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Item 9B (2)fl it December 12, 2013 Ms. Alicia Richardson City Secretary CITY OF SOUTH LAKE 1400 Main Street, Suite 270 Southlake, Texas 76092 C1J Amook Community Development Strategies 1 Dal S. Dairy Ashford, Svite 450 Houston, TX 77077 RE: RFQua11311C460KB130021- RETAIL ANALYSIS FOR THE CITY OF SOUTHLAKE Dear Ms. Richardson: CDS Market Research (CDS) is pleased to submit our proposal to perform market and economic research services in response to the RFQuaI referenced above. We understand the purpose of this Project is to evaluate the existing, near term and long term capacity of the City of Southlake (City) to support Retail businesses. CDS is proposing a carefully thought out approach and scope of services that will be conducted in a manner consistent with the City's organizational values described in the City's Strategy Map on Exhibit A of the RFQuaI. We have read and understand the goals of service listed and have specifically developed our proposal to address each of those goals. As soon as an Agreement to proceed is finalized, CDS will arrange an initial introductory kick-off meeting with the Director and Retail Analysis Committee (Committee) to further discuss the Project. Prior to the meeting, the CDS team will develop a familiarization with all the background information in the RFQuaI including transportation corridors, existing planning documents and regulations as listed and described. During conduct of the study we will take full advantage of all mapping and other resources to be provided by the City. Herein, please find firm qualifications, similar work products summaries, references, team member summaries and a detailed approach, anticipated costs, description of deliverables and a scope of services. All terms and conditions described in the RFQuaI will be adhered to in a professional manner. CDS is experienced in retail analyses having provided such Services in Texas markets for over 40-years. We appreciate the opportunity to propose services to the City of Southlake and pledge our best efforts if selected to perform this most interesting and challenging study. Respectfully submitted, J!�; 1�. 44�e- Steve Spillette President I City of Southlake GOALS OF THE SERVICE The Consultant will provide an understanding of: o The Retail currently in the City Citywide Retail Analysis o The trade area served by various categories of Retail o The viability and sustainability of the ultimate retail recommendations of adopted planned documents o The historical and projected sales tax trends The Consultant will summarize data, analysis and recommendations to sustain the City as a viable Retail provider, optimizing revenues generated by Retail businesses, while paying attention to the high -quality lifestyles standards familiar to residents of the City. QUALIFICATIONS CDS Market Research is an established professional consulting firm based in Houston offering marketing research and real estate/economic analysis to a wide range of private and public clients. For over 40 years, CDS has specialized in dealing with issues pertaining to growth and development patterns throughout Texas and many other markets. In this regard, CDS consults with retailers, builders, developers, architects/planners, municipalities, governmental agencies, investment groups and financial institutions. These ongoing involvements provide CDS staff members with an incisive understanding of socioeconomic trends, demographic patterns and market dynamics that influence residential, commercial, industrial and institutional land development/redevelopment patterns. Our approach to this project will not rely heavily on canned statistics or pre-existing data models but I] instead focus on providing Southlake with the strategic direction that will likely result in successful commercial development that will provide value to the city and benefits to your residents. To this end, David Daieiden, with 36 years of shopping center development experience and dealing with major r , retailers, has been added to the CDS team. The firm is staffed with seasoned professionals having background and experience in marketing principles, demographics, consumer psychology, statistical analysis, economics, feasibility and all aspects of planning, developing and marketing of real estate products. Our functional concept is to utilize carefully selected, solution oriented analysis teams to focus on each project assignment. CDS has completed more than 3,500 assignments, in 30 U.S. states, Canada and Mexico since the firm (j entered the information collection and analysis business in 1973. H Our policy is not to undertake an assignment if we do not have the proper staff available to complete the project on time, within budget and with exceptional results. 3 niD bpmesd Simleyiea I� (1 City of Southlake SIMILAR WORK PRODUCTS Citywide Retail Analysis CDS approaches commercial studies with a market -based approach. As each project is unique, we do not use a "cookie cutter" approach to these engagements. We listen to the needs of the client and prepare a methodology which will answer their questions, provide credible information on future needs and arm the community with a strategic recommendations plan. Three projects of note related to local retail market analysis are listed in the table below. Project Title: Uptown/Galleria Area Market Surveys and Analysis Client Contact Info: Vollmer Public Relations / Uptown Houston District Mr. John R. Breeding President, Uptown Houston District 713-521-2011 ibreeding@uptown-houston.com Project Title: Sugar Land Town Square Feasibility Study Client Contact Info: City of Sugar Land