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HomeMy WebLinkAboutContract No. 2014-2608000 WCOMB qROURLtd. 0110TEAL STATE AN 000 RE EC C ON SULTANTD S October 24, 2014 Mr. Joe Hogeboom Community Development Director CITY OF COLUMBIA HEIGHTS 590 — 40'h Avenue NE Columbia Heights, Minnesota 55421 Dear Mr. Hogeboom: , M Following up on our recent phone conversation, we have prepared a work program to conduct market analysis to identify retail market demand for retail stores, restaurants, and services that could occupy vacant retail space in the Central Valu Center and other vacant locations in Columbia Heights. Rainbow, Columbia Heights' only full service supermarket, closed Roundy's left the Twin or Columbia Heights residents are Cub Foods Cities market. The only full service grocery options f t cl n in stores in Fridley, New Brighton, St. Anthony, and Minneapolis, A SuperTarget is in Fridley, but their grocery offerings are more limited than the typical supermarket. Aldi is a limited selection, low price store stocking primarily private label groceries and does not serve all of the needs of Columbia Heights residents. Notwithstanding the competition from Cub Foods and SuperTarget, the Rainbow store had estimated annual sales of about $16.0 million, representing customers that choose not to shop at Cub Foods or SuperTarget. This sales volume is sufficient to support a smaller grocery store. Rainbow was a victim of the rapid expansion of Walmart and Target into the grocery business. Expansion of Target and Walmart superstores, each with 50,000 to 55,000 square feet of grocery items, has reduced sales at the supermarkets including Cub Foods and Rainbow. Since the superstore trend began in 2001, 25 SuperTarget and 17 Walmart Supercenter stores have opened in the Metropolitan Area. Walmart initially opened seven stores and began a second wave of supercenter development in 2012 and has opened 10 stores and is planning more. At the same time, drug stores, dollar stores, and other retailers increased their grocery offerings. The magnitude of this change in grocery shopping is demonstrated by change in retail sales of grocery stores and warehouse clubs in the Metropolitan Area between 2002 and 2007, the latest information available. Grocery store sales decreased by $545 million (11.6 percent); while 222 South Ninth Street Suite 480 Minneapolis, Minnesota 55402 - (612) 339-7000 Fax: (612) 338-5572 Mr. Joe Hogeboom October 24, 2014 Page 2 warehouse club and superstore sales increased by $1,635 million (160.0 percent). About half of this increase was groceries. This shift in grocery shopping has changed the grocery business. Changes in consumer grocery shopping trends has spurred the expansion of smaller grocery stores with store sizes ranging from 12,000 to 30,000 square feet focused on specific grocery market segments. Examples include Trader Joe's, Aldi, and a host of smaller supermarkets and natural food retailers. These stores that are expanding are one-fifth to one-third the size of the typical Rainbow store. Grocery stores that are expanding in the Twin Cities, except Hy-Vee, are seeking stores that are much smaller than the typical Rainbow store indicating that these stores must be subdividing to accommodate new tenants. In some cases, it may be more feasible to demolish the vacant store and build a new retail building designed to accommodate the new retail stores that would be market feasible. � _:�l The objective of this work scope is to identify retail stores, restaurants, and services that could occupy existing or new space in Central Valu Center or other vacant locations in Columbia Heights. This objective will be accomplished by: • Delineating Columbia Heights' trade area, evaluating its demographic characteristics, and estimating sales potential by store type. • Evaluating Columbia Heights' retail areas and identifying its retail tenants. • Identifying vacant retail space and developable vacant land in Columbia Heights. • Evaluating Columbia Heights' historic retail sales, estimating market share, and identifying sales potential for retail stores, restaurants, and services to identify stores that could be successful in Central Valu Center and other Columbia Heights locations. • Conducting a voids analysis to identify store categories that are under-represented or not located in Columbia Heights. • Identifying retail, restaurant, and service uses with sufficient sales potential to be successful in Columbia Heights and compare desired store size with available vacant space. Presenting recommendations on steps needed to create store sizes desired by potential tenants. The work program described below is designed to identify tenants to occupy existing or new space in Columbia Heights. Mr. Joe Hogeboom October 24, 2014 Page 3 WORK PROGRAM The work program outlined below is designed to fulfill the above objective. Specific work tasks are summarized below. 