NBBJ Real Estate Awards

I see it's time to send in nominations for the Business Journal's "fifth annual 2010 Top Projects Awards" (fifth... 2010...?).

There aren't a lot of Marin contenders (it's been a quiet year). A leading contender in the mixed use category will be the Tamalpais Commons project in Mill Valley (picture below). This higher-density development is the first of several planned for Miller Avenue and is still controversial with many locals who fear increased levels of traffic. I'm not sure whether the residential component is a success, but the retail is a great addition to this part of Miller, adding three new businesses: Dish restaurant, Yolo fro-yo and ToyHouse.

Another Marin mixed-use development that might receive an award is the Millworks project, which houses the new Whole Foods in downtown Novato. The City has been criticized for allowing such a large project. And in terms of design it's just OK. On balance I think it's a worthwhile project, bringing business, jobs and residents to the downtown area.

Northgate Mall probably doesn't qualify, as it opened last year. They did a great job of getting most of the space leased in the midst of the great recession, but I'm not a fan of the design: the inside of the place looks too much like a warehouse. And there are too many small design fails, such as putting the H&M entry right behind this structural column.

Meanwhile, over the street at Northgate One, the new Walgreen is my official entry for "Ugly Building Turning Its Back On The Street" category.

Buy your tickets for the gala awards ceremony now, folks.

Summer 2010 update

After a long summer of non-blogging, here's a quick back-to-school update of what's been making headlines in the Marin retail world.

Starting today with a little news story in the Marin IJ about the City of Corte Madera's commercial real estate investment portfolio. Yes, that's right, this small city of approx 9,000 people decided it was a good idea to become a landlord, paying $10m for the Park Madera shopping center at the peak of the market in 2006. Come 2010 and the rent doesn't over the debt service on the city's bond. The city originally purchased the center as a possible site for a new recreation center, however, the recent construction of a new Bank of Marin branch suggests it will remain as a retail center for the foreseeable future.

In Tiburon, the owner of Woodlands Market announced his intention to have the new store in Tiburon open by March 2011. The store will be 12,000 sq.ft, which is larger than the existing Boardwalk Market, which will close before construction starts later this year. The redevelopment will also include the addition of a pharmacy, the first one in Tiburon for several years.

A few photos snapped from around the county:

First, I liked Mi Pueblo, the Hispanic market in San Rafael's Canal neighborhood. Offers a different selection from my usual grocery stores.

Also visited the new Whole Foods at the Alto Center in Mill Valley. Yes, it's expensive, but I do like shopping there: great food and a fun shopping experience.

Over at the Village at Corte Madera there are new Teavana and Brookstone stores, while Martin & Osa and Elegant Living Furniture closed their doors for the last time.

And what are they thinking at Restoration Hardware? The latest refurbishment of their store is in the style of a 13th century European castle, complete with stockade and banqueting hall.

Whole Foods opens in Novato

The biggest retail event of the year so far happened last Thursday with the opening of the new Whole Foods in downtown Novato. The retailer timed the opening of the 39,000 square foot store to coincide with Earth Day, and got plenty of coverage in the local news.

I dropped by this weekend to check out the store. From the outside, the scale of the Millworks building is quite impressive. The development, which includes condo/apartments above and adjacent to the Whole Foods, is a lot larger than other buildings in the downtown area, most of which are single level.
The store was quite busy, with more people looking than were buying. Most popular was the bakery and the deli counter. Parking in the Millworks parking garage was easy, with access directly into the store on the main level or from the upper mezzanine.
The design is industrial, with exposed pipes and wires everywhere, and big signs and graphics within the store, including a container sitting atop the dry bulk goods corner.

Overall, a great addition for northern Marin shoppers; not so great for other grocers in the area...

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.

Tough times at the Farmers' Market

An interesting article in the Wall Street Journal today about the problems facing some farmers' markets in the Bay Area. The growth of farmers' markets has been one of the great success stories of the last few years, prompted largely by increasing public awareness about and concern for the quality and origination of their food.

