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Economic Development Division | February 2023 | Mayor’s 4-Corner Retail Committee Report Update Background Mayor’s 4-Corner Report Update • Mayor’s 4-Corner Retail Committee was assembled in Fall 2011 • Committee had 22 members: • Property owners, brokers, developers, builders, architects, attorneys, citizens, and the Chandler Chamber of Commerce • Included representation from different property specializations – multifamily, retail, office and industrial • Evaluated intersections where retail was the dominant use, with high vacancy rates and questionable long-term viability • Made recommendations to support redevelopment of underutilized properties 2 Key Issues in 2011 • The opening of Chandler Fashion Center in 2001 led to the relocation of many national retail tenants to the mall area • The opening of the Loop 202 Santan Freeway resulted in a shift in traffic patterns, affecting the viability of shopping centers and retailers in older areas of Chandler • The opening of the Loop 202 Santan Freeway also led to the development of several new power centers, attracting many national tenants • The global financial crisis resulted in bankruptcies and store closures in the retail industry that had a significant impact on Chandler • The financial crisis also affected consumer spending and population growth in Chandler 3 Mayor’s 4-Corner Report Update Alma School Road and Elliot Road Intersections Studied 4 Big Box vacancy Data Sources: CoStar (Vacancy), ESRI Business Analyst (Area Population), City of Chandler (Traffic Count) Mayor’s 4-Corner Report Update Statistic 2011 2022 Intersection Retail Vacancy Rate 53% 14% Estimated Area Population (3-Mile Radius) 124,117 131,465 Intersection Traffic Count 67,200 50,800 Major redevelopment/adaptive reuse/infill projects: El Dorado High School Intersections Studied 5 Alma School Road and Warner Road Big Box vacancy Anticipated Multifamily Redevelopment Anticipated Multifamily Redevelopment Data Sources: CoStar (Vacancy), ESRI Business Analyst (Area Population), City of Chandler (Traffic Count) Mayor’s 4-Corner Report Update Statistic 2011 2022 Intersection Retail Vacancy Rate 20% 15% Estimated Area Population (3-Mile Radius) 136,217 148,544 Intersection Traffic Count 62,100 58,700 Major redevelopment/adaptive reuse/infill projects: Chandler Preparatory Academy Intersections Studied 6 Alma School Road and Ray Road Big Box vacancy City- Owned Data Sources: CoStar (Vacancy), ESRI Business Analyst (Area Population), City of Chandler (Traffic Count) Mayor’s 4-Corner Report Update Statistic 2011 2022 Intersection Retail Vacancy Rate 40% 0% Estimated Area Population (3-Mile Radius) 134,895 147,722 Intersection Traffic Count 61,100 59,100 Major redevelopment/adaptive reuse/infill projects: VASA Fitness Intersections Studied 7 Big Box vacancy Alma School Road and Queen Creek Road Data Sources: CoStar (Vacancy), ESRI Business Analyst (Area Population), City of Chandler (Traffic Count) Mayor’s 4-Corner Report Update Statistic 2011 2022 Intersection Retail Vacancy Rate 33% 10% Estimated Area Population (3-Mile Radius) 68,459 91,158 Intersection Traffic Count 44,700 48,500 Major redevelopment/adaptive reuse/infill projects: Big Air Trampoline Park, Alta Boulders & Fitness Intersections Studied 8 Big Box vacancy Arizona Avenue and Warner Road Data Sources: CoStar (Vacancy), ESRI Business Analyst (Area Population), City of Chandler (Traffic Count) Mayor’s 4-Corner Report Update Statistic 2011 2022 Intersection Retail Vacancy Rate 22% 7% Estimated Area Population (3-Mile Radius) 137,708 148,097 Intersection Traffic Count 62,100 57,400 Major redevelopment/adaptive reuse/infill projects: Bella Grace apartments, AZ Compass Prep School, Uptown Jungle, Alta Uptown apartments (planned) Intersections Studied 9 Big Box vacancy Cooper Road and Ray Road Gilbert Data Sources: CoStar (Vacancy), ESRI Business Analyst (Area Population), City of Chandler (Traffic Count) Mayor’s 4-Corner Report Update Statistic 2011 2022 Intersection Retail Vacancy Rate 68% 3% Estimated Area Population (3-Mile Radius) 121,613 138,691 Intersection Traffic Count 44,500 49,400 Major