that structural changes will have a negative impact on retail spending. I don’t see any significant reasons why the retail sector won’t bounce back strongly when the economy recovers. Innovation will fuel economic growth once more, household incomes will grow again and retail spending will too. New retailers will emerge to challenge the existing chains and retailing – and retail real estate – will continue to change, adapt and grow.

Monday, June 8, 2009

This week's news stories

Lots of buzz this week about the new farmers market at the Alto Center in Mill Valley. "Where's the Alto Center?" was the question most asked, because most people know the strip of stores as "y'know, next to Albertson's", or "by the MV Post Office". Alas, poor Albertson's still stands empty, despite being snatched up by Whole Foods after it closed in 2007. According to a WF manager quoted in the IJ, we won't be seeing the store open until 2010 because the City has asked for a traffic study. Do they really need a traffic study when the building is changing hands from a market to... another market..? Anyway, apparently the farmers market was a hit and will be a regular attraction Friday mornings until at least November. Anna has some photos here.

More great news if, like me, you can think of nothing more enjoyable than wasting the occasional hour hanging out at Sports Authority. The store at Vintage Oaks is set to expand into the adjacent space that was vacated by the Shoe Pavillion bankruptcy last year.

Meanwhile, design firms are among the retailers being forced to shut their doors by the slow economy. The Marin IJ reports on Paper White and Green Fusion, two such businesses that are closing in San Rafael.

Finally, worth checking out is the Tavern at Lark Creek, which opened in Larkspur last week.

Tuesday, June 2, 2009

What to do with Marin's vacant car lots?

In the wake of GM's bankruptcy, the Marin IJ reports on the last of the remaining Detroit automaker dealerships in the county: Novato Chevrolet and Novato Ford. Sales at the Chevvy dealer are down 40%, but the owner is hopeful that they'll be able to stay in business. Sales at the Ford dealer are flat, indicating they've picked up some business from San Rafael Ford, which closed last year. In addition to San Rafael Ford, San Rafael Chevrolet closed in February this year, and the John Irish Chrysler dealer closed in 2007.

With the future outlook for auto sales looking bleak, what other uses might we see coming in to take over the vacant sites? Retail Traffic identifies a few options:
Approximately 25 percent to 30 percent of the dealership sites about to hit the market will likely be taken over by other car brands, estimates James Mitchell, director of the national automotive group with Marcus & Millichap Real Estate Services, an Encino, Calif.-based real estate brokerage firm. The rest of the sites, however, face an uncertain future. In the past, car dealerships were considered attractive acquisitions by developers of strip centers, small office buildings and hotels as many boast good frontage, are in high traffic locations on major thoroughfares and sit on parcels that have already been graded and require minimal site work.

And this CNBC pundit sees opportunity in the land vacated by car dealers.

But considering the rise in vacancies in commercial real estate over the last year, there are plenty of alternative sites available in Marin County, including office space vacated by Autodesk, and big box retail vacated by Circuit City, plus planned development sites that have now been abandoned. Developers are unlikely to go to the effort of permitting and developing a car dealer site when other easier alternatives are available.

So do not expect to see any new concepts opening anytime soon on the abandoned car lots. But smart operators with an eye on the long term might snatch up sites with good visibility and access for conversion to retail development when the good times come back.