Dozens of new stores open in San Rafael (actually only one: Target)

This weekend I went for a first look at the great new clothing store in San Rafael.  Then I visited the new shoe store, and also checked out the new sporting goods store, the new toy store, home furnishings store, electronics store, music store, book store and cycle store.  Oh, and then I picked up some groceries at the new grocery store and a few items at the new pharmacy, and took a well-earned rest at the new coffee shop.

Of course, as you have probably guessed, all these new stores are actually components of just one store, the gargantuan Target Supercenter, that now sits by the edge of San Rafael Bay next to that other great retail megastore, Home Depot.

And very pretty the new store looks too, with abundant plantings and brightly painted curbs in the car park, and a quite stunning vista overlooking the Bay, best appreciated from one of the comfy couches in the Starbucks concession.

Inside the store is shiny and bright and very familiar to anyone who has ever been in a Target store. The staff are friendly and efficient and the shelves are well stocked.

And because it is a Supercenter you can buy everything you need here, which is great news for those people in southern and central Marin that like shopping that way, but not so great news for the owners of other stores in the area whose sales will shrink as a result.

San Rafael Target gets the green light from Community Impact Study

The Community Impact Study for the proposed Target store in San Rafael was released today, and essentially clears the way for the City to approve the project, finding that the impact on existing retailers will be minimal.

• The study estimated that the highest impact would be on San Rafael retailers in the food and drug categories, with a decline in sales of just 2.9%.
• In addition, the Target store is estimated to create 164 net new jobs and provide a net annual tax increase to San Rafael of $646,000.
• The consultant's review of case study cities found that there were no store closures directly related to the opening of a Target store, and that generally downtown retailers adapted to the increased competition.

It's not hard to see that the report was written in order to support the proposed store. The primary reason for the absence of impact in the consultant's analysis is given in the Executive Summary:

"An analysis of retail sales compared to resident demand shows significant under supply, or retail leakage, in General Merchandise retail stores, both within San Rafael and in southern Marin County"

It appears that the consultants reached this conclusion by comparing the pattern of retail sales in central/southern Marin, where General Merchandise stores (i.e. Big Box stores) account for approx. 10% of retail sales,  to the average for California, where Big Box stores get around 18% of sales. When you look at it like this, it is then logical that there is "unmet demand" for these types of stores, and hence that the proposed Target would be satisfying this unmet demand rather than transferring sales from existing stores in the area.

I'll let you decide on whether that makes sense.  Meanwhile I'll read the rest of the report.

San Rafael Target debate heats up pending release of Community Impact Report

The much-publicized and much-anticipated Community Impact Report for the proposed Target store in San Rafael is due to be released Wednesday April 6.

In preparation, both sides are firing up their engines and preparing to do battle. Opponents gathered outside San Rafael City Hall yesterday to protest the store's low wages and use of nonunion labor. And Target stated its case with a piece in the Marin IJ that emphasized job creation, sustainability and consumer choice.

The "No" camp seems to be winning the social media war: the "Heck No" opponents have 254 Facebook likes, versus the "San Rafael say Yes to Target's" 156. The petition against the proposed store has 699 signatures.

So who is going to pleased and who disappointed by the report's findings? With such divergent views it will be impossible to please everyone. My guess is that the fiscal benefits will be found to be lower than Target's estimate, and the commercial and traffic impacts of some concern, with a recommendation for a reduced footprint - say 90,000 sq.ft, and no grocery section.

What do you think?

Borders adds San Rafael store to the closure list

News today that Borders Books has added another 28 stores to the list of bankruptcy closures, including the store on Francisco Boulevard in San Rafael.

The reprieve for the San Rafael outlet lasted just a month, and the store is now scheduled to close by late May.

In the short term the Borders closure will take some pressure off other book stores in the county, but the switch to digital media appears to be relentless - ebooks now outsell hardbacks. So is it only a matter of time before the bricks-and-mortar bookseller ends up at the same place in history as the video store and the music store?