redevelopment/adaptive reuse/infill projects: EōS Fitness, Cooper Crossing office space Intersections Studied 10 Big Box vacancy McQueen Road and Pecos Drive Medical Reuse Medical Reuse Data Sources: CoStar (Vacancy), ESRI Business Analyst (Area Population), City of Chandler (Traffic Count) Mayor’s 4-Corner Report Update Statistic 2011 2022 Intersection Retail Vacancy Rate 45% 5% Estimated Area Population (3-Mile Radius) 103,191 127,301 Intersection Traffic Count 40,500 42,400 Major redevelopment/adaptive reuse/infill projects: KTR Indoor Action Sports Playground, McQueen Medical Center Uptown Chandler 11 Mayor’s 4-Corner Report Update • Place branding initiative launched in 2017 to raise awareness of the area with participation from a group of key stakeholders • Established a name for the area that is now used by real estate brokers, developers, and businesses (not ‘donut hole’ anymore) • Branding positions the area’s unique character as a strength for business attraction and redevelopment (casual, eclectic, authentic) • Banners and traffic signal cabinet art installed to enhance sense of place within the area Infill Projects 12 • Project Name: Uptown Commons • Location: Arizona Avenue and Elliot Road (NEC) • Status: Approved • Former Use: Vacant Lot • Future Use: Apartment Complex (252 Units) • Project Name: Elevation AZ 87 • Location: Arizona Avenue and Elliot Road (SEC) • Status: Approved • Former Use: Vacant Lot • Future Use: Apartment Complex (199 Units) Mayor’s 4-Corner Report Update Redevelopment Projects 13 • Project Name: Alta Uptown • Location: Arizona Avenue and Corporate Place (SEC) • Status: Approved • Former Use: Auto Dealership Parking Lot • Future Use: Apartment Complex (425 Units) • Project Name: Alta Chandler at the Park • Location: Alma School Road and Parklane Boulevard (SWC) • Status: Under Construction • Former Use: Office Buildings • Future Use: Apartment Complex (291 Units) • Project Name: TBD • Location: Alma School Road and Warner Road (NEC) • Status: Proposed • Former Use: Sun Village Fair Shopping Center • Future Use: Apartment Complex Mayor’s 4-Corner Report Update Retail Market: Then vs. Now Overall Retail Vacancy Rates 14 Big Box Vacancy (10,000+ Square Feet) *In 2011, the committee defined “East Valley” as consisting of Mesa, Gilbert and Chandler • Retail vacancy rate in Chandler is currently at a 15-year low Mayor’s 4-Corner Report Update Area 2011 (Q3) 2022 (Q3) Phoenix Metro 12.4% 5.2% East Valley* 16.2% 5.2% Chandler 13.2% 4.6% Area 2011 (Q3) 2022 (Q3) East Valley • 117 buildings • 3.5M SF • 42 buildings • 1.5M SF Chandler • 30 buildings • 870,000 SF • 8 buildings • 320,000 SF • Property owners continue to have a hard time finding new retail tenants for vacant big box space Industrial & Office: Then vs. Now Overall Retail Vacancy Rates 15 Big Box Vacancy (10,000+ Square Feet) • Retail vacancy rate in Chandler is currently at a 15-year low Mayor’s 4-Corner Report Update • Property owners continue to have a hard time finding new retail tenants for vacant big box space Uptown Chandler Industrial Vacancy 15.0% 0.4% 11.9% 4.1% Uptown Chandler Office Vacancy Data Sources: CoStar (Vacancy), MAG Employer Database (Jobs) • Economic recovery in these areas has also included base industry growth and new job creation. From 2011 to 2021, Uptown Chandler added more than 580 jobs. Area Plan Updates 16 Mayor’s 4-Corner Report Update • Development Services concept approach is to do ‘neighborhood level’ updates based on the characteristics of each area. Proposed sequence is as follows: 1. Southside Village Area: boundaries are Frye Road to Pecos Road (north to south), and Arizona Avenue to the Union Pacific Railroad from (west to east) 2. Downtown Area: boundaries are Chandler Boulevard to Frye Road (north to south), and San Marcos Estates to Union Pacific Railroad (west to east) 3. North Arizona Avenue Area: boundaries to be determined 4. East Chandler Boulevard Area: boundaries to be determined City Code/Zoning Code Updates 17 Mayor’s 4-Corner Report Update • Proposing to bring City Code/Zoning Code updates to City Council in groups. The first group would be concurrent with the first area plan update (Southside Village