PC-2 study: Commercial space could be excessive
The draft economic impact analysis for Boca Sierra Estates shows some components of the proposed development would have a positive impact on Truckee – but the numbers don’t necessarily add up for other parts, including the 85,000 square feet of commercial space and 80,000-square foot supermarket center.
“In summary, it is estimated that the proposed project will have a positive impact on Truckee’s economy, but the development of 125,000 square feet of commercial space cannot be supported without a significant loss of sales revenues currently earned by existing establishments,” the report noted. The analysis is based upon the existing population plus PC-2, with no calculation for other growth in Truckee.
“What it’s telling us is that we shouldn’t be approving a specific plan that would allow 125,000 square feet of retail space to happen that first year,” Truckee Community Development Director Tony Lashbrook said. “It’s at least a call for phasing, if not an outright reduction in commercial space.”
Lashbrook said the town wants a phasing program for the development based on expected market demand.
“That’s not in the first draft,” he said. “We need that.”
The Boca Sierra Estates Specific Plan proposes to develop 789 acres at the intersection of Interstate 80 and the Highway 267 Bypass.
The Hopkins Family, which owns the property, proposes to develop an 80,000-square foot grocery store center west of Highway 267 adjacent to Interstate 80, and an 85,000-square foot commercial village east of the highway. The village would include 45,000 square feet of general commercial retail and 40,000 square feet of office space.
A 15-room destination resort and spa and an 18-hole golf course with pro shop and clubhouse would be located alongside the commercial village.
The proposed project would also develop 600 housing units – with 100 to 150 multifamily residences and the remainder as single family homes.
About 500 acres of the project would be dedicated as open space.
According to the report, the proposed general commercial space at PC-2 would have a significant impact on existing specialty retailers, apparel shops, restaurants and home furnishing establishments.
Existing businesses in those categories could be expected to lose between $3.25 and $8.19 million out of their current $58.7 million captured, the analysis revealed.
“On average, each business will lose between 6 and 14 percent of sales,” the analysis stated. “The existing small businesses will have to compete harder with each other. Some businesses will be able to absorb the losses. For other businesses the lost sales will be devastating, and may lead to store closures.”
The analysis, which assumes no businesses will relocate as a result of PC-2, said businesses in the development’s commercial space could generate $12.75 million in sales.
Of that total, $4.9 million could consist of sales which are currently leaving Truckee, and $4.6 million from new growth created by PC-2. The remainder, $3.25 million, would be captured from existing businesses.
Of the 85,000 square feet of commercial space created by the project, at least 24,500 square feet would be oversupply, the report stated.
“This oversupply indicates that the general commercial space proposed at PC-2 will either lag in performance behind Truckee’s other commercial districts, or be very successful and take business away from the other commercial districts,” the report noted.
“In either case, the oversupply of space will create vacancy and blight.”
Lashbrook said the analysis was based on a buildout of all retail in PC-2 commercial within two years, and did not factor in additional growth outside of the development. He said that in past years between 280 and 290 homes have been built in Truckee. The past year, more than 400 homes were built.
Grocery store impacts
Figures for the proposed 80,000-square foot grocery store center indicate that it would have to capture $11.4 million in sales from existing Truckee grocery stores in order to be financially feasible. It could capture $1.4 million in sales leakage from the community and $1.3 million from the PC-2 housing, for a net positive impact of $2.7 million.
The analysis details three scenarios which could unfold as a result of the new supermarket opening:
– The new supermarket may underperform for years as it struggles to capture sales away from more established commercial areas.
– The new supermarket will be immediately successful at capturing sales away from the existing stores. Existing stores will stay open and earn reduced revenues.
– One of the existing supermarkets will close due to loss of sales.
The analysis noted that existing Truckee supermarkets would continue to make profits if the PC-2 grocery store is built, although not at the current levels. Existing sales performance places Truckee’s supermarkets somewhere between the top two and 10 percent of national performers. If the new store captures $14.1 million in sales the other supermarkets would continue to be above average, with $29.4 million in annual sales.
According to the analysis, sales captured by the existing stores would have to fall below $24.7 million before Truckee would face a possible store closure.
In order for the new supermarket to support itself without drawing sales away from the other stores, an additional 4,400 units of housing would have to be built outside of PC-2.
Golf course impacts
The analysis said it will be necessary to develop a high-quality championship golf course in order to compete as a golf destination and attract visitors to the resort. It estimated that the course could expect 25,000 rounds of play during a 6-month season, with estimated green fees of more than $100 per round.
Additional revenues could be earned during the winter months if groomed cross country ski trails or other types of snow play are offered. The course could annually generate $2.75 million in green fees, $125,000 in golf cart rentals, $180,000 in pro shop sales, $110,000 in snack shop sales and $62,000 in driving range revenue – for a total of $3.23 million.
The analysis noted that the the proposed 150-room destination resort would create a positive impact on Truckee’s economy, contributing an estimated $3 million per year in room revenues. Guests would also spend an estimated $4 million yearly on shopping, gifts and eating out.
“Most importantly, the proposed destination resort will help diversify Truckee’s visitor base, which is dominated by second homes,” the analysis stated. “A destination resort with an expected 60 percent occupancy rate will diversify Truckee’s tourist industry.”
The analysis said the proposed 600 new homes at PC-2 would provide a positive economic contribution to the local economy, generating a demand for $5.8 million in additional commercial services.
“However, only $1.9 million of the demand can be captured by the store types proposed for PC-2, the analysis noted. “Most of the new commercial demand will be for store types not in Truckee, such as automobile dealers, discount stores, warehouse clubs and others.”
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