Borders San Rafael store escapes the chop (for now)

As Borders books seeks bankruptcy protection, the good news for Marin fans of the store is that the San Rafael location is not on the list of 200 initial store closures. Whether the reprieve is temporary or permanent will depend on the success of the company's restructuring.

Elsewhere in the Bay Area, the retailer is making big cuts. The San Francisco stores on Post Street and at the Westfield Center will close, as will Santana Row, Alameda Towne Center and others in San Jose and San Mateo.

*Update: the good bad news is....

San Rafael Target decision delayed again; and where did that sales tax come from..?

San Rafael Council failed to come to a decision again on the proposed Target in San Rafael after another marathon session at last night's Council meeting. This time the loudest noises were being made by those in opposition to the store, who continue to ask questions about traffic impacts, minimum wages and the effect that the store will have on local Mom & Pop retailers.

Earlier in the day Target launched its charm offensive by stationing people around the city with large red "Yes Target" signs. There's also a website, Facebook page and twitter feed.  The opposition group also has a "Heck No" Facebook page, and is attempting to get enough signatures on a petition to force a referendum.

As an aside, it is interesting to see that Target is claiming $675,000 in new sales tax revenues will be provided by the new store. If this figure is the 1% sales tax that goes to the City of San Rafael, that would suggest Target expects the store to make $67.5MM in annual retail sales, which just happens to correspond to $500 per square foot for the 135,000 sq.ft store. Add on to that figure sales from groceries (which aren't taxed) and you have what will be one of the best performing Target stores in the nation (Target's average sales performance was $287 per sq.ft in 2009).

Of course this won't be new sales tax, but will instead be the tax that would have been paid at wherever Target's customers shopped before the new Target appeared; so the majority of it will be a diversion of tax receipts to the City of San Rafael from other Marin cities, in particular the City of Novato, which is where locals buy their Target stuff now. A sizable proportion would likely also be diverted from other stores in San Rafael, so the net new tax receipts for the City of San Rafael would be somewhat less than $675,000.

Overall, I think $70MM+ in annual sales is rather ambitious for a store in this inconvenient and unattractive location, so don't be surprised if the numbers come in quite a bit lower than advertised.

New store news: Target, Urban Outfitters and Woodlands Market

In Corte Madera, the new Urban Outfitters store at the Town Center is taking shape. The shell is finished, staff are being recruited, and the store is being fitted out. The photo below shows how the covered walkway has been enveloped within the store footprint.

Over in San Rafael, the debate over the proposed new Target continues to hit the headlines. Last week the San Anselmo Chamber of Commerce passed a resolution in opposition to the development. Then, after a marathon 7-hour meeting, the San Rafael Planning Commission approved the project:

"Our working families need the convenience of economically priced items in one place that doesn't require a trip on the freeway," Chairwoman Maribeth Bushey-Lang said. While "there are a lot of reasons why this is not the ideal location by any stretch of the imagination," job creation, sales tax revenue and convenient shopping outweigh those concerns, she said.

Also last week the Marin IJ reported that downtown Tiburon will be without a grocery store for up to four months after the Boardwalk Market closes at the end of this year. The owners of the Woodlands Market, who are taking over and expanding the space, had been in discussions with the Boardwalk to buy their business and keep the store open through the transition. However, these talks have broken down, and it looks like the store will close while the Woodlands space is built out, with an opening date sometime in April 2011. This is further bad news for Tiburon, which has the worst performing retail sector in Marin. However, this surely is a great opportunity for a quick-moving operator to set up a grocery store in one of the vacant downtown spaces.

The impact of Target in San Rafael

The proposed Target store at San Rafael was in the news last week as the San Rafael Chamber of Commerce postponed making a decision on whether or not to support the development.

This is a familiar big-box retail situation that has played out across the United States. Typically, the City often favors the development because it creates jobs and provides fiscal benefits from sales taxes. Other retailers and their representatives denounce the effect that the proposal will have on locally-owned independent businesses and the historic downtown and neighborhood stores. And the proponents claim that they will be providing a service that will compete mainly with other big box stores and will allow people to shop locally instead of having to drive to the big box stores and malls in other towns further away.

