Item 3 - North 40 Phase 1To:
From:
Subject:
CDAC 11-11-15
ITEM 3
MEMORANDUM
COMMUNITY DEVELOPMENT DEPARTMENT
Conceptual Development Advisory Committee • ,/_, ~ ,
Laurel R . Prevetti, Town Manager/Director of Community Dev~~ 11/J
Phase 1 North Forty Specific Plan Area
Conceptual Development Advisory Committee CD-15-005
Requesting review of conceptual plans to implement Phase 1 of the North 40
Specific Plan. APNs: 424-07-024 through -027 , -031 through -033 , -035 , -070, -
083 through -086, -090, and -100.
PROPERTY OWNERS: Grosvenor USA Limited, Summerhill N40 LLC, Thomas
Yuki, Elizabeth Dodson, and William Hirschman
APPLICANT: Grosvenor USA Limited
PROJECT PLANNER: Marni Moseley
Date: November 5, 2015
REMARKS:
The Conceptual Development Advisory Committee (CDAC) discussed the proposed application
at the October 14, 2015 meeting (Report and attachments can be accessed at
http ://www.losgatosca.gov/AgendaCenter/Conceptual-Development-Advisory-Committe).
The draft meeting minutes from the October 14,2015 meeting are included as Item 1 on the
agenda. The applicant has provided additional materials in response to the October discussion (see
Attachments 6 through 9).
As set forth in the North Forty Specific Plan, an economic study is needed to evaluate the proposed
commercial development and its potential competitiveness with downtown (see Attachment 9).
The Committee is encouraged to review and discuss the study. Time permitting, the Committee
may wish to continue to discuss the items not covered at the previous meeting, or set a special
meeting to continue the discuss ion.
Attachments received with October 14, 2015 C DAC report:
1. Location map (one page)
2. CDAC application (s ix pages)
3. Applicant's letter (six pages)
4 . BMP Program Details (seven pages)
5 . Conceptual Plans (16 pages)
Conceptual Development Advisory Committee
November 11 ,2015
Page2
Attachments included with this CDAC report:
6. Cover letter from Grosvenor, Eden Housing, and SummerHill Homes dated October 21,
2015
7. Multi-modal exhibits
8. Revised BMP Plan and letter from Barbara E. Kautz
9. Economic Study
Distribution :
Grosvenor USA Limited, I California Street, Suite 2500, San Francisco, CA 94111
Elizabeth Dodson and William Hirschman, 15055 Los Gatos Blvd., Suite 310, Los Gatos, CA 95032
Thomas Yuki , 15495 Los Gatos Blvd., Los Gatos, CA 95030
Summerhill N40 LLC , 5000 Executive Parkway, Suite 450, San Ramon, CA 94583
N:\DEV\CDAO CDAC MEMO\N orth 40 -Phase I . l l -11-IS.docx
GROSVENOR
Mr. Joel Paulson
Town of Los Gatos Planning Department
110 E. Main St.
Los Gatos, California 95031
Dear Joel:
~
EDEN SUMMERHILL HOMES -
HOUSI NG C OMM U N I T II S O r O I ST I N C I"ION
October 21, 2015
We appreciate the feedback that CDAC provided on October 14th. Unfortunately, due to time
constraints we were not able to have discussion on all of the issues that the Committee raised.
With that, we look forward to continuing the dialogue at the upcoming CDAC meeting . Members
of the Committee specifically raised the following issues for future discussion:
• The on-and off-site North 40 multimodal opportunities (see attached); and
• The relocation of the existing walnut trees or the planting of new walnut trees in the 30'
agrarian setback along Lark.
In addition we are hopeful to be able to distribute the Economic Impact Analysis at the nex t
meeting based on the scope that we vetted with the Committee on October 14th. Unfortunately,
it is not ready for distribution in the CDAC packet at this time.
Finally , there was significant discussion about our proposal on how to comply with the Town 's
BMP ordinance. Our attorney, Barbara Kautz, has prepared a separate letter regarding our
proposal, which we request be distributed to the CDAC members.
Thank you, and we look forward to the November 11th CDAC meeting .