Marin currently has 12 farmers' markets (a list is here), with the biggest being the Sunday market at the Civic Center, and other new markets are planned, such as the one proposed for Marinwood Plaza. But as the WSJ reports, there are not enough customers to support all the markets, so income for the farmers is falling to a level where it is not worth their while setting up their stalls. The problems caused by an over-saturation of farmers' markets in Marin were highlighted last week in an op-ed piece in the Marin IJ by the Marin Agricultural Institute, which organizes farmers markets in Marin.

The WSJ reveals that there is (or was) good money to made at farmers markets:

Amber Balakian, a fourth-generation farmer from Balakian Farms in Reedley, about 20 miles south of Fresno, has experienced the deteriorating economics firsthand. Her family sets up shop at the San Francisco Ferry Building farmers' market on Saturdays. While they used to ring up sales of $10,000 per trip, there are so many other markets drawing visitors away that "now we make half that" at the Ferry Building market, she says.

This past year, Ms. Balakian, 24 years old, drove more than 200 miles each week to a one-year-old market held in a Whole Foods parking lot in Mill Valley. The market started at 9 a.m. each Friday, so Ms. Balakian often arrived the night before and spent the night in a hotel before selling the tomatoes, peaches and carrots her family grows on its 75-acre farm. On a good day, she sold about $3,000.

But Ms. Balakian recently tried selling at farmers markets in Pleasanton and Los Altos, where "we didn't make enough to cover our expenses," she says. She adds that she sold "maybe $500" in produce at the Los Altos market.

Let's hope that we keep supporting our local farmers' markets. But as organic and local produce catches on with mainstream supermarkets, and additional permanent organic markets open (such as the new Whole Foods in Mill Valley and Novato), we may see fewer farmers' markets operating in Marin in the future.

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.

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.

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.

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.

Marin Retail: nothing much happening here...

Credit to the North Bay Business Journal for making the effort to report on the state of Marin's retail market. The content was not that exciting, but did include some dry real estate statistics and commentary. Let's interpret:

"Vacancies rise modestly". The vacancy rate in Marin shopping centers increased from 4.0% in 2007 to 6.2% in 2008. So the amount of vacant store space increased by more than 50%. Modest increase? No. But we're still way below the national average of approx. 10%

Average asking rental rates in the county are approx. $28 per sq.ft NNN, and are highger in the south of the county ($36 per sq.ft) than the north ($25 per sq.ft).

"Both Whole Foods and Trader Joes set to add stores in 2009". But don't form a line at the door just yet. The last time I looked, the Novato Whole Foods was not expected to open until spring 2010. And in this economic climate I would be surprised to see any activity at the sites acquired by Whole Foods in Mill Valley and Trader Joes in Larkspur.

Paradise in Pacheco

Good news week continues with the announcement that Paradise Foods will open it's second Marin store at Pacheco Plaza later this year. Paradise, aka "Marin's most extraordinary market", has a strong following at it's existing store in Corte Madera, which opened in 2001, where the gourmet selection includes a large range of prepared meals, pre-cooked in the store's kitchen.

According to the Marin IJ, Pacheco Plaza owner John Kieckhefer chose Paradise Foods over other potential tenants because customers wanted a gourmet grocer. Said Paradise Foods' Mel Gilmour:

"We had looked at other sites a while ago, then decided we weren't going to expand," Mel Gilmour said. "But when that one became available we felt like it was a good location for us. It's a market we could do well in. We see it as a good fit with the whole place being redeveloped and fixed up."

So is this an inspired move by Paradise Foods, opening their second store in an established center, far enough from their existing store not to compete, but in a region where they already have some knowledge of the market and where they have a good reputation?

Or is it a risky adventure, choosing to expand at a time when most retailers are cutting back their plans for new stores, and going head to head with a new full-range Safeway store and with the prospect of a new Whole Foods opening in downtown Novato?

The huge risk that I see is in the customer demographics. Gourmet markets like Paradise Foods, Mollie Stones, and Woodlands require affluent consumers, and there aren't as many of these in Northern Marin. Average incomes in Novato were $82,000 in 1999, compared to $112,000 in Corte Madera and $200,000 in Tiburon.