1. Trade Area Analysis The trade area for Columbia Heights will be delineated based on arterial road patterns, drive times, and past McComb Group research. Trade area delineation will take into consideration physical barriers and competitive shopping areas in surrounding communities. The economy of the trade area will be analyzed to identify and quantify those factors that generate support for retail, restaurant, and service establishments. Factors to be evaluated include, but are not limited to: daytime employment, population, households, and household income for 2000, 2010, 2014 and 2019. Retail purchasing power and trade area households will be identified for target years of 2015 and 2020. Our proprietary purchasing power model includes over 120 types of business establishments. A list of these business establishments is attached. 2. Columbia Heights Retail Evaluation Columbia Heights' retail areas will be visited to identify existing retail stores, restaurants, and services to determine Columbia Heights' tenant mix. Retail establishments in Hilltop and Fridley will be identified separately. Individual business establishments will be identified and categorized by type and by area. Vacant retail space in Columbia Heights will be identified by location and size including developable vacant land. The vacant Rainbow store interior will be examined to determine if and how it could be subdivided. Owner cooperation will be required for this visit. Owners or brokers of vacant spaces and land will be contacted to obtain information on leasing activities and other information relevant to their property. 4. Retail Sales Trends Retail sales trends for Columbia Heights will be analyzed utilizing information from the Census of Retail Trade for 2002 and 2007, and updated with Minnesota sales tax information to determine 2012 retail sales. Retail sales by store type will be compared with purchasing power to determine current market share. Retail sales potential in Columbia Heights will be estimated taking into consideration competitive impacts, trade area demographics, trade area purchasing power, and estimated market share. Based on this analysis and current trends, future retail, restaurants, and services sales potential will be estimated by business type. These retail sales estimates will be converted to square feet of retail space by business establishment. Those businesses b I — OTIr, r-I October 24, 2014 Page 4 with sufficient retail sales for profitable operation in Columbia Heights will be identified. Estimates of retail, restaurants, and services space supported by sales potential will be prepared for target years 2015 and 2020. 6. Voids Analysis and Retail Store Demand The Columbia Heights retail tenant mix (Task 2) will be compared with the results of retail sales potential (Task 5) to identify store categories that are under-represented and not located in Columbia Heights. This list will be further refined to identify typical retailers and store size in each category. 7. Retail Space Characteristics Prototypical store size requirements for each store will be compared with vacant spaces in Columbia Heights to determine if existing spaces are consistent with retail store size, Central Valu Plaza will be examined to determine if subdividing the large vacant space is a viable remerebandising option or if a newly constructed building would benecessary to attract the store types with sales potential, 8. Recommendations Recommendations will be formulated identifying actions that should be taken to improve the marketability of vacant spaces or land parcels. The results of our work will be documented in a final report designed to meet client needs. The report will contain appropriate graphics and explanations of our principal findings, conclusions, and recommendations. Three meetings are planned during the course of the evaluation to keep the client informed of our progress and findings. These meetings include the following: + Start-Up Meeting will be held at the beginning of the engagement to finalize research objectives and obtain client-provided information. Progress Meeting will be held with the client to discuss preliminary results of the market analysis, retail sales potential, and retail store demand. Report Meeting will be held to present results of our work and recommendations with the client. This meeting will cover all aspects of the research program. The budget provides for three meetings as described above. Additional meetings will be billed at our normal hourly rates plus expenses. Mr. Joe Hogeboom October 24, 2014 Page 5 Wal, WIN An optional task is described below that you may wish to consider. 