City of San Carlos - Real Estate Market Study (November 13, 2006)

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Report to Council - Real Estate Market Study by Bill Lee, ERA (November 13, 2006)

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Attachment:        Real Estate Market Study of San Carlos – September 2006  icon - pdf

To: City Council

Date: November 13, 2006

From: Brian Moura, Assistant City Manager/Acting Economic Development Manager

Subject: Report to Council – Presentation of Real Estate Market Study by Economics Research Associates (ERA)


Background

The City Council approved a contract with Economics Research Associates (ERA) to prepare a Real Estate Market Study of San Carlos. ERA has done a number of Market Studies of San Carlos over the past 20 years and their work has been valuable in identifying market niches and Economic Development opportunities for the City. A copy of the Market Study document is attached.

 

Staff sees this Market Study as the starting point for the City’s Economic Development Plan. The information in this study will be used by Staff and the consultant retained by the City (RSG) to explore the Economic Development opportunities that are present today in San Carlos.

 

Report Highlights

In this Market Study, ERA reviews the market potential for Retail, Hotel, Office and R&D/Flex developments in San Carlos. They conclude that in the short term, Retail and Hotel development is the most likely to occur in specified areas in San Carlos. Longer term, ERA sees opportunities in these segments as well as the Office and R&D/Flex segments.

 

Also noteworthy in the Market Study are 4 Economic Development “strategies” that ERA sees as areas that are opportunities in San Carlos. These strategy areas are:

1. Reinforce the concentration of construction related businesses on the Eastside in the area bounded by Old Country Road, Industrial Road, Terminal Way and Bing Street.

2. Encourage medium to larger floor plate retail redevelopment in the corridor along Industrial Road from opposite the parcel designated for hotel use at Holly Street and Industrial Road, along Industrial Road next to Highway 101 to the off-ramp of Highway 101 at Brittan Avenue and Industrial Road.

3. Use the City’s properties at Wheeler Plaza to create a landmark town center project.

4. Explore the transition of the Shoreway Road Area to a concentration of biotechnology uses.

 

Comments and Discussion from EDAC

The Real Estate Market Study was presented to the City’s Economic Development Advisory Commission at their October 4, 2006 meeting. EDAC has been involved from the start of this project and met with the ERA staff earlier this year prior to the preparation of the report. The Commission discussed the report findings with Mr. Lee and his staff and here are some highlights of that discussion from the October EDAC meeting:

 

1. Construction Related Businesses

ERA noted that business to business sales (construction supplies, electrical and lighting, etc.) represents one third of the sales tax in San Carlos. These business to business sales not only generate sales tax revenue for the City but they also keep high paying blue collar jobs in the community and support high land values to locate in the San Carlos market. Mr. Lee suggested that firms such as Lowe’s and Expo Home Center would be logical additions to the strong Business and Materials segment that has long led the City’s business economy and the sales tax revenues.

 

2. Encourage Medium and Larger Floor Plate Retail on Industrial Road

Bill Lee said this stretch of Industrial Road with its excellent Highway 101 visibility offers the City an opportunity to enhance this type of retail development in San Carlos and would result in reserving good regional retail locations in San Carlos. He feels that it is a key economic development opportunity that should be explored by the City.

 

3. Development of Wheeler Plaza Area into a Town Center

ERA sees the City’s ownership of this parking plaza and several businesses in this area as an opportunity for Downtown San Carlos to offer a better balance of unique local stores and some desirable national retailers. Its development should strengthen the overall vitality of Laurel Street rather than threaten locally owned businesses. In response to questions from EDAC members, Mr. Lee suggests that an effort to design what such a project would look like along with an economic analysis of its viability would be helpful as a next step. He believes that such a design/economic study could be done for $10,000 - $20,000.

 

4.   Transition Shoreway Road Area to Biotech Uses

ERA sees this strategy as the most speculative of the four due to heavy competition for biotech firms in the area and varying estimates of the growth of this market segment.  They note that a biotech developer has bought the Shoreway building that formerly housed the Cell Net firm in San Carlos, so some biotech development at that site seems likely.

 

5.   Retain Tesla Motors in San Carlos

Mr. Lee noted that Tesla Motors, a company manufacturing electric cars on Bing Street, has grown to over 100 employees.  He suggested that the City work with that company to try and retain their operations in San Carlos – both to cultivate sales tax revenues for the City and the high paying jobs that the firm generates.

 

6.   Prospects for Hotel Development

EDAC members had several questions about the prospects for more hotel development in San Carlos.  They noted it is appealing since it generates low amounts of traffic yet can be very financially rewarding for the City.  Mr. Lee indicated that the market study analysis suggests that the first phase of additional hotel development in San Carlos is still a few years away.  ERA also feels that when more Hotel development does come to San Carlos, it will probably result in two or three hotels in the three star market (100-200 rooms per hotel) rather than one large hotel in the 500 - 600 room range.

 

7.   Impact of PAMF Proposal on Economic Development in San Carlos

EDAC members also asked ERA about their views on the use of the 301 Industrial Road property (former EIMAC/Varian site) and the proposal by the Palo Alto Medical Foundation (PAMF) to place a Clinic, Medical Office Building and Hospital on that site.  Mr. Lee said that he believed approval of the proposal would likely generate more medical and medical-related uses in that area of San Carlos.  He did not believe that the construction of the PAMF development would significantly impact interest in hotel development in San Carlos.  He also expressed concern that the PAMF proposed project would “eat up” some of the remaining traffic capacity on the East Side of San Carlos, thereby limited the City’s other economic development opportunities.

 

8.   Location of Future Mixed Use and Housing Projects

In response to EDAC member questions about mixed use projects that would include retail and housing, Mr. Lee indicated that he thought these were best placed on the West Side of the Railroad Tracks rather than in the East Side of San Carlos.