The Chamber plans to research other communities where Target stores have located. There are many examples where unlimited development of strip malls has killed downtown retail areas, but fewer where the impact of one store is clear cut. Target and Wal-Mart have plenty of experience in making their case in these situations.

A 135,000 sq.ft Target store like the one proposed in San Rafael would probably generate $40m-$50m in annual retail sales. The size of the retail spending market in central and southern Marin in the categories of goods that Target sells is approximately $1 Billion. Often, retail developers will cite growth in retail spending as demonstrating a need for new development. This isn’t the case in Marin, where population growth is less than one percent annually, and retail sales have been in decline as a result of the recession and the longer term growth of internet sales. The new Target’s $40m-$50m annual revenue would instead come from existing spending, which means on average the new store would capture 4%-5% of existing stores’ sales. This average figure represents a fairly minor sales decline that could be considered as being within the normal scope of competitive business. However, the distribution of impact will not be even, but will depend on (1) geography: the closer, the higher the impact, and (2) comparability: customers are more likely to switch from similar stores selling similar products; therefore niche, gourmet and specialty stores are less likely to notice an impact, but department stores and big box mass-market stores would take a larger hit.

Among the retailers in downtown San Rafael, many of the fashion boutiques and niche stores selling gifts and accessories wouldn’t compete directly with Target. The stores selling more generic items, like toys, sports goods, household goods, books, electronics and cds are in more danger of taking a sales hit from Target. And all businesses, including the eateries and health & beauty services that don’t directly compete with Target, will suffer if the new store reduces shopper traffic along Fourth Street.

Montecito Plaza

Montecito Plaza Shopping Center is located on Third Street in East San Rafael and is part of a wider commercial hub that also includes the grocers Whole Foods and United Markets.

The center is over 50 years old and is locally-owned by San Rafael's Seagate Properties. Total retail space is approx. 130,000 sq.ft, anchored by a popular Trader Joe's grocery store, PETCO, and Rite Aid.

The center has a simple timeless layout based on a U-shape set around the car park, with a covered walkway providing sheltered access between the stores. Traffic is good, and since Trader Joe's opened a store in Larkspur last year, it's not impossible to find a parking space.

The retail mix includes everyday convenience stores and services, with a good selection of places to stop and eat or pick up food to go. There are several independent local retailers, such as Mad Rags as well as regional chains (Performance Bikes).

Pinkys Pizza and Cafe Trio are two popular eateries located at the entrance to a courtyard that leads through to the San Rafael canal at the rear of the property. The canal isn't the prettiest piece of water in the world, but it would be nice to see some effort to open up the back of the center and face the water with some restaurants and cafes.

The eastern side of the center is quieter, and includes evening-trade restaurants (Puentez Taqueria, Runi) and lower-volume retailers. Worth looking for is Jasmine Market, a small Mediterranean grocery store.

Overall, there are few vacancies in the center, with exceptions being small units hidden at the corners. Pasta Pomodoro is the highest-profile vacant unit. It's getting harder all the time to find a video store in Marin that hasn't closed, so I was surprised to see Silver Screen Video still open.

Overall, Montecito Plaza is a busy and popular shopping center, with a great location and good tenant mix. Expect to see it remain so for the next 50 years.

Grocery Stores Gone Wild

This might sound strange, but the most dynamic sector of Marin's economy has to be grocery retailing. The transformation in this sector over the last few years has been remarkable and is set to continue this year with more new stores opening and - very likely - more old stores closing.

Ten years ago, the grocery scene in Marin was dominated by mid market regional chains such as Albertsons and Bell Markets that operated 15-20,000 sq.ft stores. By 2006 Albertsons had closed or sold all their stores. Also in 2006 DeLano's took over five Marin Bell Market stores, although the ones in downtown Tiburon and Novato have since closed.

Over the last couple of years we've seen new stores from Trader Joe's in Novato and Larkspur, a large new Safeway at Hamilton Marketplace, the discount Grocery Outlet opened in Novato and Paradise Foods took over the old Safeway store at Pacheco Plaza.