1. Marketing Materials Information from the above tasks will be summarized to create marketing information that can be targeted at specific retail stores, food services, and services. This marketing information will be prepared in a form that can be used with other Columbia Heights marketing materials. The cost for this task is $2,500. The market research described in this proposal can be completed within an eight-week period following receipt of a signed engagement letter and retainer. QUALIFICATIONS AND EXPERIENCE McComb Group, Ltd. is a full-service retail and real estate co sul ing f specializing in market n t firm s research and financial feasibility. The firm has extensive experience in the retail industry and has conducted market research for retail stores and shopping centers of all types including regional malls, community centers, and specialty centers. McComb Group, Ltd, has a team that is qualified to conduct the research described in this proposal. McComb Group's professional staff associated with this engagement includes the following: James B. McComb, President, founded the predecessor of McComb Group in 1974 following six years as a member of the corporate staff with Dayton Hudson Corporation. His experiences at Dayton Hudson and daily association with merchants and shopping center developers provided the impetus for McComb Group's approach to shopping center and retail market research and financial feasibility, which includes strong elements of design and merchandise sensitivities. The firm's approach to shopping center research an d marketing has undergone continuous development and refinement over the past 37 years, Linda Oie, Senior Associate, has 27 years experience conducting market, demographic, and consumer research, Ms. Oie manages the firm's geographic information systems (GIS) and demographic databases using a variety of computer platforms and proprietary software. Prior to joining McComb Group, Ms. Oie was employed as Marketplace Information Manager at SuperValu, Inc. Her responsibilities included conducting strategic consumer- based analysis of existing and prospective supermarkets, profiling SuperValu customers, and delineating trade areas for existing and proposed stores. 4 Susan Nache, Consultant, has 16 years of experience and performs market research, demographic analysis, and consumer research tasks, Ms. Nache conducts consumer Mr. Joe Hogeboom October 24, 2014 Page 6 research analysis and cross-tabulation on McComb Group's survey processing software; and utilizes McComb Group software programs for financial feasibility and statistical analysis. . Mi. McComb will be responsible for managing and directing the overall research program and will participate directly in findings and conclusions. Individual work tasks will be assigned to personnel within the firm based on qualifications and experience. BUDGET The budget for the work program and work products described in this proposal is shown below Professional Services Budget Trade Area Analysis $ 1,750 Columbia Heights Retail Evaluation 1,600 Vacant Retail Space 1,200 Retail Sales Trends 1,900 Retail Sales Potential 1,400 Voids Analysis and Retail Store Demand 2,500 Retail Space Characteristics 800 Recommendations 1,100 Report Preparation 850 Meetings 1,400 Total Professional Services $14,500 Expenses (Estimated) Mileage $100 Demographics Services 250 Computer and Software 200 Report Production 800 Reproduction 100 Miscellaneous 50 Total Expenses $ _1,500 TOTAL. GET 516,000 The professional fees for the services outlined in this proposal total $14,500 and will be performed at a price not-to-exceed that amount. Expenses, estimated at $1,500, are to be reimbursed based on actual cost. The budget is based on the amount of time required to perform the work tasks and our normal hourly billing rates of $275 for principals, $200-$275 for executive associates, $150 for senior associates, $125 for associates, and $75 -$100 for consultants. Company policy requires a retainer of approximately one-half the estimated budget for the project or $8,000. The retainer will be applied to the final invoice as a credit for billing of professional services and expenses. Invoices for professional services and expenses will be rendered at mid- month and month-end as our work progresses. Mr. Joe Hogeboom October 24, 2014 Page 7 Standard billing terms are net ten days, A finance charge of 1.5 percent will be charged on all unpaid balances outstanding more than 30 days. This proposal was prepared with the understanding that the results of our work will be used by the client to identify the types of stores that can be attracted to Columbia Heights. Our report will be prepared for that purpose and will be subject to the following qualifications: Our analysis will not ascertain the legal and regulatory requirements applicable to this project, including zoning, other state, and local government regulations, permits, and licenses. No effort will be made to determine the possible effect on the proposed project of present or future federal, state, or local legislation, or any environmental of ecological matters. 