Ms. Regina Morales Director of Economic Development 281-275-2273 ecodev@sugarlandtx.sov Mr. Joe Esch (now Executive Director of Economic Development Missouri City, TX) 281-403-8594 iesch@ci. mocity.tx.us Year Completed: 2009 Scope of Work: • Comprehensive survey of 400 citywide households • Inventory of existing properties • Telephone survey of 200 Uptown residents • Intercept survey of 400 Uptown visitors • Personal interviews with over 40 brokers, business leaders, retailers, property managers and owners • Analyze findings and prepare recommendations for action plan implementation Years Completed: 2001 and 2002 Scope of Work: • Define market/trade area • Assessment of growth factors • Inventory of existing properties and analysis of supply characteristics • Identify best market opportunities • Project demand for planned components • Document support for creation ofTIRZ • Determine market feasibility and project absorption rates Deliverables: • Report detailing survey findings, including shopping patterns and preferences, as well as additional retailers desired • PowerPoint presentation to Uptown Houston District board Deliverables: • Full market feasibility report addressing various town square components (2001) • Update of initial report to exclude school district tax revenues from TIRZ projections and confirm final market feasibility (2002) 4 CD Aft co-OWo- IF d 1 fl City of Southiake Citywide Retail Analysis Project Title: Baytown Retail Analysis Years Completed: 2008 and 2013 Client Contact Info: Scope of Work: Deliverables: Baytown / West Chambers • Economic and demographic • Phase I Report: Inventory County Economic analysis of local conditions to and Base Information -- 2008 Development Foundation support retail activity, • Phase II Report: Commercial Mr. B.J. Simon including psychographic Districts — 2008 Associate Executive Director analysis • Baytown Retail Analysis and 713-420-2961 • Community -wide survey on Update - 2013 bisimon@baytownedf.orp shopping and dining preferences, patterns, and additional retailers desired (2008) • Interviews with Baytown officials and real estate professionals (2008) • Comprehensive inventory of retail businesses • Analysis of potential in three older retail districts (2008) • Retail opportunity analysis to identify store types with greatest potential for investment in Baytown PROJECT TEAM The project team assembled for this project includes the credentials and technical competence that is required to successfully complete a retail analysis of this nature and magnitude. Our project team was assembled particularly to address the essential issues of the City of Southlake and includes principal personnel who are highly experienced and qualified to resolve them. CDS principals will be responsible for leading the project team, including "hands-on" development of project elements, as well as overall project management, timing and sequencing of team member involvement, and providing performance review and quality control. Fallowing are brief summaries of the experience of the individuals on the team. Resumes are included i A in a later section. Steven R. Spillette, President Steve Spillette is an Urban Development Strategist with 19 years of diverse experience in real estate and urban planning. His experience includes positions with a national economic research firm, a management district, and a city planning department. After starting his own firm in 2001, he has conducted market/economic studies and financial analyses projects for over 30 clients including cities, management districts and private real estate firms. Many of those projects were in conjunction with CDS prior to the merger of Spillette Consulting and CDS. He earned a B.A.S. degree in Quantitative Economics and Applied Earth Sciences from Stanford University, a Masters in City Planning at the University of California at Berkeley, and an M.B.A. from Texas A&M University. Mai� CO Community Development 5t.ii.giea City of Southlake Brenda Persons, Vice President Citywide Retail Analysis (l Brenda Persons, Vice President, is a highly experienced professional with over 20 years of experience in real estate. For CDS, Ms. Persons has conducted market studies for community retail enhancement and J multifamily development feasibility. Most recently she managed community assessments and strategic recommendations for Baytown and Bay City, Texas. She is also skilled at student housing market I analysis. She began her career at Weingarten Realty in Houston, Texas in 1985 as a Site Location l Analyst. Previously, she was a portfolio analyst for Bank One Corporation. Ms. Persons has a Bachelor of Business Degree in Finance/Real Estate from University of Texas in Arlington, Texas. She has held her Texas Real Estate Salesman License since 1990 and her Appraisal License since 2004. Ty S. Jacobsen, Market and GIS Analyst Ty Jacobsen joined CDS in 2007 after his graduation from Baylor University. Ty is skilled in the use of geographic information systems, demographic statistics and business inventories. Ty is a key contributor to most studies performed by the CDS team. The nature of his work has provided him the unique opportunity to become involved with multiple type of land use for both public and private clients. For this project, Ty will be responsible for data development of all types as well as mapping and presentation. David Daleiden, Principal, Daleiden & Associates David Daleiden has more than 42 years of experience in real estate market research specializing in supermarket, retail and shopping center site location strategy, shopping center viability, merchandising analysis, and asset management evaluation. He