And the action is set to continue in 2010. First out of the blocks this year is Mi Pueblo, which opened March 20 in the old Circuit City store in San Rafael's Canal neighborhood. Of all the new supermarket openings in Marin, this one seems to make the most sense, providing a large format grocery store targeted precisely at the local Hispanic market and serving an area that didn't already have such a store.

But grocery retailing will get really wild in the next few months with the opening of two new Whole Foods stores. The first will be a 40,000 sf store in the new Millworks development in downtown Novato, which will open on April 22nd. This will be followed early June by the new Mill Valley store, which will occupy the 23,000 sf ex-Albertsons space at the Alto Center.

The Whole Foods in Novato will no doubt make life tough for other grocers in the local area, in particular those competing at the higher price points, such as Paradise Foods and Harvest Market. The smaller WF store in Southern Marin will pull customers from Tiburon and Corte Madera as well as Mill Valley, so any sales impact will be spread among several existing stores. Whole Foods will also provide some serious competition for the various farmers markets around the county, some of which are already under strain.

If any other grocers want to try their luck in Marin there are several vacant stores available, including those at Fair Anselm in Fairfax, the ex-Delano's in downtown Tiburon and The Square Novato, and Marinwood Plaza. Unfortunately, as the current crop of new markets get established, this list is more likely to get longer than shorter.

Missing in action

I can't believe that this blog has been around for almost two years and there remain several retail places that I've yet to feature. So here's my top 10 target list for 2010:

1. Sausalito (a) Bridgeway & (b) Caledonia Street
2. Marin City
3. Downtown Mill Valley
4. Downtown Tiburon
5. Corte Madera Old Town Square
6. Magnolia Avenue in Larkspur/Kentfield
7. East San Rafael / Montecito Plaza
8. San Rafael to San Anselmo (4th Street)
9. South San Rafael / Bellam & Andersen
10. Terra Linda / Scotty's

Any other requests?

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.

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.

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.

News in brief

Some retail-related news stories kicking around this week:

Marin County retail sales in the fourth quarter of 2008 were 14.1% lower than the same quarter in 2007. Novato's sales were down 7.1%. (That's taxable retail sales) Source: the Quarterly Sales Tax Update prepared for the City of Novato.

The City of San Rafael is to complete the Environmental Impact Report for the proposed Target superstore, even though the project is on hold. Source: Marin IJ

The Tavern at Lark Creek will open next week (June 3rd), replacing the Lark Creek Inn. According to the blurb, the Tavern will offer "a seasonally driven menu that highlights elevated crowd favorites. Main courses will be under $15". Sounds great - unless you're the nearest competing restaurant in the under$15 category, which just happens to be the Yankee Clipper, also owned by the Lark Creek Group...

The Marin IJ sent a reporter to the community meeting for the North Redwood Boulevard Corridor and found a surprising degree of consensus: Yes to a new hotel (because it will create tax revenue); Yes to narrowing Redwood Boulevard; Yes to large format retailers; but No to the proposed Walgreens.

Northgate is leading the race to adopt social media. The mall now has a Facebook page to go with it's Twitter account. Unfortunately the mall is still under serious renovation, so to make up for the absence of stores, it is posting some delightful photos of piles of construction rubble.

Mi Pueblo heading to East San Rafael

Mi Pueblo Foods, a Bay Area hispanic grocery store, is aiming to take over the old Circuit City store on Bellam Blvd in East San Rafael. According to the North Bay Business Journal, the store submitted a planning application to the City at the end of March and there will be a hearing at the City May 19th.

Juvenal Chavez, CEO of Mi Pueblo explains what the store is about:

Mi Pueblo’s competitive advantage comes from high standards for operational efficiency, respectful service and store environment as well as a selection of products that is sensitive to the interests of a given community and cultural distinctions between Hispanic consumers. That means understanding how color and decor cues differ between the states in Mexico and with southern Mexico, Central and South America.

Also, included in store design are large inside and outside areas that provide gathering places for groups of men who work or live together as well as women with children while shopping.

Employee training also is key to the appeal. The 200 or so employees to be hired for the San Rafael store may come in without a lot of skills, but they will learn how to meet cost targets for each department as well as how to win each customer with common courtesies such as looking them in the eye.