Sincerely,
A . Don Capobres
Senior Vice President
Grosvenor
Linda Mandolini
Pre sident
Eden Housing
Wendi Baker
Vice President of Development
SummerHill Homes
ATTACHMENT 6
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PREUMINARY CONCEPT PLAN FOR LARK AVENUE BIKE LANES I MULTI-USE PATH
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TOWN COUNCIL VISION
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on the Town 's mfrast ructure ,
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11
goldfarb
Iipman
attorneys
M Dav id Kroot
lynn Hutchins
Koren M. Tiedemann
Thomas H. Webber
Dionne Jacks on Mclea n
Michelle D. Brewe r
Jenn ifer K. Bell
Robert C. Mills
Isabel l. Brow n
1300 C loy Street, Eleventh Flo or
Oakland, Calilo rnta 94612
51 0 836-6336
October 21 , 2015
Laurel Prevetti, Town Manager
Town o f Los Gatos
11 0 E. Main Street
Los Gatos, CA 95030
R e: P roposed Below Ma rket P r ice Housing P r ogram -North Forty
Via e-mail
James T. Diamond , Jr. Dear Town Manager Prevetti:
Margaret F. Jung
Heather J . Gould
William f. DiCamillo
Amy DeVoudreuil
Barbaro E. Kautz
Erica Williams Orchor ton
luis A. Rodriguez
Rafael Yoqulon
Celio W. Lee
Dolores Bos tian Dolton
Joshua J . Mason
Vincent l. Brown
Hono A. Hardy
Caroline No sello
Eric S. Ph illips
Elizabeth Klueck
Son Francisco
415 768-6336
los Angeles
213 627-6336
Son Diego
619 239-6336
Goldfarb & Lipman l lP
This letter is written on behalf of Grosvenor Americas in relation to its application for
approval of a mixed-use development in the North Forty Specific Plan area containing
320 units (237 units allowed under the Specific Plan plus a density bonus of 83 units),
and in particular, in relation to its proposed plan for compliance with the Below Market
Price Housing Program (the "BMP Program") adopted by the Town of Los Gatos (the
"Town").
Attached is a revised BMP proposal clarifying the development team's proposed program
of BMP units and requested modifications to the BMP Program.
Most importantly, under a provision of State housing element law, the Town cannot
require that Grosvenor provide for-sale BMP units rather than rental BMP units. Rather,
Government Code Section 65589.8 provides that if a local government adopts a
requirement in its housing element that developments contain a percentage of affordable
units, as Los Gatos has done, the local government shall permit a developer to satisfy that
requirement by constructing rental housing at affordable monthly r ents. This is precisely
what is being proposed by the development team: The Town requires that new
developments contain a percentage of affordable units, and the developer proposes to
satisfy the Town's BMP requirements by constructing rental housing at affordable
monthly rents . Consequently, the Town must allow the proposed rental affordable units
to replace for-sale affordable units.
The proposed senior rental affordable housing provides 25 percent more affordable units
(50 units rather than 40) at deeper affordability levels than required by the BMP Program,
as shown in the table below and further described in the attached description of the BMP
Program. It is not financially feasible for the development team to provide both the
proposed senior affordable housing and additional affordable for-sale affordable housing .
In a p roject conforming strictly to the BMP program , the senior affordable housing would
be replaced with market-rate rental housing, and the affordable housing would consist of
ATJ'ACHMENT 8
1588\0 3 \1776409.1
October 21,2015
Page2
scattered for-sale and rental housing. This would not provide any of the benefits described in the
attached BMP Program.
Very Low Low Median
Income Income Income TOTAL
--
For-Sale 16 15 :31
Units
Rental 9 9
Units*
Total 25 15 40
For-Sale
Units
Rental 49 1 50
Units*
Total 49 1 50
*Note that under the decision in Palmer/Sixth Street Properties v. City of Los Angeles, the Town cannot actually
require any rental affordable housing in its BMP Program.
If you have any questions regarding these requests or if you would like any additional information,
please feel free to contact me.
(s~ry,, ~ ~ + <L.-~-7. /'
BARBARA E. KAUTZ
Partner
bkautz@goldfarblipman.com
cc: Rob Schultz, Town Attorney
Joel Paulson, Planning Manager
Don Capobres, Grosvenor Americas
Wendi Baker, SummerHill Homes
Linda Mandolini, Eden Housing
1586\03\ 17764r:n.l
North 40-Proposed BMP Plan
(Revised October 21, 2015)
The Town 's Below Market Price (BMP) Program promotes the development .of affordable
housing units by providing standards and guidelines that require the creation of a certain number
of affordable units in a development project.
