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City Staff Misleads the Council on Target Mall

IMG_4062by Colin Walsh

In an item on tonight’s City Council agenda, Developers and City staff are asking the City Council to relax requirements at the Target shopping center on 2nd Street by Mace. 10 years in, there are still store fronts there that have never held a store. Sadly, the City staff report urging the change has huge glaring problems.

The City of Davis staff report to council states “After 10 years of operation in the city, staff believes it can be empirically deduced that the tenants in the shopping center are not relocating from the downtown area, nor are they causing closure and mass vacancy in the downtown area.” “Empirically deduced” is an exceedingly strong statement given the circumstances.

IMG_4058The City Staff report offers only the 2017 State of the City Report as “empirical” data from which to deduce such a finding. The staff report includes a table taken directly from the 2017 report. The data is from the 4th Quarter of 2016, almost 3 years ago. That is not relevant to the 2nd Quarter of 2019. It makes no sense for the City to rely on such dated data when current data is readily available.

This outdated data has 3 specific limitations. These 3 limitations make it obvious that the staff is either intentionally or accidentally misleading the council.

First, the data only includes information regarding vacancy or occupancy. For example, if a clothing store closes, but the space that was previously occupied by the clothing store is then rented by a restaurant, this does not register as a change. So, if a clothing retailer closes downtown, and the space is filled by a restaurant, as is currently happening on the corner of 2nd and E, this does not register as a change in occupancy, and therefor is not considered by the staff, never mind that the clothing store competed with Target and TJ Max.

The staff report also quotes the following from the 2017 State of the City Report, “The retail market in the city and Davis Core Area is much tighter than the county’s more balanced market. This is evidenced by relatively positive net absorption, vacancy rates of 3.7 and 3.2 percent, compared to the countywide rate of 5.3 percent, and increasing rental rates.” First, this is dated information and the Downtown now has a negative absorption rate, with vacancies increasing. Also, this again only focuses on vacancy, and not types of businesses, so store front conversions from retail goods to restaurants is not captured, yet this is exactly what is happening downtown.

A second limitation is the time frame. The 2016 data in the 2017 state of the City Report predates the closure of the Davis Ace Housewares store, Whole Foods, the Gap and many other stores. These 3 stores alone however account for about 40,000 square feet of newly vacant retail space. These large store closings mark a significant change to the downtown. This newly vacant retail space is about 5% of all available downtown retail space. These stores competed directly with Target and TJ Maxx. These store closing can easily be seen as business being moved to the Target mall location in direct contradiction to the staff report.

It is really outrageous that the staff should use data from a May 2017 report that overlooks the more recent vacancies of 3 large stores all competing with the Target mall.

Radio Shack closed downtown as well, leaving Target on 2nd Street as the only electronics store in Davis, again in stark contradiction to the City staff report.

IMG_4063A third problem with the staff report is the staff has narrowed the parameters to make the bold claim ignoring the retail space on the other side of 2nd Street from the Target mall. By ignoring these properties, the staff overlooks Strelitzia Flower Company. Strelitzia was a long time Downtown Davis business. Strelitzia operated first as a Downtown Davis flower cart starting in 1971, and then as a storefront on G Street starting in the 90s. They then moved from downtown to 2nd Street in July of 2008. It can be “empirically deduced” that Strelitzia moved to 2nd Street from Downtown, exactly contrary to staff’s statement.

City staff needs to cut out the hyperbole and start being straight with the council and the community. The staffs conclusions cannot be “empirically deduced” from the faulty dated data they use. These egregious errors in the staff report leave the council with only one option, this item needs to be sent back to staff for better analysis and more recent data. This current report has completely overlooked potential negative impacts of the Target mall on Downtown Davis.

Table 15
Table 15 from the 2017 State of the City Report. This Data was complied by outside consultants BAE and is now very dated, but this is what the staff relies on to argue for change at the Target Mall.

============= update 5/15/2019 ==============

This screen shot from CoStar was taken on May 13, 2019. This type of data is readily available to commercial property brokers. Note that this report from CoStar still omits the Whole Foods space because Whole foods is still paying rent although the store sits empty. 

Costar

Comments

Ron O

Colin: This is interesting. However, if the spaces on 2nd Street are remaining empty, I'm wondering what you might ultimately envision there, without a zoning change of some type.

Colin Walsh

Ron O, I don't know that I have a simple answer, but I would definitely phrase the question differently. As I see it the real question is:

What will Davis do with the increasing amount of vacant retail space in town?

To look at just the vacancies at the Target Mall without considering the downtown vacancies lacks the context of the larger problem. It is probably also worth considering the high number of vacancies at the Woodland Mall. Store front retail is having a problem that is larger than just our Target Mall.

making another decision that would negatively effect the downtown to help the Target mall developers does not make sense to me.

Ron O

Thanks, Colin. It makes perfect sense to me, now.

On the Vanguard today, one commenter questioned the value of Davis ACE.

Support for rezoning the sites adjacent to Target seem to be primarily coming from those who support wholesale changes to downtown - especially residentialization efforts. In my opinion, some of those folks don't really care about maintaining a strong commercial core.

