Friday, July 12, 2019
City Council met Tuesday night to discuss the state of Boulder’s retail environment. It is, in a word, OK. But there are indicators that point to a not-so-OK future.
Along with feedback from shoppers and shop owners, the findings of a comprehensive study point to a desire for regulatory reform, concerns over affordability and continued reliance on tourist and non-resident spending as shopping behaviors change and the city’s population ages.
The ~200-page report is packed with facts and figures. Here are some key takeaways and important numbers that show who is shopping and doing business in Boulder, who isn’t, and how we compare to our neighbors and peer cities. (For city staff’s summary of the study, view their presentation to council.) Scroll to the bottom to see an overview of council members’ comments Tuesday night.
Why this matters
Sales and use taxes fund one-third of the city budget, and retail sales tax is 75% of that. Although our sales tax revenue has grown 21% in the past five years, growth has failed to keep up with inflation. If the trend continues, the city could find itself facing serious budget cuts.
Boulder sales tax growth, 2014-2019: 21%
Boulder retail basics: Space and spending
2,700 retailers operating in the city in 2018
6.6 million total square feet of retail space
60.3 square feet of retail space per capita
$2.957 billion in annual retail sales
$27,024 in retail sales per capita
How we compare to our neighbors
Broomfield: 5.1 million total square feet of retail space; 71.6 sq ft of retail space per capita; $1.041 billion in annual retail sales; $14,627 per capita
Longmont: 5.9 million total square feet of retail space; 61 sq ft per capita; $1.341 billion annual retail sales; $13,858 per capita
Lafayette: 1.8 million total square feet of retail space; 58.2 sq ft per capita; $239 million annual retail sales; $7,736 per capita
Louisville: 1.5 million total square feet of retail space; 70.7 sq ft per capita; $349 million annual retail sales; $16,458 per capita
Superior: 0.8 million total square feet of retail space; 55.8 sq ft per capita; $389 million annual retail sales; $29,942 per capita
Too much space for shopping?
Boulder and surrounding areas have much more retail space relative to population than the United States as a whole (23.4 square feet per capita), which is itself among the most over-retailed in the world.
Staff noted that Boulder has a high vacancy rate and low absorption rates — a measure of demand vs. supply; the higher the number, the more quickly spaces are being filled — relative to its neighbors and peers. This indicates that the city may have as much or more retail space than it needs. The memo to council says, “Staff recommends that the (retail) strategy include careful consideration of any increases to Boulder’s retail inventory.”
*Boulder’s vacancy rate includes 150,000 square feet at Macy’s in the Twenty Ninth Street mall, which is an anticipated but not current vacancy. If that store is either filled by another retailer or converted to a different use, the city’s vacancy rate would drop to 3.9% — still higher than most of its neighbors.
**Louisville’s abnormally high vacancy rate includes large empty stores such as the recently closed Hobby Lobby, as well as the construction of 100,000 square feet of new space that has not yet been leased.
Ann Arbor, MI: 3%
Iowa City, IA: 1.7%
Lawrence, KS: 4.2%
Palo Alto, CA: 1.5%
Santa Cruz, CA: 2.7%
(Peer cities were selected for population, income and high concentration of college students. Palo Alto was picked because it is often referenced as being similar to Boulder, although the study noted that home prices and incomes are higher there.)
*Without the Macy’s vacancy in the mix, Boulder’s absorption rate drops to -0.2%
Ann Arbor: -1.2%
Iowa City: 0.7%
Palo Alto: 0.2%
Santa Cruz: -1.2%
Also notable is that four of Boulder’s peer cities and one neighboring municipality have no new retail space under construction.
Boulder: 24,500 square feet of retail space under construction
Broomfield: 123,000 sq ft
Longmont: 7,500 sq ft
Lafayette: 20,000 sq ft
Superior: 22,000 sq ft
Ann Arbor: 23,000 sq ft
Iowa City: 0
Palo Alto: 0
Santa Cruz: 0
The Pull Factor
The pull factor is a measure of how retail sales exceed resident purchasing power. A pull factor higher than 1 indicates that more non-residents than residents are buying goods and services. Boulder has a stronger pull factor than any of its neighbors for electronics, groceries, sporting goods, restaurant meals and home furnishings.
There are two areas where Boulder’s pull factor is lower than its neighbors, indicating that shoppers are going to neighboring cities for those purchases: department store and apparel purchase. Indeed, sales tax revenue for apparel has declined for the past four years and is down 13% so far this year.