was formerly the Director of Research for Weingarten Realty, one of the country's largest real estate investment trusts (REIT), where he worked for 36 years. He was responsible for creating the research department and implementing new, creative, and f customized methods to help with teasing, new development, acquisitions, asset management, and retail �. viability and strategy. He also acted as a location consultant to many of the company's national and local retail clients. His most recent role at the company was Senior Strategy consultant to Weingarten's top executives. He is now an independent consultant and has done work for retail developers in Houston i and Tyler, Texas as well as for the City of West Monroe, Louisiana. He holds a Master Degree in Marketing Geography and a Bachelor Degree in Finance from Wayne State University. J I CD C—,nify Deve6pnenr 51rd"im - City of Southlake Citywide Retail Analysis CDS' APPROACH TO THE RETAIL MARKET ANALYSIS Services of CDS Market Research will be rendered through performance of a customized thorough research program, preparation of a preliminary and final market planning report and consultation with City representatives regarding the implications of the findings and conclusions. Example Map Retail Concentrations !. Retail Competition In this task, the Team will prepare an overview analysis of the existing retail centers in a carefully defined competitive market area (CMA). 1-1 -- Spatial Distribution of Competitive Commercial. — Team members will collect information on retail centers in the CMA from third party sources. Information such as detailed size, major tenants, vacancy and lease rate data will be collected and assessed. Primary sources of this information will be real estate reporting services, governmental agencies, CDS data bases and primary in the field research and observations. 1-2 — Mapping of Commercial Properties. Using the information from subtask 1-1, the commercial developments in the CMA and surrounding areas will be mapped and compiled by street into driving routes for Subtask II-3. 1-3 — Driving Survey of Competitive Commercial. We will drive primary and secondary traffic arteries in the City to gain a more focused understanding of its submarkets, their current retail offerings and their retail opportunities. In this field work, the team will conduct a visual inspection and inventory of existing shopping centers and stand alone retail facilities. During this process, the team will determine ingress and egress to each submarket's retail areas from population clusters, residential neighborhoods and other communities. Additional size, tenant, vacancy and lease rate data may be collected from this on the - ground research. DELIVERABLE OF TASK I • A Retail Competition Report including: o Maps of Significant Retail Centers around the area. o List of Retail Centers with size, major tenants, occupancy and rent rate information. 7 SOL PRIve'opmenf Sliclagie I City of Southlake H. Trade Area Delineation and Analysis Example Trade Area Determination Citywide Retail Analysis In this task, the team will define the retail Trade Areas and analyze the retail market area through field research coupled with the findings of Task I. Trade Area definition will be sensitive to, and may vary with, the different classes of retail centers and occupants. II-1 — Retail Manager Interviews. The team will conduct a series of investigations and interviews with retail store owners or managers to determine the geographic markets for various retail establishments (by size, category, and competition). This subtask will include, at a minimum, interviews with 2-3 selected retailers in each potential submarket to ascertain the areas from which their customers are traveling to shop. II-2 — Request for Zip Codes from Retailers. — With the support of the City and the owners of retail centers, it might be possible to request a list of the residence zip codes of the last month of credit card purchases. II-3 —Trade Area Boundary Determination. In this subtask, the team will work with City representatives to create custom retail trade area based on findings from the area competitive commercial analysis of Task I and personal interviews from Subtask II-1. The team will develop a presentation quality retail trade area boundary map. II-4 —Trade Area Characteristics. In this subtask, the team will prepare information the Trade Area including a demographic profile, a psychographic profile and a characterization of the retail and services offerings. In addition, the recent performance of the retail centers in the trade area, absorption, occupancy, and rental rates will be assessed. The team will use Nielsen/Claritas demographic information and Claritas Prizm NE Marketing Segmentation. For retail performance, the best available local, regional and national reporting sources will be used. II-5 — Trade Area Determination and Analysis Report. At the end of this task, an interim report will be produced which includes all of the information developed in Task II. This report will be reviewed with City officials and will be adjusted based on comments received. DELIVERABLES OF TASK II a Trade Area Determination and Analysis Report including: o Presentation quality retail trade area boundary map o Demographic profile of the retail trade area o Psychographic profile of the trade area consumers 8rdb CLOSOW C... -its D-6p.-t 51,a"ies H d y City of Southlake Previous Growth Projections Employment MOM ugmo 10a,000 E 60.000 s na.aua 10.04 —sqr rYd � ..uarr wwcs»r.s uing�.,re uiiq �v [d�rc. Population .purr, - ----------. 