Great to see new businesses entering the county and taking advantage of opportunities as underperforming stores close.

Target delays proposed San Rafael store

No major surprise that Target Corp has delayed its plans to build a 140,000 sq.ft store next to Home Depot on Shoreline Parkway in San Rafael. The big box retailer announced last year that it would cut back on store openings for 2009 and 2010 and is also committed to opening a new store next year in Petaluma.

According to the North Bay Business Journal, the landowner, who goes by the unfortunate name of Cal-Pox, is none too keen on the delay and wants the City of San Rafael to finalize the EIR. Cal-Pox is still reeling from the loss of a major tenant earlier this year when the nearby Chevrolet dealership went out of business.

2007 Retail Sales data for the four largest cities

Here is another more detailed cut of the 2007 Retail Sales data that was released at the beginning on this month. The charts show the share of total Marin County sales that is captured by each of the four largest cities for four types of retail store.



For Apparel stores, Corte Madera is the place to go. More than a third of the County's sales at apparel stores take place here. The Village at Corte Madera captures almost all of these sales and it's share has probably strengthened since then. Since 2007 several new apparel stores have opened at The Village, including Abercrombie & Fitch, True Religion, Martin & Osa, Puma and Michael Stars.

General Merchandise is also strong at Corte Madera (think Nordstrom & Macys), with San Rafael (Northgate department stores) also getting a quarter of total county sales. The winner however is Novato, with the big boxes at Vintage Oaks (Costco, Target) helping the city take a third of county sales.

Sales at Eating and Drinking places is by contrast widely distributed across the county. Almost half of sales in these outlets occur outside the big four cities. Marinites are lucky to have many options in this category, with multiple eateries available in towns such as Tiburon, Sausalito, San Anselmo and Larkspur.

When it comes to Furnishings & Appliances, San Rafael takes the prize, capturing almost 50% of Marin County sales. Big boxes along 101 and Bellam, and smaller furniture and homewares outlets along Fourth Street, help make San Rafael the destination of choice for these purchases.

Home Depot to shutter Yardbirds

Home Depot's Yardbirds store on Fourth Street in San Rafael has become the latest high profile casualty of the recession. The hardware chain announced yesterday that it is shuttering its 34 Expo Design stores and 5 Yardbirds stores as part of a consolidation around the core Home Depot Brand.

This is the second goodbye to Yardbirds in just three years. The original chain was purchased by Home Depot in 2006, a move that was mourned by many as a sign that the store's days were numbered. According to those who know, the site was originally occupied by the Alpha Beta Market [photo credit: Romley].

Top Retail Cities in Marin

Continuing our look at the retail sales tax data for Marin County from the California Board of Equalization (great name by the way). The table below shows total sales at retail outlets by city for the years 2006-07. So what is it telling us?

• San Rafael captures the largest slice of retail sales, with $1.3 billion or 38% of sales in Marin in 2007. San Rafael extends over quite a large area, which includes the downtown area, Northgate Mall, the big box retail along 101, Montecito Plaza and Home Depot.
• Novato is the second largest city, with 18% of the total, or $595 million. Most of this is drawn through Vintage Oaks.
• Corte Madera, with sales of $450 million, or 14% of the total, takes third place.
• The city with the greatest increase in sales was San Anselmo, with growth of $9.9 million, or 14% between 2006 and 2007. I don't recall any major retail changes taking place, so I wonder if the change reflects the impact of the floods on New Years Day 2006, which took out many downtown businesses for several weeks.
• Mill Valley also had a good 2007, up $6.9 million or 3.7% in 2007, possibly as a result of new store openings at Strawberry Village.
• Corte Madera recorded the greatest fall in sales over the period, down $4.2 million or 0.9% in 2007. This may reflect refurbishment work at the Town Center (Barnes & Noble) and The Village, which went through a program of renovations in 2007.

The BoE data also provides details of sales by retailer category. Unfortunately, the Board is in the process of changing how it classifies businesses, so we can't do a meaningfull comparison with previous years. I'll publish some charts with this data later this week.