Boulder: $1,941 annual household spending potential; Pull factor: 1.5
Broomfield: $1,384 spending potential; 0.8 pull factor
Longmont: $540 spending potential; 0.4 pull factor
Lafayette: $1,521 spending potential; 0.9 pull factor
Louisville: $459 spending potential; 0.8 pull factor
Superior: $317 spending potential; 1.2 pull factor
Where people are shopping — and where they’re not
The vast majority of Boulder’s shops and restaurants — 5.9 million of 6.6 million total square feet, or 89% — are located within 10 retail “nodes,” with downtown and the Twenty Ninth Street mall alone accounting for 5 million square feet of retail space. Seventy-five percent of city residents live within walking distance (3/4 mile) of one of these nodes. There is only one high-density area (300 residents per acre) not within walking distance of retail: Vista Village mobile home community north of Valmont Road.
BaseMar: 164,528 sq ft of retail space; 11,473 employees (2015 numbers); 19,977 population within ¾-mile radius
29th Street/Boulder Valley Regional Center (roughly Pearl to Arapahoe, Folsom and 32nd): 2,559,772 sq ft; 17,520 employees; 11,656 population nearby
Gunbarrel: 141,422 sq ft; 5,718 employees; 3,304 population nearby
The Meadows: 251,009 sq ft; 1,939 employees; 9,220 population nearby
North 28th Street: 1,146,147 sq ft; 6,577 employees; 11,783 population nearby
North Broadway (Ideal Market, etc.): 152,602 sq ft; 17,485 employees; 10,742 population nearby
North Broadway Annex (Lucky’s, etc.): 85,600 sq ft; 2,348 employees; 7,263 population nearby
Pearl Street: 801,226 sq ft; 20,226 employees; 18,206 population nearby
Table Mesa: 345,332 sq ft; 2,943 employees; 10,761 population nearby
The Hill/CU: 220,916 sq ft; 21,891 employees; 18,954 population nearby
The performance of these retail nodes has varied over the past few years. There have been large declines in sales tax revenue from 2015 to 2018 at BaseMar (15.6%) and The Meadows (4.9%) due to closures, while Table Mesa brought in 12.7% more revenue during that time following a major renovation, and the Hill increased tax revenue by 23.4%, largely attributable to a concentrated effort by the city and merchants there.
Boulder’s two biggest retail areas had vastly different experiences from 2015 to 2018. Downtown grew its sales tax revenue by 5.5%, while Twenty Ninth Street declined by 6.3%. Struggles appear to be continuing at the latter site: so far in 2019, sales tax collections are down 4.87%.
Satisfaction not guaranteed
Although 68% of shoppers surveyed (906 total) were satisfied with the availability of retail goods and services in Boulder, there were variations by demographic.
Residents were more likely to be satisfied (73%) with Boulder’s offerings than workers, 61%. Satisfaction was negatively correlated with age: The older the respondents, the less happy they were with the city’s retail scene.
Everyone was unhappy with prices but, perhaps unsurprisingly, the poorer the respondents, the less pleased they were with the cost of goods. Just 40% reported being somewhat or very satisfied.
The very wealthy (annual household income over $250,000) were the least enthralled with goods and services located near their homes: 46% were very or somewhat satisfied, and 44% were very or somewhat dissatisfied. That is perhaps explained by the rural character of many high-cost neighborhoods, which tend to have large lots, large homes and do not allow commercial enterprises, putting residents out of walking distance from most retail.
Those of more modest means appear to have better options closer to home. Sixty-seven percent were very or somewhat satisfied with the selection and 56% were very or somewhat satisfied with the availability.
Seventy-five percent of residents who responded to the shopper survey were homeowners.
What the people want
Feedback was varied and diverse on what shoppers would like to see in Boulder. A sample of the wishlist items:
Want family-owned, minority-owned, locally-owned businesses
Want more family restaurants, not fast-food and high-end eateries
Going outside Boulder for gas, clothes, furniture and groceries
Especially Costco and Walmart (less traffic, more parking)
More options for clothes for men, children and seniors, big and tall
Need: Sporting goods, electronics store, eyewear, car dealership for more brands
Need: Quality butcher/fishmonger, doughnut shops, tortilla shops, Chick-Fil-A
More diversity: Greek, Ethiopian and Jewish restaurants requested
More access to fruits and veggies for Asian and Latino populations
More shoe repair, vacuum repair shops
Hair salons/barber shops that serve more diverse clients
Independent/foreign movie theater
One main theme rose to the top: affordability. Shoppers want stores that sell stuff cheaper. Off-price retailers (industry-speak for businesses catering to lower-income demographics) have been fleeing Boulder for the past few years.
Expectations vs. reality
Affordability was a top concern for business owners, too. In a survey of 61 retailers, the top three challenges to doing business in Boulder were all cost-related: taxes and fees, rents and employee retention due to a lack of affordable housing.