For the proposed North 4.0 development application, the development team has proposed the
following housing program:
• Ownership townhomes/garden cluster/courtyard condominiums .: 253 (SummerHill)
• Ownership garden cluster: 7 (Hirschman)
• Live/Work Condominiums: 2 (Grosvenor)
Rental Apartments: 8 (Grosvenor)
• Affordable rental apartments for seniors: 50 (Eden)
As described in our letter· of October 14, 2015 requesting the density bonus allowed by state law ,
the above numbers include the baseline number of units (237) plus the additional 35% density
bonus units (83), for a total proposed program of 320 residential units. The Town's BMP
program requirements are calculated using the baseline count (237), less the BMP units.
The affordable rental senior apartments are being proposed to satisfy the Town's BMP program
and will offer amenity-rich, high-quality apartment homes for seniors making up to 50% of the
area median income (very low income). The proposal helps to achieve many goals and policies
contained in the Town's General Plan; the 2015-2023 Housing Element; and the North Forty
· Specific Plan:
General Plan Policy LU-11.4/Nortlz Forty]: Provide for a variety ofresidential housing
types, both rental and owner-occupied. A minimum of 20 percent . of the units shall be
affordable to households at the moderate income level or below. ·
Housing Element Goal HOU-1: Expand the choice of housing opportunities for all
economic segments of the community by supporting the development of affordable
housing in a variety of types and sizes, including a mixture of owner.ship and rental
housing.
Housing Element Goal HOU-5: Retain and expand affordable hous ing opportunities for
seniors.
Housing Element Policy HOU-6.4: Support the provision of permanent, affordable, and
accessible housing that allows persons with special needs to live independent
lives ... II [P} ersons with spe cial needs II include extremely low income hous eholds [and]
the elderly ...
North Forty Specific Plan Policy LVJO: Provide and integrate a mix of residential
product types designed to minimize impacts on schools ... and serve the unmet housing
needs within the Town of Los Gatos [identified as young adults, seniors, and empty
nesters].. '
Below we have detailed what is required under the BMP Program, what the team is proposing,
proposed BMP program modifications, the justification for these requested modifications, and
the advantages of this proposal.
Requirements of the BMP Program
• Number of Units
Per the Town's BMP, developments of 101 units or more are required to provide BMP units
equal to twenty percent of the number of market rate units, with smaller projects requiring
gradually fewer units based on a formula. The number of BMP units required under the
Program would be slightly different depending on whether the Town chooses to define the
combined application as one project· or three:
The development team views this proposal as a coordinated approach to create a truly
integrated and holistic neighborhood. Therefore we are assuming that for the purposes of
BMP calculation, the "project" includes the Phase I North 40 development as a whole. As
shown above, this approach also provides the benefit of one additional BMP unit above the
number that would be required if the units were calculated separately for the Grosvenor ,
Hirschman, and SummerHilJ components.
• Affordability of BMP Units
In addition to specifying the required number of units, the BMP Program further requires that
the units must at least be affordable to both median income households (those earning
2
between 80% and 100% ofthe area median income (AMI) and low income households (those
earning between 50% and 80% AMI). Half of the for-sale BMP units are required at least to
be affordable to low income households and the other half to median income households.
The rental units must at least be affordable to low income households. Given these
requirements, the 40 proposed BMP units would roughly be distributed as follows:
BMP Affordability as Required
Very Low Low Income Median Income Total
Income
For-sale units 0 16 15 31
Rental units 9 9
TOTAL 25 15 40
What is Being Proposed
The development team is proposing a 50 unit project consisting of forty-nine ( 49) one-·
bedroom units for · very low income seniors and one (1) two-bedroom median income
managers unit. Because Eden's development will be able to leverage additional fmancing for
a stand-alone affordable housing building, more affordable units will be provided than are
required, and the units will be more deeply affordable than is required, as follows:
• BMP Affordability as Proposed
Very Low Low Median Total
Income Income Income
Rental units 49 0 1 50
While the final income targeting will depend on the financing secured, the unit rnix of a 9%
tax credit development would be roughly as follows:
Extremely Low Income Units @ 30% AMI
10
Very Low Income Units@ 45% AMI
9
Very Low Income Units@ 50% AMI
30
Median Income Unit @ 80% AMI (Manager's 1
Unit)
3
The affordable housing program will be most successful if fifty units are built, due to
economies of scale and more successful management of a building of this size. Because
Phase I is not proposing to construct all ofthe 270 baseline units but is proposing this surplus
of BMP units, we request that these additional 1 0 units count towards any future residential
development's BMP requirements on the remainder of the North 40 properties.
