Sunday Commentary: How Can Davis Restore Its Retail Base?

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Downtown_Davis1

As the city of Davis looks to generate revenue to pay for unfunded infrastructure and to continue city services, it has become apparent that not only does Davis lack the overall retail base, but even establishing retail in places where there is space, especially the downtown, is challenging at best.

The problems that Davis faces became obvious when we ran the per capita retail sales figures and found Davis was near the bottom of comparable cities.  Among cities near Davis, Woodland has twice the per capita retail sales, while Dixon and West Sacramento have more than three times the retail sales.

This is not a new problem.  When we have put together task forces – D-Side, the Innovation Parks Task Force, the Studio 30 Report – the lack of sales tax revenue has been found to be a key driver.  The plan sought to utilize the university as a driver of economic development. The notion of technology transfer takes research from the university and transfers it to the private sector, generating products that come from research, startups which become the basis for new companies, and jobs.  Ultimately, economic development will generate sales tax and property tax revenue for the local community.

The key was to create space with which to put not only startups but also companies wanting to move to the area to take advantage of a world class university.  Indeed, many companies are looking at places like Davis because, while we think our costs are high here, they are nothing compared to the Bay Area.

Unfortunately, the places where we identified those spaces are now all defunct.  Nishi was supposed to provide 300,000 square feet – it was defeated narrowly at the polls.  Financing issues, potential opposition, and difficult politics led to the demise of both peripheral research park locations, Davis Innovation Center (north of Sutter-Davis) and the Mace Ranch Innovation Center (east of Target).

So where do we start?  Yesterday we highlighted a letter by Jeff Boone, who notes the loss of some iconic Davis downtown stores.  It is important to recognize that we did not just lose tax revenue when the innovation parks and Nishi went away, we lost potential jobs to young professionals who would be coming into town and be the demographic that spends the most on retail.

Mr. Boone writes, “Compared to all other comparable communities, Davis has about only about 50 percent of the supply of commercial retail property per capita. It is the law of supply and demand causing Davis commercial rents to escalate.”

He adds, “The lack of development also results in fewer professional jobs and a constrained housing supply, which in turn cause Davis to be under-represented in young professionals and young families — the demographic that spends the most money at retail locations.”

This leads him to conclude: “So our retailers get the double whammy… too few paying customers per capita and too high commercial rents. When the business numbers no longer pencil out, the business has to either find lower-cost space or else close down.”

Meanwhile, Chamber President Jason Taormino notes that redevelopment, according to a study that was commissioned, “was not economically feasible at this time, and is a sign that is hard to ignore.”

He adds, “With the increase in property taxes triggered by the sale – several of the existing business owners decided to close or move to lower cost buildings.   This is an indicator that market demand for space in Davis, especially for retail, is lower than desired.”

“Over the past decade, downtown Davis has converted 60,000 sf of office and retail (per City of Davis) to bars and restaurants.  If office and retail are dwindling then we have a less balanced economy,” he writes.  “As we have fewer high paid employees downtown working in offices, they shop less and a negative cycle of less retail and more bars and restaurants catering to college kids continues.”

Mr. Taormino focuses on the prospect of redevelopment, noting, “Economically vibrant communities across the world have found that, when demand is high enough, it warrants redevelopment with a focus on mixed use architecture, allowing retail on the ground floor and office and housing above.  How high the new buildings rise is a reflection of the strength of the market.”

In our view this leads us back to the need to explore innovation centers – utilizing the university as an engine for economic development through technology transfer.

But as noted above, those present financing and other challenges as well.  In the post-redevelopment agency world in which we now reside, one answer might be public-private partnerships.  The city, the university, and the private sector all have their own reasons to invest in economic development, and working together they might be able to overcome financing hurdles.

In the meantime, the downtown needs to view economic development as a means for prosperity – bringing in thousands of high paying jobs and young employees who are the ones who make the purchases.

Yesterday’s article unfortunately devolved back to housing, but, while housing remains a critical need and challenge, the city’s finances teeter on the brink.  We need to figure out ways to invest in new development that will be acceptable to the community’s slow growth core but helpful to the city’s bottom line.

As I noted yesterday, this doesn’t have to be radical change.

The model of many of these research parks is modeled after a university – with high-tech building, open space and a campus-like set up.  The innovation parks would be an extension of the university into the private sector and that can be done on a limited amount of land in a way that fits with our broader community.

We don’t need to create a huge amount of new retail on our edge, we can be more efficient with the land we have.

But none of this is possible if the answer is always “no” or “we can’t,” or if we allow the perfect to continue to paralyze us from the potential of the good.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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20 thoughts on “Sunday Commentary: How Can Davis Restore Its Retail Base?”

