Final Report Downtown Austin Retail Market Strategy For The Downtown Austin Alliance and the City of Austin Submitted by Economics Research Associates April 2005 ERA Project No. 15373 1101 Connecticut Avenue, NW Suite 750 Washington, DC 20036 202.496.9870 FAX 202.496.9877 www.econres.com Los Angeles San Francisco San Diego Chicago Washington DC London New York Executive Summary Introduction Methodology Economic Overview Task 1: Infrastructure Inventory Task 2: Retail Inventory Summary of Retail Supply Competitive Context Shoppers Behaviors Survey Customer Base Survey Task 3: Retail Demand Analysis Task 4: Market Strategy Summary of Best Practices Case Studies Downtown Austin Retail Panel Downtown Austin Retail Strategy Task 5 – Barriers to Entry and Recommended Implementation Strategy Implementation Recommendations APPENDICES: Infrastructure Inventory - Black & Vernooy Downtown Retail Demand Survey – Selected Findings, M. Crane & Associates, June 2004 International Downtown Association Broker/Developer Panel Report Case Studies – Downtown Retail Incentives Best Practices IDA Survey of Retail Incentives 1101 Connecticut Avenue, NW Suite 750 Washington, DC 20036 202.496.9870 FAX 202.496.9877 www.econres.com Los Angeles San Francisco San Diego Chicago Washington DC London New York General & Limiting Conditions Every reasonable effort has been made to ensure that the data utilized in this study reflect the most accurate and timely information possible. This study is based on estimates, assumptions and other information developed by ERA from its independent research effort, general knowledge of the market and the industry, and consultations with the Downtown Austin Alliance and its representatives. No responsibility is assumed for inaccuracies in reporting by the DAA, its agent and representatives or any other data source used in preparing or presenting this study. No warranty or representation is made by Economics Research Associates that any of the projected demand estimates or results contained in this study will actually be achieved. This report is intended to provide the client and the City of Austin with guidance for preparing an informed retail marketing strategy for Downtown Austin. It should not be used for purposes other than that for which it is prepared or for which prior written consent has first been obtained from ERA. This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions and considerations. EXECUTIVE SUMMARY Downtown Austin Retail Market Strategy Downtown Austin is known throughout Texas and across the United States as a thriving destination for live music, dining and entertainment; many other cities envy the active streets and sidewalks, the positive reputation that the city enjoys as a visitor destination and the quality of life that sets Austin apart from less exciting downtown areas. In addition to its reputation for dining and entertainment, Austin has thousands of new downtown residents who have chosen to live in the heart of the city in mid-rise condominiums, urban apartments and lofts. Almost 67,000 downtown office workers sustain the weekday market (and up to 90,000 in the larger trade area), and the expanded convention center, downtown hotels and museums draw visitors from the region and across the country. With a growing regional population and an extraordinary range of activities, downtown Austin remains at the heart of the region and frames Congress Avenue, one of America’s greatest streets and the “Main Street of Texas.” The City has demonstrated its commitment to downtown through the Second Street Project, the expanded convention center, the new City Hall and future development plans for the Seaholm Power Plant and Tom Green Water Treatment Plant, among other sites. Whole Foods has opened its national flagship store in downtown Austin, simultaneously providing for a critical resident market need and a state of the art retail store that will be a model for other cities. All of these elements have combined to create Austin’s success to date, but the opportunity is there to add the final piece of the puzzle—downtown as a retail destination for the region. Perhaps the greatest opportunity is represented by close-in residents on all sides of the central business district who want to shop downtown but cannot find the products and services they want today. Almost all of the other pieces are already in place to provide locations for new retail businesses – the market is present, shoppers are motivated, and retail space is increasingly available. What is missing is a distribution of the right mix of stores and the process to attract them downtown. In ERA’s experience, this is an opportunity that most cities want, but few can realistically achieve. Downtown Austin is the rare example that can actually achieve it. In order to capitalize on this opportunity, the Downtown Austin Alliance (DAA) and the City of Austin retained Economics Research Associates (ERA) to conduct a Retail Development Strategy Study for downtown Austin. ERA was charged with creating a demand model based on demographics and spending patterns of three primary markets— downtown and nearby residents, downtown employees, and visitors (including convention center visitors, business visitors and tourists) —to determine how much retail downtown Austin can support. ERA also analyzed existing retail patterns and current development trends in the 587-acre study area, which was divided into nine subdistricts (the map and subdistricts are shown on page 3 of this Executive Summary), to