4 Our report and analysis will be based on estimates, assumptions and other information developed from research of the market, knowledge of the industry and discussions with the client. Some assumptions inevitably will not materialize and unanticipated events and circumstances may occur; therefore, actual results achieved will vary from the analysis, * Our analysis will not evaluate management's effectiveness or be responsible for future marketing efforts and other management actions upon which actual results are dependent. * Our report will be intended solely for the purpose described above and should not be used for any other purpose without our prior written permission. Permission for other use of the report will be granted only upon meeting company standards for the proposed use. These qualifications will be included in our final report. If the report is used for purposes other than specified above, we reserve the right to review the materials for proper use of our work. ME Date., A -WAS- U Date., A RETAIL STORE S A SERVICES CONTAINED IN PROPRIE'T'ARY PURCHASING POWER MODEL SHOPPING GOODS CONVENIENCE GOODS General Merchandise Food Stores Discount stores Grocery stores Department stores Supermarkets Warehouse clubs & supercenters Convenience food Variety stores Specialty food stores Miscellaneous general merchandise Meat Markets Apparel & Accessories Fish & Seafood Markets Clothing Stores Fruit & Vegetable Markets Mens and boys Other Specialty Food Stores Women clothing Baked Goods Children's & infant Confectionery and Nut Stores Family clothing All Other Specialty Food Stores Clothing accessories stores Other Convenience Goods Other clothing stores Drug & proprietary stores Shoe Stores Hardware Men's Liquor Women's Florist Children's & infant Food/health supplement stores Family shoe stores Food Service & Drinking Places Athletic footwear Full - service restaurants Furniture & home Furnishings Limited service restaurants Furniture Cafeterias Floor coverings Snack & Beverage Places Window treatment stores Ice Cream & Soft Serve All other home furnishings stores Frozen Yogurt Electronics & Appliances Stores Doughnut Shops Household appliance stores Bagel Shops Radio, tv & electronics stores Coffee Shops Computers & Software Cookie Shops Other Shopping Goods Other Snack Shops General Line Sporting Gds. Specialized food places Specialty Line Sporting Gds. Drinking places Book stores - general Gasoline Svs Stations /Cony. Specialty book stores Gas /Convenience food stores News dealers Other Gas Stations & Truck Stops Stationery Stores and Office Supply Musical Instrument & Supplies O'T'HER RE'T'AIL STORES Jewelry stores Building Materials & Garden Supplies Hobby, toy & game Home centers Camera & photographic supply Paint, glass & wallpaper Gift, novelty & souvenirs Other building materials Luggage & leather goods Outdoor power equipment Sewing, needlework & piece goods Retail nurseries, lawn & garden Pet stores Motor Vehicles & Parts Dealers Art dealers Automotive dealers Optical goods stores New and used car dealers Pre - Recorded Tapes, Compact Discs Used car dealers Cosmetics, beauty supplies & perfume Mise, motor vehicle dealers All other health & personal care Boat dealers Used Merchandise Stores Recreational vehicle dealers Motorcycle dealers All other automotive dealers Auto parts, accessories & tires Auto parts & accessories stores Tire dealers RETAIL STORES t SERVICES SERVICES HEALTH CARE Personal Care Services Offices of physicians (except mental health specialists) Barber shops Offices of physicians, mental health specialists Beauty shops Offices of dentists Nail salons Offices of chiropractors Diet & weight reducing services Offices of optometrists Other personal care services Offices of mental health practitioners (except physicians) 1tDrycleaning and Laundry Services Speech therapist & audiologists Coin- operated laundries & drycleaners Physical & occupational therapists Drycleaning & laundry services (except coin -op.) Offices of podiatrists {Other ]Personal Services Offices of all other mist, health practitioners Child Day Care Services Outpatient care centers Funeral Homes & Funeral Services Mental health & substance abuse Photographic Services Kidney dialysis centers Photographic Studios All other outpatient care centers Veterinarian Services Home health care services Pet Care Rental and Leasing Formalwear and costume rental Video tape and disc rental Home health equipment rental Recreation Bowling centers Physical fitness facilities Golf Courses and Country Clubs Professional Services Offices of real estate agents & brokers Insurance agencies Offices of lawyers Tax preparation services Interior design Household Goods Repair Home & garden equipment repair Appliance repair Reupholstery & furniture repair Footwear and leather goods repair Watch, clock and jewelry repair Garment repair and alteration services Computer office machine repair Automotive Repair and Maintenance General automotive repair Automotive exhaust system repair Automotive transmission repair Brake, front end & wheel alignment Eletrical Repair Shop, Motor Vehicle Paint or body repair shops Automotive glass replacement Automotive oil change & lubrication shops Carwashes