Tuesday, October 10, 2006

Major Retailers Make Inroads in Outlying Areas

Major Retailers Make Inroads in Outlying Areas
Sacramento-Area Stores Will Feel Some Impact, But Growth Will Limit Damage
Sacramento Business Journal - October 6, 2006
by Kelly Johnson
Staff Writer

The outlying areas of Sacramento are increasingly getting their own big stores and don't need us as much.

Vacaville is slated for an almost 700,000-square-foot regional center. And stores have started opening in Amador County's largest shopping center, a 35-acre development that will house big-box outlets including Lowe's and Staples.

Large-scale retail development in these outlying communities means those residents won't have to trek into the capital region for big purchases -- or deposit their sales-tax dollars in the coffers of Greater Sacramento's communities.

The four-county Sacramento area will lose out on some dollars, but the impact won't be significant, local retail real estate brokers and economic development officials said. This area is growing its population and retail offerings to mostly or completely offset losses, they said.

Also, Greater Sacramento still has several big draws that will continue to attract consumers from afar. Home furnishings giant IKEA tops that list.

"It takes a toll, but I don't think you can quantify it easily," said Scott Reynolds, an independent Sacramento retail real estate broker.

"There will be some impact," said Jon Schultz, a CB Richard Ellis broker who is marketing the Vacaville center.

"I don't think it's really going to disrupt Sacramento because Sacramento is growing like a weed," said Boyd Cahill, a retail broker with TRI Commercial/CORFAC International.

Big retail, small cities
Major retailers are expanding out into smaller communities for several reasons.

"They're realizing these outlying communities have significant demand for these services, and they're a large trade area," said Heath Kastner, one of the CB Richard Ellis brokers leasing the Amador Ridge shopping center.

These outlying communities are growing their population, and as traffic congestion worsens in metro areas, their residents are less willing to travel far to shop elsewhere. Retailers have found that by locating in strategic locations, they can capture most people in a particular area, Kastner said.

The Amador County Lowe's, which in April was the first retailer to open in Amador Ridge, might be an example of that.

Dixon, a Solano County community just outside of Greater Sacramento, landed a Wal-Mart Supercenter and is getting a Home Depot. With 20,000 residents, "we don't have that many rooftops," said Dixon economic development director Mark Heckey.

But Dixon's relatively cheap land, its access to busy Interstate 80 and its location between Bay Area and Sacramento employment centers makes the community desirable to major retailers, he said. Developers and retailers also will pounce on Dixon if the proposed horse racetrack gets built.

Part of the attraction of Vacaville, likewise, is the expanded trade area it can reach as thousands of cars drive by daily between San Francisco and Tahoe.

Solano County's population also is growing, some of its big employers are expanding, and it is attracting new companies. At 645,000 square feet, Vacaville Pavilion would rival the city's largest retail development, the outlet mall, said Eric Luchini, Vacaville associate planner and the project manager of the proposed regional center. Vacaville Pavilion would be larger than the Nut Tree redevelopment, which is bringing big-box stores including Best Buy, Borders, Old Navy and Sport Chalet.

Retail chains also are expanding in suburban or rural areas to satisfy Wall Street's demand for growth as they run out of places in metro areas. Major retailers have figured out they can survive with the population base those areas offer without cannibalizing their other stores, said Dave Mossman, vice president of development for Donahue Schriber, which operates 16 Sacramento-area shopping centers.

Some retailers have created smaller stores for less densely populated communities. Lowe's, for example, opened its smaller format home-improvement store in Amador Ridge, spokeswoman Jennifer Smith said. Smaller stores cost less to develop and can pencil out for the retailer. About 20 percent of new store openings will be the smaller format, she said.

Shopping close to home
Communities hate to lose sales-tax revenue, but some realize they shouldn't depend on shoppers from afar. Encouraging shopping closer to home helps reduce traffic congestion and air pollution.

Some communities, including Roseville, are trying to rely less on retail sales-tax revenue by diversifying income. Property taxes, hotel taxes and business-to-business sales can help, said Julia Burrows, Roseville deputy city manager and economic development director. When a new employer comes to town, for example, the city of Roseville encourages the company to buy supplies locally instead of from an out-of-the-area corporate office.

Residents in Jackson and elsewhere in Amador County have mixed feelings about the arrival of that county's largest shopping center, said Susan Peters, a planner with the city of Jackson. "It's kind of a doubled-edge sword." Residents are glad for the convenience of buying school clothes and home furnishings closer to home -- most shop in Sacramento or Stockton -- but they fear their own traffic congestion and a loss of business for the smaller shops.

Vacaville's Luchini reckons that the community's residents primarily head toward the Bay Area to shop. If Vacaville Pavilion lands R.C. Willey or other big retailers for which Sacramento has a monopoly in Northern California, Greater Sacramento will hurt more from the Vacaville development, Luchini said.

A large focus of Vacaville Pavilion will be home furnishings and other home-related stores that didn't find a home at the Nut Tree, broker Schultz said.

Retail growth in the outlying communities, he said, is "a typical example of the retail environment maturing."

Greater Sacramento should know about that. Not long ago, the Sacramento community's residents journeyed to Emeryville to load up at IKEA. Now in a loss to the Bay Area, West Sacramento has its own IKEA.

Vacaville Pavilion
Location: Vacaville
Developer: Kornwasser Shopping Center Properties LLC
Brokerage: CB Richard Ellis
Size: 675,400 square feet
Opening: Summer 2008
Anchors: Not yet disclosed

Amador Ridge
Location: Amador County's town of Martell, near Jackson
Developer: Catlin Properties Inc.
Brokerage: CB Richard Ellis
Size: Eventually 448,714 square feet
Opening: Lowe's open; more stores by December
Anchors: Lowe's, Staples, Safeway, likely Target

kjohnson@bizjournals.com | 916-558-7860

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