determine the primary corridors and districts in which the DAA and City should focus their initial recruiting efforts. The study was comprised of five tasks: • Infrastructure Inventory • Retail Inventory • Retail Demand Analysis • Market Strategy • Barriers to Entry and Recommended Implementation Strategy The findings and recommendations of each of these tasks are summarized in the following report. The Downtown Austin Retail Market Strategy was completed over a sixteen month period beginning in December 2003 and also included a number of public meetings, presentations, and coordination meetings with special committees of the DAA and the City at benchmark points in the study. The findings of the analysis are summarized in this document with a focus on implementation and sustainability and are intended to provide a framework for development of a strong retail component in downtown Austin, strengthening the existing retail base and adding complementary new development. Project Area Boundaries The project study area included nine distinct shown on the map (please see following page); study area subdistricts include: • Lamar Boulevard/Baylor Street area • West Sixth Street • The Warehouse District • Second Street • Congress Avenue • The Arts District • Red River/East Downtown • East Sixth Street • Convention Center The study also incorporated the market influence of other consumer markets and retail areas in central Austin including the State Capitol complex, the University of Texas campus, the West End, Barton Springs Road, and the South Congress Avenue area known as SoCo. Resident areas included neighborhoods east, south, west and north of the downtown area as well. Task 1—Infrastructure Inventory As demonstrated by the City staff’s cooperation with Black + Vernooy on the Infrastructure Analysis developed under Task 1 of this Scope of Work, there are many positive aspects to the City’s role in encouraging downtown development. In our experience, the infrastructure analysis mapping (produced by City staff in several departments and Black + Vernooy) is a powerful planning tool that will enable the City to make informed decisions on public infrastructure and capital investment for many years to come. The Austin model is the best we have seen in our national work, and we wish to credit the City on its role in assembling data and assisting in production of the layered database. To analyze and document these conditions, Black + Vernooy, Architecture + Urban led the first task under the retail market strategy, which included a Geographic Information Systems (GIS) based inventory of downtown Austin’s infrastructure. The resulting analysis and mapping provides a ‘geography of capacity’ for downtown Austin’s infrastructure. Several departments of the City of Austin provided critical assistance to Black + Vernooy in compiling and assessing infrastructure systems, including a needs assessment of storm water drainage, water supply, wastewater, electrical supply, parking, public transportation, streets and sidewalks and telecommunications. With the cooperation of the City, a GIS inventory of selected utilities was combined into one database and made accessible at the City’s website; the link to the infrastructure inventory can be found at the following web address: http://coagis1.ci.austin.tx.us/website/COAViewer_downtown/viewer.htm. Key findings from each section of the infrastructure inventory and analysis are described below: Storm Drainage • Because of seasonal weather patterns and the physical geography of the area, Central Texas and downtown Austin are susceptible to flash flooding. Downtown Austin is surrounded by Shoal Creek to the west, Waller Creek to the east, and Town Lake to the south. In addition to the natural creek and river drainage system, a secondary man- made system conveys storm water to the creeks and lakes. Development is constrained by the 25- and 100-year floodplains, as well as by localized drainage limitations. • Recommendations o Find resources to fund and build the Waller Creek Tunnel. o Complete GIS database for storm drainage. o Complete Capital Improvement Projects for localized flood control. o Investigate solutions for flood control along Shoal Creek. Economics Research Associates Final Report: Downtown Austin Retail Market Strategy ERA No. 15373 Page 7 Water • Downtown Austin is served by two of the City’s three water treatment plants, Green and Ullrich. Though most downtown districts are well served, development is constrained in certain areas where water service is supplied solely through the alleys. This occurs primarily in historic districts and has resulted in severely limited fire flow capacity. In addition, the aging and less efficient Green Water Treatment Plant sits on a prime waterfront site and could be developed for a higher public use or tax base- generating purpose. • Recommendations o Close or downsize Green Water Treatment Plant. o Identify and upgrade locally constrained areas for fire flow. Wastewater • Downtown Austin is served by a system of north-south gravity lines, a 42" cross-town main along Town Lake, and a lift station at Shoal Creek and Cesar Chavez. Some downtown areas do not have adequate mains to support new development because they historically contained single family or warehouse uses. The Wastewater Utility expects that demand will soon exceed capacity in the North and South Austin outfall lines. In addition, the Shoal Creek lift station, which serves west downtown and upper West Campus, is currently operating at full