  1. Topcat

    How Can Davis Restore Its Retail Base?

    It may be too late for Davis to “restore its retail base”.  We’ve seen massive changes in the retail industry and Davis has not kept up with the changes. The growth of shopping centers with big box stores such as Costco, Target, Wal-Mart, Best Buy, Home Depot, Lowes etc. has left Davis behind.  In fact, I know many Davis residents who do the majority of their retail shopping at these stores.

    The second major trend in retail is online shopping.  I personally know a number of people who do a lot of shopping on Amazon as well as other sites. Online shopping is easy, convenient, and cost effective. When I am looking for something specific I often go online first to see what is available and how much it costs.

    1. Matt Williams

      I agee with Topcat in principle, but would flip his two retail shopping trends.  The online shopping trend is far more important now that the big box stores in shopping centers trend.  I would go so far as to say that shopping centers are seeing a decline in their business as well.  Local, small, boutique/niche retail businesses will continue to hang on, but other than something like an Apple Store (which could end up on the UCD campus rather than in Downtown, if one did come to Davis) I really don’t see a light at the end of the tunnel for Davis retail.

      Far more important for Davis is to be actively working with the California State government to ensure that all online shopping purchases that are delivered locally pay the full complement of sales tax . . . state, county and city. The Measure O sales ttax that goes to Davis rarely is collected for online purchases.  The California Board of Equalization needs to diligently enforce its sales tax regulations.

  2. Don Shor

    The proposal was alluring because it would beautify the area and improve links between the university area and downtown, while also bolstering the city’s lagging sales tax base. “Davis is not a wealthy city, and low sales tax receipts are part of the reason,” the 1961 Core Area Plan explained. “Commercial development in the core contributes only 5 percent of the property tax, a relatively low percentage.” [4] The plan noted Davis trailed neighboring communities badly in sales tax revenue: for 1959-60, Davis had per-capita sales tax receipts of $6.18. That was less than half the $12.50 brought in by Woodland and little more than one-third the $17.90 enjoyed by Dixon. “Davis residents spend only 54 percent of their retail dollar in Davis. Obviously, this can be increased,” the plan said, reporting that residents tended to stay in town when shopping for groceries, gasoline, hardware, and even automobiles, but headed for cities such as Sacramento for restaurants, linens, dishes and clothing.

    http://cityofdavis.org/about-davis/history-symbols/davis-history-books/growing-pains-chapter-9

      1. Don Shor

        Mainly questioning the use of the term “restore” in the title of this article.

        Woodland has always been the retail hub. It’s the city that serves the surrounding rural population, had and has the ag supply firms, had the larger retail outlets. Woodland was where Davis residents went to buy appliances and furniture in the 1970’s. Davis had a Sears catalog store; Woodland had the actual stores. Davis has had a couple of department stores that sold to a broad demographic, but their focus was always heavily on the student population. Woodland has retail, Davis has cars. The cities have been symbiotic in sales for decades, at least as long as I’ve been here (1974).
        Prior to Second Street Crossing nobody had ever, to my knowledge, proposed a large-scale retail project here. The combination of demographics and the lack of freeway-visible (by which I mean I-80, not 113) and easily freeway-accessible land for that type of retail has been a major issue. Going down the freeway, the visible land is in auto sales. The university owns the rest of what would normally be freeway development, and then you’re in another county.
        Davis can’t develop large-scale retail to draw customers from outside areas because there is no suitable place for it. Woodland and West Sacramento (and Dixon and Vacaville) had loads of retail-suitable acreage. This is what I mean when I have said repeatedly that the retail shortage in Davis is largely due to the history and geography.
        There has never been a time or place for the retail development, except where the auto dealers are. And those auto dealers generate a good, large amount of sales tax revenues. Davis landowners didn’t come to the city and say ‘we want to build stores there’ and get rejected. So far as I know, the landowners wanted to build houses and auto dealerships. Nobody’s proposing significant retail and getting told no.
        Even if we wanted another 15 – 20 acre retailer, that isn’t happening any more. The big retailers are finding they don’t need such a huge physical footprint. Downsizing stores is the trend. There is going to be a glut of vacant big-box property. There are several categories of retail that are shrinking rapidly: electronics, office supplies, music, bookstore chains, and more. The big-box general merchandisers won’t need to have display space in those categories, and the specialty retailers are already shrinking or disappearing (Office Max merging with Office Depot, Best Buy on the skids, etc.). With continued slumping sales in many categories, Walmart is shifting their focus to small grocery outlets — groceries are one of their only profitable divisions over the last few years. Malls are a thing of the past, big box is a thing of the past.
        Outside analysts and business planners don’t see Davis as a place to invest in new businesses largely because of the demographics. They see Davis as a nice bedroom community. If Davis wants to draw people to spend money here, it isn’t going to be by building the same big retail stores people can go to anywhere else. It is going to be by being cute, funky, hip, and focusing on small retail and food shops. Destination shopping and dining, not mass merchandise. Businesses that fit with the image Davis already has, and the community identity Davis residents share.
        Note: that is copied and pasted from a similar discussion we had here in 2013.