Affluent consumers do exist in Novato (2,077 households in Novato had incomes above $150,000 in 1999, compared with just 1,438 households in Tiburon), so there is potential demand for an up-market grocer. But can Paradise Foods get those Novato customers to drive past Whole Foods to visit their store in Ignacio? That, I think, will be difficult.

*update: news release

Waiting for Whole Foods...

The IJ reports on the long long wait for Whole Foods to open their new store at the Alto Center in Mill Valley. WF claim they are simply going through the required permitting phase, but you can't help but wonder whether they are deliberately dragging their feet.

The delay has fueled rumors that Whole Foods leased the space to keep Trader Joe's out of Mill Valley. An existing Whole Foods outlet does a bustling business about two miles away at 414 Miller Ave. in Mill Valley. Kathy Severson, executive officer for the city's Chamber of Commerce, said she couldn't comment on such speculation, but "I do know that the Miller Avenue Whole Foods is considered a very high-volume store for its size."

Enough said.

Novato Grocery Wars

For many years the citizens of Novato have bemoaned the lack of good retailers in their town. Well things are certainly changing now, at least in the grocery sector, where two major supermarkets are under construction, a Trader Joe’s recently opened, Costco is expanding and a discounter called Grocery Outlet is planning to enter the market.

So is there room for all this additional supermarket space – or will the massive increase in competition force some existing grocery stores out of business?

In the incumbent corner, the supermarkets currently serving the community are:

Safeway, Novato Fair: 42,800 sq.ft
DeLano’s, The Square: 30,000 sq.ft
Harvest Market, San Ramon Plaza: 25,000 sq.ft
Costco, Vintage Oaks: 40,000 sq.ft (food section)
Safeway, Pacheco Plaza: 22,500 sq.ft
Trader Joe’s, The Village: 12,100 sq.ft

Total 172,400 sq.ft

Population 60,000
Sq.ft per Capita 2.9 sq.ft

By 2009, the following new additions will be open:

Safeway, Hamilton: 55,000 sq.ft
Whole Foods, Novato: 42,500 sq.ft
Grocery Outlet, Novato: 25,000 sq.ft
Costco expansion: 10,000 sq.ft (est. food section)

Total (existing & new) 304,900 sq.ft
Population 61,000
Sq.ft per Capita 5.0 sq.ft

Going from 2.9 sq.ft per capita to 5.0 sq.ft per cap is a major increase, which is certain to have some lasting impact on the existing food retailers in Novato. There isn't going to be a lot of population growth to support this additional floor space, so retailers are going to have to fight hard to grab market share.

The table below details my estimate of how grocery sales will be affected by the new competition. In total, annual supermarket sales will increase from $128.4 million to $164.7 million. This means supermarkets in Novato will hold on to a bigger share of resident spending on food by taking share from supermarkets outside Novato and from non-supermarket channels, such as convenience stores and specialty food shops.

Because of the increased floor space, the average trading level per square foot will decrease by 22% overall. Individual stores will be impacted to different degrees, depending on their individual competitive strengths. But it looks like some existing supermarkets will see their sales fall by 30% or more.

I’ve also assumed that the Safeway at Pacheco Plaza will not be replaced by a supermarket, but if one were to open it would really struggle to establish itself in this market.

Pacheco Plaza

In Ignacio, just south of Novato, is one of my favorite Marin shopping centers: Pacheco Plaza. This local grocery-anchored center was built in 1967 by the Kieckheffer Company and is still owned by the family. I love it simply for the architecture, which has something modern and typically Californian about it – it’s the shopping center equivalent of an Eichler house. The entrance to the center is framed by the Bank of Marin and West America Bank, with the latter having a neat drive-through tucked under its slanting roof that looks like an upturned planter. The other key elements that I like are the stylish monument sign and the big red Safeway signs on the supermarket. Alas for poor old Pacheco, those big red “S” logos won’t be there for much longer. A gleaming new Safeway in steel and glass is growing out of the ground at Hamilton on the eastern side of 101. In a matter of months the Pacheco store will close, the customers will disappear and the specialty shops will exit.
But of course the Kieckhefers are not going to give up without a fight. After forty one years service to the community they're ready to re-model, re-brand and re-launch! Behold the Pacheco Lifestyle Village! Plans have been submitted and approved. Architects drawings portray ultra-trendy shoppers loaded with full shopping bags and sipping lattes in the sun outside brightly-lit shops. Ah... the dream lifestyle.
I wish them luck and I think they might need it. Lucky Novato-area shoppers will soon have new full size Safeway and Whole Foods markets, as well as the recently-opened Trader Joe’s. Competing with that will be tough, especially with a new Safeway just across the freeway.