Colin Walsh

The following comments where sent to me directly:

1 - Office Max in South Davis and to a limited extent CVS have electronics, but actually what's available in store - only in the warehouse - at both Office Max and Target is quite frustrating, especially in comparison to what's available online.

2 - Ace Homewares was simply another building of the, um, Ace campus, and a lot of this stuff is in the remaining building. I am not addressing the specific competition issue.

3 - I'm not clear how much the decision about Radio Shack was based on local competition https://www.davisenterprise.com/business/davis-radioshack-to-close/

3a - Upper Crust seems popular - a new direct specialty bakery retail location is a great thing.

4 - Does Target really compete directly with the clothing stores in Downtown that have closed? I always get the impression it competes with the used clothing stores... I don't buy a lot of clothes and don't have kids to clothe so I am clearly not an expert on this.

5 - Whole Foods was always a bad match, wasn't it? This relates to a larger issue of corporate decisions - like with Radio Shack - that are probably worth studying separately from the changes in local stores.

Colin Walsh

My reply to the above comments:

1 - Office Max:
Good point, though limited to office oriented products

2 - Ace Homewares was simply another building:
Yes, but the offerings have been greatly reduced since consolidation and much of what has been eliminated competed with Target

3 - Radio Shack:
It may be that it was corporate failure that did in Radio Shack, but much of waht was once sold on G street is now carried at Target.

3a - Upper Crust seems popular:
That's great but begs the question, would they have located in the Target Center if smaller stores were available as is being requested now.

4 - Does Target really compete directly with the clothing stores in Downtown?
Target may not be as "fancy" but if you need clothes and you don't want to drive out of town there are only os many places to go.

5 - Whole Foods was always a bad match, wasn't it?
Whole foods probably competed more directly with the Co-op and Nuget, but the reality is there is only so many grocery stores are needed, and Whole Foods lost. Even if the directness of competition is argued, it is clear that 20,000 SF of vacated retail in downtown should have been considered.

Jane Schafer-Kramer

When Preeti Girl downtown closed, the business owner specifically cited a rent increase as the reason. Not Target.

Robert Canning

Do you have access to more recent data such as you show in the figure in the article? Does it exist?

Although you accuse the staff of overstating and "hyperbole" you don't really give any evidence for your argument other than store closures, which are probably more due to e-commerce. The Strelitzia store moved so they could have their wholesale and retail business under one roof. I think what you are talking about is the evolution of our downtown rather than the death of it.

Upper Crust is a great example of a local business that may or may not succeed in it's current location because it is downtown (who want's to go to 2nd and Mace for bread!) and close to the Co-Op - which probably matches it's targeted audience. I believe the food-based businesses, which have come to dominate our downtown, will continue to thrive. Other, niche stores like Bizarro World, the bike stores, and some others will also survive because of their narrow audience among young adults.

Colin Walsh

Robert, more current data is easy to get. I posted a screen shot of current data on the Davisite Facebook page.

Robert Canning

Colin, I don't participate in Facebook - maybe you could post it here?

Civil Discourse

Colin Walsh:
"3 - Radio Shack:
It may be that it was corporate failure that did in Radio Shack, but much of waht was once sold on G street is now carried at Target."

As a self professed Audio Video Nerd with a lifelong like / dislike relationship with Radio Shack, I can say with some authority Radio Shack competes with Davis Ace more than it does with Target. Ace has an "okay" Audio / Video section, and when they had the home store, basic appliances like phones. Target is horrible. Nobody I know goes to Target for that stuff. You go to Ace, and hope for the best. Target doesn't even have the cell phone retail stuff that Radio Shack had, and I think that was some of their major business in the end.

Anyway, I'd love to be proven wrong, but the statement "much of what was once sold on G Street is now carried at Target" doesn't ring true for my experience.

Colin Walsh

Robert,
I added data from CoStar to the end of the story.
If you read the Staff report, the staff report cites the old 2016 Downtown retail vacancy rates as how they "Empirically" demonstrate Target has not effected downtown businesses. Which specific stores closed is less the point than that there is significantly more vacant retail space in downtown than is being reported in the staff report. There is also a significant difference in the current absorption rate vs. the 3rd quarter 2016 absorption rate the staff uses.

The Council seemed to really miss the point last night when the focused on the brand names of the closed stores down town as opposed to the higher vacancy and similar services at the Target mall. It may be my fault for focusing on the brand names over just the pure loss of retail in the downtown.

Robert Canning

Thank you Colin for the new data. The city staff's data compares downtown to all of Davis to Yolo County. I'm unclear what the CoStar data is showing. Is it just downtown or all of Davis? It would be good if you could pull the same data from one year ago for comparison. Also, I am not familiar with some of the terms - e.g. "net absorbsion". Finally, the top header notes this is for retail. Does that include food and bars?

Colin Walsh

Robert,
A few answers:
The data I posted is for the downtown.
Net absorption = is the available store space increasing or decreasing. a positive number means store fronts are being filled, a negative number as we currently have means increasing vacancies.
Retail includes food and bars
I am busy doing other things but any commercial real estate broker should be able to pull this data for you. The data is not hard to get, and the City could easely be accessing it.

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