        1. Roberta Millstein

          If Davis wants to draw people to spend money here, it isn’t going to be by building the same big retail stores people can go to anywhere else. It is going to be by being cute, funky, hip, and focusing on small retail and food shops. Destination shopping and dining, not mass merchandise. Businesses that fit with the image Davis already has, and the community identity Davis residents share.

          Yes.  This.

        2. Frankly

          These is so much wrong with this I don’t know where to begin.

          Davis can’t develop large-scale retail to draw customers from outside areas because there is no suitable place for it.

          Let’s start here.  BS.  Nishi.  Mace 391.  MRIC just to name a few.  Then the land south and north of I-80 between already developed Davis and the causeway.  Land around 113 and Davis is also just fine for building new retail.

          The big retailers are finding they don’t need such a huge physical footprint.

          Cites are needed here otherwise it is just your made up stuff.  Ever been to Sheels in Reno Nevada?

          http://photos-ak.sparkpeople.com/nw/3/0/l300988625.jpg

          Malls are a thing of the past, big box is a thing of the past.

          It is a mixed bag.  Some slumping some are not.  It depends on the region, the store and many other factors.  For many places that are slumping it is because of overbuilding during the pre-resession era and lackluster economic growth.  But in Davis with a deficit of supply it is much more likely that additional retail would thrive.  What about a big REI in Davis?

          Outside analysts and business planners don’t see Davis as a place to invest in new businesses largely because of the demographics.

          This not really the full picture.  Outside investors are interested in developing the commercial inventory to bring Davis to par with available good paying jobs so that the demographics supports the retail they also want to include to bring Davis to par.

          It is going to be by being cute, funky, hip, and focusing on small retail and food shops.

          So, how is that working out?  More Pizza and beer.  The funky is the smell of vomit in the street after all the drunks clear out.

          1. Don Shor

            Let’s start here. BS. Nishi. Mace 391. MRIC just to name a few. Then the land south and north of I-80 between already developed Davis and the causeway. Land around 113 and Davis is also just fine for building new retail.

            Nishi would have had a small amount of retail. MRIC was not intended as a retail site. South of Davis along Chiles is a possibility, yes. New retail along 113 is also a possibility. If the landowners of Nishi wanted to put a shopping center there, do you think that would have passed with the voters? (Genuine question, not rhetorical).

            But in Davis with a deficit of supply it is much more likely that additional retail would thrive. What about a big REI in Davis?

            Davis does not stand alone. It is part of the I-80 corridor. I think you’ll find that is overbuilt with retail. Do you have some reason to believe that REI is interested in building in Davis?

            The big retailers are finding they don’t need such a huge physical footprint.

            Cites are needed here otherwise it is just your made up stuff.

            https://www.npd.com/wps/portal/npd/us/news/tips-trends-takeaways/big-dreams-small-stores/
            http://nreionline.com/retail/big-box-giants-downsize-drive-productivity-smaller-urban-stores

            So, how is that working out?

            How many retailers are there in downtown Davis right now? How many in other local cities?

          2. Don Shor

            What about a big REI in Davis?

            Personally, I would prefer that Davis have made an effort to keep Outdoor Davis by helping to find a suitable location for them.

        3. Roberta Millstein

          How many retailers are there in downtown Davis right now?

          I think we also need to talk about how many retailers Davis has lost recently, and what the City can do to help retain them.

        4. Grok

          If Davis wants to draw people to spend money here, it isn’t going to be by building the same big retail stores people can go to anywhere else. It is going to be by being cute, funky, hip, and focusing on small retail and food shops. Destination shopping and dining, not mass merchandise. Businesses that fit with the image Davis already has, and the community identity Davis residents share.

          I agree. I would call this playing to the strengths of the community.

          To this I would add that that downtown needs to be accessible to cars bikes and pedestrians. The downtown will be better for bikes and pedestrians if we can get the cars parked in peripheral lots rather than driving around looking for street parking in the core grid of the downtown.

          I hate to be so repetitious, but there is this large lot on Olive drive that would have been a great place to build parking with easy access to the downtown without having the cars actually come into the downtown.