Area): 1. Building setbacks for infill development 2. Building height trigger for midrise overlay (45’ to 50’) 3. Murals 4. Mechanical screening 5. Blade sign limitations (enlarge) 6. Single-family permitted in MF-1, MF-2 and MF-3 districts by right 7. Driveways/front yard paving regulations (establish maximum paving allowances) 8. Alleys (permit primary vehicular/pedestrian access) • February 2023 kickoff for Area Plan Updates and City Code/Zoning Code Updates Other Staff Recommendations 18 • Economic Development is also working on recommendations to support redevelopment and placemaking projects: 1. Expand Adaptive Reuse Overlay District Boundaries • Issue: The Adaptive Reuse Overlay District has been successful in facilitating reuse projects, but its geographic scope is very limited • Proposal: Expand the district boundaries to include all parts of Chandler north of Loop 202 Mayor’s 4-Corner Report Update 19 2. Expand the Commercial Reinvestment Program boundaries to match proposed Adaptive Reuse Overlay District and shift focus of program funding • Issue: Program was created to provide reimbursements to private property owners for redevelopment activities, but most financial support is not legal per court ruling of Arizona’s Gift Clause • Proposal: Use funds on public infrastructure upgrades, land acquisition/assembly, and placemaking projects Shade Structures Pedestrian Lighting Murals Midblock Crossings Protected Bike Lanes Mayor’s 4-Corner Report Update Other Staff Recommendations 20 3. Advocate for changes to state legislation that would encourage the redevelopment of underutilized properties to provide new housing units • While redevelopment often seems like an obvious answer, there are additional costs and risks that property owners/developers need to take into consideration: Fragmented Ownership Approval Processes Site Prep/ Restoration Pace of Development Mayor’s 4-Corner Report Update Other Staff Recommendations City Redevelopment Powers 21 • Existing state legislation empowers municipalities to engage in redevelopment, but it cannot produce the large-scale housing development needed in Arizona. • Government processes are slow. • Eminent domain is highly contentious. • Revenue bonds for redevelopment projects are higher risk and less attractive to investors than other revenue bonds (e.g., utilities bonds). ARS Title 36 - Public Health and Safety Chapter 12 PUBLIC HOUSING Mayor’s 4-Corner Report Update City Redevelopment Powers 22 • Additional legislation could be enacted to help municipalities better support private sector led redevelopment projects. • One idea would be to allow municipalities to authorize a temporary property reclassification for redevelopment projects that create new housing units. • Reclassifying to Class Six would lower the assessment ratio from 10% to 5% for residential projects, substantially reducing property taxes. Over time, cumulative savings would offset the higher costs of redevelopment. • Factoring this benefit into a pro forma, developers would be able to see they can achieve their required internal rate of return from the redevelopment project. Mayor’s 4-Corner Report Update Proposed State Legislation 23 Process for Municipalities to Authorize Property Reclassification: Developer submits a site analysis to the municipality explaining how the property satisfies the conditions for a slum or blighted area designation under ARS 36-1471. Municipality adopts a resolution pursuant to ARS 36-1473 finding and declaring the site a slum or blighted area and that redevelopment is necessary. Developer submits a redevelopment plan to the municipality pursuant to ARS 36-1479. Municipality contracts for an economic and fiscal impact analysis pursuant to proposed section ARS 36-1492. Mayor’s 4-Corner Report Update Proposed State Legislation 24 Process for Municipalities to Authorize Property Reclassification (continued): Developer and municipality enter into a redevelopment contract authorizing real property reclassification to Class Six for seven years (5% assessment ratio). County assessor establishes a base tax payment using the current year real property tax bill. During reclassification, property taxes