1C•,(M —Sugar land----Oslw-GACShams—UsfnS1,W e CD C.... ry D—!op...t Stn l" , Citywide Retail Analysis o Drive -time Analyses, including presentation quality maps • Presentation to City representatives • Agreement on Task II's market area definitions and characteristics Ill. Market Analysis This task will provide an assessment the local market. We will utilize demographic and retail performance statistics from Task I and Task II trade area analysis and augment that with area sales trends from the State Comptroller. This "macro to micro" analysis will enable the team to better understand existing area retail economic dynamics. III-1 —Area Residential Growth Projections. In this subtask, the team will utilize growth forecasts prepared by CDS and other sources as available, such as those from the North Texas Council of Governments, for the Trade Area defined in Task II and for other communities in the area. This data will be used to determine future population, household and income data as related to effective buying power for: • The City of Southlake • Competing markets in the City's trade area • Relevant portions of the county • The overall region. The demographic projections will account for current and likely future residential growth in the city and adjacent areas, including a review of government and CDS projections of employment / population growth. In this subtask, the team will capture information on existing residential development patterns and projects, including number of units/lots and typical pricing, through information provided by the City Planning Department and representatives of other governments, plus landowners and other development industry representatives. Primary research will identify and quantify residential development in the pipeline. Current and expected future conditions will be thematically mapped illustrating such characteristics as population density, household income, and growth, and employment density. The process identifies trends in population ethnicity that may provide opportunities to compete in particular retail niches. 9 City of Southlake Citywide Retail Analysis ( 1 These data will be summarized in a comparative evaluation that l I assesses the city's' competitive positioning for retail attraction f 1 based on residential population and income growth trends. I 10 III-2 — Other Relevant Existing Conditions. — This subtask will address other elements of existing and future conditions that affect the city's competitive place in the region's retail economy. Such elements include: • Transportation improvements and traffic patterns, • Non-residential population that provides additional retail demand (employment, students, tourism, pass -through traffic), • Other factors such as notable amenities, regional public safety perceptions, and aesthetic qualities, and • Existing public policies that affect retail development (for example, sign regulations, municipal long range plans, and zoning). III-3 -- City wide and Surrounding Area Sales Trends. — In this subtask, the team will collect the sales (gross and taxable) information from the State Comptroller by City and selected Zip Codes by three -digit NAICS codes. This data will be compiled and analyzed to determine key sales trends by retail and services categories by geographic area. III-4 — Projections of Future Retail Sales, Supportable Space, and Tax Revenue. Based on the demographic analysis, expectations of future housing and employment growth, the team will prepare a baseline forecast for the amount of annual sales for retail goods and services and translate those sales into both retail / services space needs using data from the Urban Land Institute's Dollars and Cents of Shopping Centers or other sources as applicable, and into sales tax revenues (general and 413). Consideration will be given to the increasing role of online shopping and its effect on particular retail sectors. III-5 — Area Market Analysis Report. -- At this point in the study, an interim report will be developed which will include an overall analysis of local area demographics, shopping center information and overall sales trends. This interim report will be presented to the Director and Committee for review. DELIVERABLES OF TASK Ili • Area Market Analysis Report • Presentation to City representatives • Agreement on Task I's key findings as they relate to subsequent tasks. �D communy9—t U."'. r� 4 I City o/ 5outhlake Citywide Retail Analysis IV. Retail Gap Analysis and Leakage Assessment Typical Leakage Analysis $77.4 $37.2 $(40.2) $35.0 $7.4 $(27.5) $22.6 $8.4 $(14.2) $186.9 $64.5 $(122.4) $237.5 $107.6 $(129.9) $6.3 $1.9 $(4.4) $2.6 $0.9 $(1.7) $19.0 $1.2 $(17.8) $51.5 $54.3 $3.8 $5.5 $9.3 $3.8 $7.4 $12.4 $5.0 $1.1 $1.6 $0.4 $1.5 $3.9 $2.3 $7.0 $1.9 $(5.1) CQ�& Community t)cnlopmeM Shalegias In this task, the team will evaluate the gap and leakage from local residents who shop in locations outside of the city. The team will analyze actual sales figures, formulate estimated potential sales and identify retail sales surpluses and/or leakages for the various retail sectors. The estimated needed retail and services businesses will be identified by discrete sectors (5-digit NAICS code) which will identify the specific type of business. Using this city-wide analysis, an estimate of the needed stores and sales potential will be developed for each identified submarket. IV-1 - Over/Under Analysis. In this subtask, the team will evaluate the current offerings in the city against a standard set of businesses derived from regional pattern of retail and services businesses. Using this analysis, specific store types which appear to be under supplied in the market will be identified. In addition, areas where existing stores appear to be