capacity and cannot support new residential development. • Recommendations o Elevate the funding priority of the Shoal Creek Lift Station and North/South Austin Outfall Relief Projects, currently planned for 2010 at the earliest. o Identify and upgrade locally constrained areas for wastewater service. Electric • Most of the Downtown study area is part of a redundant network for electrical service. This is not true, however, for the areas west of West Avenue. Though Austin Energy is required to provide service when it is requested, customers requiring more than 300 kilowatts of power must provide space for a transformer vault. Allowing space for this vault inside a building means that less floor space is available for the building’s primary use; this is especially an issue in small, historic buildings. Austin Energy’s newest project is District Cooling. Two chiller plants form the beginnings of a Downtown District Cooling chilled water loop, though the loop has not yet been extended north of 4th Street. • Recommendations o Create electrical vaults every two blocks as needed in downtown historic districts. o Expand downtown “Underground Distribution Network Area” west of West Avenue. Economics Research Associates Final Report: Downtown Austin Retail Market Strategy ERA No. 15373 Page 8 o Complete District Cooling loop. Encourage Austin Energy to market service to existing buildings with aging on-site chillers. Parking • A City of Austin-conducted parking study in 2000—and City and DAA updates made since that time—indicate that there is an adequate inventory of on- and off-street parking in downtown Austin. There is not, however, an overall parking strategy designed with retail sensitivities in mind. • Recommendations o Continually update parking inventory as new supply is added and as all or part of existing private parking structures open to public use. o Implement a coordinated parking management plan. o Create a Parking Authority. Public Transportation • Capital Metropolitan Transit Authority (Capital Metro) operates an extensive bus system and is planning a commuter rail line that will terminate in downtown. At this time, 45% of all bus routes run through downtown. • Recommendations o Create intermodal transfer center(s) to relocate some bus routes off Congress Avenue. o Design transit routes near, but not on, selected primary transit corridors. o Implement the “All Systems Go” Rail proposal. o Improve connectivity between downtown, the State Capitol Complex, and the University of Texas as suggested in the Capital Metro connector study. o Support creation of HOV or managed lanes on MoPac and I35. o Support relocation of Union Pacific freight rail to the SH-130 right-of-way to free up MoPac for urban passenger rail uses. Streets and Sidewalks • Retail is best supported by a system of two-way streets that support pedestrians, bicycles, and automobiles. Sidewalks should be shaded by trees and/or awnings. • Recommendations o Provide walkable sidewalks for every street in downtown. o Overhaul City of Austin License Agreement Process, which hinders locating balconies, awnings, and sidewalk cafes in the City’s right-of-way. o Reconsider downtown’s one-way street system to convert to two-way streets, which provide for more flexibility, traffic calming and more pedestrian-friendly environments; this will be particularly important in priority retail streets/zones. o Commit to building all reconstructed streets to Great Streets standards, even if Great Streets-style amenities cannot be funded at the time. Economics Research Associates Final Report: Downtown Austin Retail Market Strategy ERA No. 15373 Page 9 Telecommunications • Downtown Austin is served by many telecommunications companies providing traditional, fiber optic, broadband, cellular, and Wi-Fi services. • Recommendations o Support improvement of cellular phone coverage. o Support proliferation of Wi-Fi hot spots. Task 2—Retail Inventory The retail inventory task consists of an overview analysis of the competitive retail supply in the greater Austin area, a detailed inventory of retail and retail-appropriate space in the downtown study area, retailer interviews to determine typical customers and customer behaviors, and a survey of shopper preferences and behaviors of Austin residents. • Competitive Retail Supply—ERA's analysis of the competitive supply of retail shopping within a 15-minute drive time of downtown Austin indicates approximately 4.7 million square feet of existing retail space in nine malls and shopping centers. Each of these centers includes at least one anchor use and a predominantly tenant mix of national chain retailers. • Retail Inventory—DAA staff collected primary research on nearly 35 percent of the total retail space in the study area. Data was collected and classified by district, and included use type, size, vacancy rates, rental rates, and estimated average sales productivity. • Customer Base Survey—DAA staff conducted a survey of downtown retailers to obtain anecdotal information regarding the characteristics of current downtown shoppers. Data collected included age range, gender, average transaction size, average sales per square foot, likelihood of shoppers to make a purchase, and perceptions regarding parking. The table on the following page compares the current inventory and retail mix by subdistrict, relevant results of the retailer survey, and aggregated rent levels by subdistrict. Economics Research Associates Final Report: Downtown Austin Retail Market Strategy ERA No. 15373 Page 10