paid to any district cannot be less than its share of the base tax payment. Property significantly increases in value following redevelopment. Developer pays lower property taxes than usual due to reclassification, helping to offset site restoration costs. Mayor’s 4-Corner Report Update Case Study 25 Sun Village Fair Towne Center • Built in 1991 • 158,000 SF of retail space on 17.3 acres • Grocery store anchor left in 2016; 84,000 SF space remains unfilled • Current occupancy rate is 23% • Tenant mix includes cash for gold, payday loan, furniture rental businesses Riata Apartments • Built in 2019 • 300 units on 8.6 acres (50% of Sun Village land area) • 93% occupancy rate (City avg. is 92%) • $1,810 average rent (City avg. is $1,886) • Sold in November 2020 $91 million / $303,333 per unit Data Sources: CoStar commercial real estate database Mayor’s 4-Corner Report Update Case Study: Property Taxes 26 Sun Village Fair Towne Center Riata Apartments Data Sources: Maricopa County Assessor’s Office, Maricopa County Treasurer’s Office 2021 Taxes Full Cash Value $11,451,400 Limited Property Value (LPV) $10,851,271 Assessment Ratio 18% Assessed LPV $1,953,228 Property Tax Bill $232,520 Property Tax / SF Land $0.31 2021 Taxes Full Cash Value $66,000,000 Limited Property Value (LPV) $42,777,000 Assessment Ratio 10% Assessed LPV $4,277,700 Property Tax Bill $469,088 Property Tax / SF Land $1.25 Mayor’s 4-Corner Report Update Case Study: Property Taxes 27 Sun Village Fair Towne Center Riata Apartments Data Sources: Maricopa County Assessor’s Office, Maricopa County Treasurer’s Office 2021 Taxes Full Cash Value $11,451,400 Limited Property Value (LPV) $10,851,271 Assessment Ratio 18% Assessed LPV $1,953,228 Property Tax Bill $232,520 Property Tax / SF Land $0.31 2021 Taxes If Reclassification Was Applied Full Cash Value $66,000,000 Limited Property Value (LPV) $42,777,000 Assessment Ratio 5% Assessed LPV $2,138,850 Property Tax Bill $234,544 Property Tax / SF Land $0.62 Mayor’s 4-Corner Report Update Case Study: Fiscal Impact Analysis 28 Data Sources: Used “Community Project Assessment System” developed for the City of Chandler by Applied Economics Sun Village Fair: Inputs & Assumptions • 158,000 SF shopping center • No investments made in renovations • 35,658 occupied SF (23% occupied) • $22 per SF annual lease rate • $300 per SF average in-store retail sales • 65 full-time employees (1 per 550 SF) • $41,600 average salary ($20 per hour) Riata Apartments: Inputs & Assumptions • 300 new housing units constructed • $81.9 million capital investment • 18-month construction period • 50% occupied in year built; 93% after • $1,810 per unit rent • $86,880 average household income • Reclassification benefit for first 7 years Mayor’s 4-Corner Report Update Case Study: Fiscal Impact Analysis 29 Data Sources: Used “Community Project Assessment System” developed for the City of Chandler by Applied Economics Sun Village Fair: 10-Year Impacts • Negative net fiscal impact on the city • Net income of -$81,307 • General Fund Revenues: $1.67M • General Fund Expenses: $1.75M • Revenues include property taxes, commercial lease tax, retail sales tax, local spending by employees • Most significant expense is public safety Riata Apartments: 10-Year Impacts • Positive net fiscal impact on the city • Net income of $1.94M • General Fund Revenues: $5.21M • General Fund Expenses: $3.27M • Revenues include property taxes, building permit/plan review fees, construction TPT, residential lease tax, state shared revenues, local spending by residents Mayor’s 4-Corner Report Update 30 • The 4-Corner report intersections are performing better now than in 2011 with redevelopment/reuse projects and an improved retail market lowering vacancies. • The City has actively helped to revitalize and bring new uses to these areas. • Staff recommends the City take the following additional, proactive steps: • Implement City Code/Zoning Code Updates • Expand Adaptive Reuse Overlay District • Invest in Placemaking Activities • Strategic Parcel Assemblage • Work with Partners to Propose Redevelopment Legislation Mayor’s 4-Corner Report Update Recap & Staff Recommendations Thank you! Questions?