over supplied are also identified. IV-2 - Leakage Analysis. In this subtask, the team will use a combination of qualitative and quantitative analyses to arrive at a useful analysis of the leakage. Leakage relates to the sales of specific types of merchandize and services that are being diverted outside of the community. The Leakage/Surplus analysis summarizes the relationship between the demand (consumer spending) and supply (actual retail sales) in a given geography. The team will determine potential leakage using common models, as illustrated by the table on the left. That data will be combined with the information from the Over/Under analysis to get quantification of the types of stores needed in the community. However, it is important to note that quantification of leakage is not consistent or exact. This team will use other quantitative and qualitative analyses to evaluate both the type/amount of leakage and the possible community strategies to reduce the drain. Dollar expenditures for "major" store types will be compared with regional numbers to determine which store types are under -performing. Leakage is a function of proximity to available buying power as well as the quality of specific locations and management. Some leakage can be re -directed back into the shopping district by adding stores or repositioning specific competitive stores or services. Some leakage can simply be explained by the strength of competitive offerings. 11 City of Southlake Citywide Retail Analysis F1 Our customized analysis will provide more than just tables such as the example on the on the previous page. IV-3 — Leakage and Gap Analysis Report. At the end of this task, an interim report will be produced which includes all of the information developed in Task III. This report will be reviewed with City officials and will be adjusted based on comments received. DELIVERABLES OF TASK IV • Leakage and Gap Analysis Report including: o Provide summary charts and graphs of each retail sector illustrating potential sales versus estimated actual sales, and o a customizable Microsoft® PowerPoint presentation containing retail leakage analysis summary information. • Presentation to City representatives • Agreement on Task IV's conclusions regarding needed retail stores and services in the target area under study V. Evaluation of City Land Use Strategy Following the completion of the citywide retail analysis, CDS will compare the findings to the locations indicated for potential i retail uses in the Southlake 2030 Consolidated Future Land Use j Plan and other applicable Adopted Planning Documents. 2030 Land Use Plan V-1 — Compare Retail Quantities, Types, and Locations. CDS will compare the quantities of retail space identified in the analysis with the areas projected for desired retail uses in the Adopted Planning Documents to evaluate whether the City's 1, plans indicate an under- or over -supply of designated land area. CDS will work with the City to develop typical retail space -to - land -area conversion factors to perform this evaluation. Il !1 CDS will also examine the areas eligible for retail uses per designation in the various long range plans to advise the City on what types of retail uses are most likely at these locations. The locations of existing types of retail (local / community / destination etc.) will be examined to understand if locations designated in the City's plans might be better suited for market success and business functionality. V-2 — Retail Long -Range Trends and Competition Evaluation. Many factors that affect the viability of retail development and ongoing success are beyond the control of an individual 12 CD Cammunily Gave :enf Slrcdegin+ fl I H i L_ City of Southlake CONSULTANT DELIVERABLES Citywide Retail Analysis municipality. CDS will provide an assessment of long range trends and risks that could fortify or challenge Southlake's retail potential during the City's planning horizon. V-3 — Strategic Recommendations. In this subtask, the team will prepare a set of strategic recommendations that will assist in preserving and enhancing the retail and services offerings in the community and specifically for the future retail development areas identified in the Adopted Planning Documents. Key aspects of these recommendations could include: • Transportation and other infrastructure • Land use and aesthetic policies (zoning, parking, sign regulation, etc.) • Community investments (event destinations, public spaces, parking) • Incentive policies • Environmental management (public safety, landscaping, social programming) DELIVERABLES OF TASK V • Retail Land Use Strategy Report which will detail the results of the evaluation of the City's plans for future retail land uses: o Expectations of the magnitude and type of retail space that might be captured in each area and o Strategic recommendations for preserving and enhancing retail uses for each of the identified areas. • Presentation to City representatives • Agreement on Task V's conclusions In addition to the interim reports described above, a final summary report will be prepared. All meetings associated with deliverable reporting will include involvement of Staff, Committee and Public Input entities as appropriate. ANTICIPATED COSTS Based upon the tasks requested of the consultant in the RFQuaI, the nature of the existing city and its retail landscape, and experience with past retail analysis projects, CDS finds that the $40,000 maximum budget quoted in the RFQuaI is an appropriate anticipated cost for the work. CDS specifically tailored the Approach described in this proposal to fit within this budget amount. -- - 13 CD Cammvniiy Dms!opmenF Sioiegies