But I will certainly miss the old center. Can we at least keep the monument sign? The City wants to replace it with one that is up to code - i.e. no more than six feet tall, like this one at Novato Fair. Yuk!

Larkspur Landing Shopping Center

Larkspur Landing residents will get a new place to stock up on groceries when Grocers Landing opens its doors at the Larkspur Landing Shopping Center. The retailer is currently fitting out one of the vacant units at the eastern end of the mall. According to its website, the store will include gourmet and prepackaged foods.

Larkspur Landing Shopping Center has always struggled to establish its retail identity. It currently has an eclectic mix of stores, eateries, service providers and commercial offices that don’t quite gel.

The center is located off Sir Francis Drake Blvd, just east of the 101 intersection. It is the main component of a mixed-use zone which also includes Century Theatres, a Marriot Courtyard and several garden-style apartment buildings. It is linked by a pedestrian bridge to the Golden Gate Ferry terminal.

There are several separate one and two storey buildings at the center, most of which are clustered around an outdoor pedestrian mall, which contains a nice fountain and is a pleasant spot to sit and have lunch on a sunny day; although there always seems to be a cold breeze blowing through the mall whenever I’m there.

The largest space is occupied by Bed Bath & Beyond, which took over the 42,000 sq.ft box vacated when the original supermarket moved out a few years ago. The other key tenants are Marin Brewing Company, Noonans Bar & Grill and 24-Hour Fitness. Aside from some other eating and drinking places (Starbucks, Tam Cellars, Tha Siam) the remainder of the mall has little to offer, with quasi-retail uses such as AAA travel, a Yoga Studio, beauty salon and several vacant stores. And even though the car park always seems full, the mall is almost always empty. On a midweek afternoon you’re more likely to see tumbleweed than shoppers rolling along between the stores.

The Landing was designed as a grocery-anchored neighborhood retail center. Problem is there’s hardly any neighborhood for it to serve. Neighborhood centers need 10,000 people living in their primary trade area. The Landing’s primary trade area is constrained by natural and man-made barriers: Highway 101 to the west, the Bay to the south, the hills to the north and San Quentin to the east. Less than 1,000 people live in this pocket of land.
I wonder how the developers expected this center to work? Did they think the ferry commuters would stroll over to shop there on their way home? Maybe they anticipated a greater density of new home development in the area. Or perhaps they imagined the 5,000 “residents” of San Quentin State Penitentiary would provide a loyal and regular source of customer traffic.
Without a local customer base, the only businesses that can trade successfully at the center are destination stores, such as the Marin Brewing Company and Bed Bath etc. These businesses are well known throughout central Marin and they work fine, albeit in isolation. We all get the BB&B 20% off coupons in our mail every month, stuff them in our kitchen draw until the next one arrives, then forget to take them with us when it’s time to buy towels.
Destination retailers don’t need to co-locate with a critical mass of other retailers, which is why you find them on stand-alone sites with good visibility and car parking. People drive up, go inside to do their thing, and then leave. Destination shoppers are not there to wander around and browse at nearby stores; hence the vacant units at The Landing.
Perhaps if a major destination grocer – Trader Joe’s or Whole Foods – had taken the ex-Albertsons space instead of BB&B, the rest of the shopping mall would have kept busy enough to keep the stores trading along the mall, the non-retail uses out and the vacancies down. But Trader Joe’s has plans for a new store at the nearby Cost Plus Plaza, and Whole Foods has committed to the old Albertsons site in Mill Valley.