Many business owners felt that these big costs would come with a big payoff, due to the sheer number of visitors to the city and the deep pockets of its residents, according to a survey of 22 recently moved or closed retail operations. But “the reality did not necessarily live up to expectations,” one anonymous retailer said.
Boulder: $25.37 per square foot average rent
Broomfied: $27.80/sq ft
Longmont: $22.63/sq ft
Lafayette: $17.08/sq ft
Louisville: $25.19/sq ft
Superior: $27.33/sq ft
Ann Arbor: $21.36/sq ft
Iowa City: $14.12/sq ft
Lawrence: $14.46/sq ft
Palo Alto: $61.88/sq ft
Santa Cruz: $22.93/sq ft
Costly red tape
The study noted that Boulder’s average rents were in line with its neighbors’, as was the cost of electricity and sales tax rates. Although Boulder’s sales tax is the highest at 8.85%, all surrounding cities have rates above 8%, with the lowest being Broomfield at 8.35%.
Where Boulder differs are its regulatory fees. No actual numbers were shared, but the study detailed several stipulations that were unique to Boulder. The city’s fees are higher than its neighbors by a “substantial margin,” the study found.
Two scenarios were presented to show the different requirements in Boulder versus surrounding areas:
For a hypothetical 10,000-square-foot infill construction project, costs included: change of use, temporary certificates of occupancy, impact fees, linkage fees (only applicable in Boulder), final architecture review (only a separate fee in Boulder and Lafayette), final landscape review (only a separate fee in Boulder), final site plan review (only a separate fee in Boulder), combined engineering (only applicable in Boulder), concept plan review and comment, rezoning, site review, use review (only applicable in Boulder and Superior, only a separate fee in Boulder).
For a hypothetical $500,000 tenant improvement project, costs included: permit fee, energy code compliance fee (only applicable in Boulder), plan check, electrical (only a separate fee in Boulder, Lafayette and Superior), mechanical (only a separate fee in Boulder), plumbing (only a separate fee in Boulder), fire (n/a in Boulder, only separate fee in Lafayette), demolition, signs (only separate fee in Boulder and Longmont) and use tax.
Parking requirements were also lower in Boulder than in neighboring cities, the study found, and the most complex to navigate. “Because of the ‘essentially suburban form’ (low-density, auto-reliant development patterns) of the city,” the study said, “lower parking requirements may also make Boulder less attractive to retailers concerned with parking availability for their customers and employees.”
Boulder: Varies by district. But typically 2.5 to 3.3 spaces per 1,000 square feet of space for general retail; 4 per 1,000 sq ft for food service OR 1 space per 3 seats
Broomfield: 5 per 1,000 square feet for general retail; 6.67 per 1,000 sq ft for food service
Lafayette: 5 per 1,000 square feet for general retail; Greater of 6.67 per 1,000 square feet OR 1 space per table for food service
Longmont: 4 per 1,000 square feet of general retail; 12 per 1,000 sq ft of food service (10 per 1,000 sq ft for drive-thrus)
Louisville: 6.7 per 1,000 square feet of general retail; 1 per 3 seats in food service
Superior: 3.3 per 1,000 square feet of general retail (2 per 1,000 sq ft for furniture and appliance stores); Greater of 1 space per 3 seats for food service or 5 per 1,000 square feet (more for fast food)
Regulatory reform in the works
City Council members were very receptive to the idea of easing Boulder’s regulatory burdens on retail businesses, particularly for small and/or independent operators. Councilman Bob Yates said “not a week goes by” that he doesn’t hear from community members about how difficult it is to navigate city processes.
It’s been a problem “for decades,” said councilwoman Cindy Carlisle. “It’s another method of torture in this community.”
Councilwoman Lisa Morzel said the planning process used to be “great” — back in 1986.
“We had a lot fewer regulations then,” noted City Manager Jane Brautigam.
Mayor Suzanne Jones added that each council since that time — including this one — has layered regulations onto existing requirements.
“We make all these bells and whistles that people have to jump through,” she said. “We have met the enemy, and it is us.”
The city is already working on a large-scale paring down of regulations, Brautigam said. All planning and development processes will be re-evaluated by the end of 2020. The finance department is also working to streamline the sales tax process.
“We hope to make significant progress in this area,” Brautigam said. “We are really, really trying on this. This is not something that can change overnight.”
Councilman Aaron Brockett reminded the council that a group was formed to work on this issue in the recent past.
The group “came under some pretty harsh criticism from members of council because it was perceived as working with users who were also developers,” he said. “I would ask us to be receptive, because council has not always been receptive to similar efforts in the past.”
To view a Twitter thread of Tuesday night’s discussion, click here.
— Shay Castle, firstname.lastname@example.org, @shayshinecastle
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