           

        5. Chamber Fan

          One thing that I think we should be aware of in this discussion- every city that I know of is losing retailers.  Long time entities are going out of business.  Some on the brink.  What’s hurting Davis is not that we’re losing retailers, but that we lack a base to be able to lose them without undue pain.

        6. Frankly

          I would call this playing to the strengths of the community.

          Strengths?   There isn’t much that I would call “strong” about this community lately.  It is full of crack and is weakening by the day.

        7. Frankly

          Personally, I would prefer that Davis have made an effort to keep Outdoor Davis by helping to find a suitable location for them.

          Don, a “suitable location.”   Hahahaha!  Where the f _ _ _ do you suggest?

          How about Mace 391?

          Seriously… do you even listen to yourself?

          That is the problem… there isn’t any other suitable location.

        8. Frankly

          How many retailers are there in downtown Davis right now? How many in other local cities?

          So your only criteria is the retailers downtown?  Just skip counting them for the entire city… only that six or so square blocks downtown?  The downtown that you have demanded competition protection from since I have been blogging with you?   Great Don.  Yes, Davis has more downtown retailers than downtown Woodland.  Oh wait, no that is not the case.  Woodland downtown is growing… actually taking Davis downtown retailers.  Davis downtown is shrinking in retailers.  But Woodland also has all those big box stores that Don says will kill the Davis downtown if we allow them.  Just like Target did for Davis… even though there are few downtown retailers that even sell the same products.

          Seem like Don might not know what he is talking about here.

          But I knew that long ago.

        9. Grok

          Strengths?   There isn’t much that I would call “strong” about this community lately.  It is full of crack and is weakening by the day. – Frankly

          This says a lot about you Frankly.

  3. Frankly

    Online retail currently only accounts for about 8.10% of all retail sales.   The trend is growing, but there are still a lot of reasons for shoppers to visit brick and mortar stores.  It depends on the products, the store and the relative convenience.

    There are three primary reasons that I would shop online verses brick an mortar stores:

    1. Convenience.  Time required.

    2. Inventory. Choice. Selection.

    3. Price including shipping.

    All three of these things can be countered by the design and service of the brick and mortar alternative.  But if the store is too small to have sizable inventory, with too little parking and located in a difficult to get to location to offer reasonable convenience and time savings… and with rents too high to compete on price…. well then on-line retail will be the preferred choice.

    In other words, the no-growth trends of Davis are actually causing more people like me to chose on-line retail.

    1. Tia Will

      Frankly

      You left out a major reason for not visiting large box stores. There are a number of us who simply hate the environment. Fluorescent lighting, ugly flooring, a universally cold atmosphere, with an excess of goods arranged in ways to tempt people to make impulse purchases of items that they do not need and in many cases do not even particularly want.

      I don’t know what the percentage of people buying at big box stores and would actually like to see that percentage of purchases and how that percentage has changed as on line shopping has increased.

  4. Edison

    The status of retail is indeed unfortunate, but I concur with the points made by Topcat and Matt. For example, for many years I bought a certain brand of cat litter at Ace Hardware in Davis.  It was often not in stock, thereby requiring multiple return trips. Then I found an online retailer where I could order the same brand of litter in quantity for almost 30% less than Ace charges, and with free shipping. In fact, the online source often sends me email notices of special offers, which most recently allowed me to get a 42% discount.  It could not be more convenient.  I don’t have to drive downtown, thereby saving on gas and reducing air pollutants. And yes, the retailer charges the appropriate sales tax. 

    Some could reasonably argue that shipping cat litter directly to my house is inefficient, but UPS travels through my neighborhood daily regardless of whether or not I place an order, and local UPS delivery trucks run on CNG rather than diesel or gasoline.  And yes, the retailer charges the appropriate sales tax. I’m sorry that Ace no longer gets this portion of my business, and I realize that a “brick and mortar” establishment must pay for rent, labor, workers comp, etc., but being on a reduced retiree income, I feel compelled to look for bargains whenever possible.

    I’d venture to guess that with the high educational attainment level of Davis residents and correspondingly high computer usage, online shopping may be more prevalent here than in most locales. In my case, during the past year I’ve found tremendous bargains on a variety of hiking and backpacking gear that was unavailable anywhere in Davis, or even at the REI store in Sacramento. Constantly looking at sites like Backcountry.com, Backcountry Edge, Moosejaw and buying directly from manufacturers has enabled me to take advantage of great deals and deep discount sales.  I’m sure many other Davis residents are doing the same thing. The selection is better and the prices are lower.

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