The affordable component will help meet the needs of low income seniors in Los Gatos with
safe, attractive, and affordable homes and on-site services that will help these individuals
thrive. ·
The project will include high quality amenities available in all Eden developments including
a community room, a computer center and library, and landscaped courtyards and furnished
lobbies for casual social interaction . The architecture and interiors will be designed in such a
way to provide a stimulating, spacious, and inviting environment for the seniors as they age
in place. Eden's service provider and affiliate, Eden Housing Resident Services, Inc., will
offer resident activities and programs specifically designed for seniors.
Proposed Modifications to the BMP Program Guidelines
The development team is requesting modifications to the BMP Program Guidelines regarding
the following specific requirements :
• Type of Units, Rental vs F or-Sale: The BMP Program requires that the "BMP
units within a project that contains both rental and owner-occupied units shall also
be designated as both rental and as units for purchase, in a ratio similar to that of
the market-rate units." The development team is proposing that the affordable
units consist of rental housing rather than a mix of for-sale units and rentals .
Justification: The Town 's requirement that BMP units in for-sale projects must
a lso be for-sale units is inconsistent with the housing element statute. State law
requires that the Town permit a developer to satisfy its inclusionary requirements
by constructing rental housing at affordable monthly rents . (Gov't Code Section
65589.8 .) The d evelopment team is therefore entitled to use the proposed rental
affordable units to satisfy the BMP Program's requirement that 20 percent of units
be affordable .
In addition, a requirement that the senior affordable units be for-sale units would
make the project infeasible because of its proposed tax credit financing , which
will not fund for-sale units. State law does not allow a condition to be imposed
that renders a project infeasible because of its method of financing . (Gov't Code
Sections 65008(b)(2), (b)(3).)
• Location of Units: The BMP Program requires that the "BMP units shall be
dispersed throughout the development, to the extent feasible, in all buildings, on
each floor , and in each project phase." (emphasis added) In this case, the
4
development team is proposing a single affordable. senior housing component
which is located on the air rights above the Market Hall.
As discussed in detail in our density· bonus application, housing designated for
seniors must be contained in a structure separated from all-ages housing. This
makes it infeasible to disperse the housing throughout the development in all
buildings and on each floor. A centralized location is key to the proposed
financing and Eden's ability to serve very low income seniors and to provide on-
site supportive services .
• Size of Units: The BMP Program requires that the "size and design of BMP
dwelling units shall be reasonably consistent with the market rate units in the
project." (emphasis added)
Because the proposed BMP units are designated for seniors, they. are necessarily
smaller than the market-rate units; it would not be reasonable to expect seniors to
maintain units as large as the market-rate units, nor could units so large be
affordable to very low income households. The exterior design, however, as
discussed below, is fully consistent with and integrated into the design of the
project as a whole and the Market Hall, in particular.
Items Consistent with BMP Program Guidelines
• Building Exterior: The BMP Program requires that there "shall not be significant
identifiable differences between the BMP and market-rate units visible from the
exterior" and the "external appearance of BMP units should be indiscernible to
that of the market rate units in the project." The affordable senior housing will be
a part of the Market Hall, will not be identifiable as an affordable development,
and will have high quality architecture consistent with the rest of the development
and the other rental units in the development. Eden and Grosvenor are using the
same architect and contractor to design and build this building. The affordable
housing will not be distinguishable as affordable housing merely by architectural
treatments. As part of the separate Market Hall building, it will have its own style
in order to create visual interest and texture to .the neighborhood.
• Interior Finishes : The BMP Program requires that the "internal finish of BMP
units should be identical to that of the market rate units 'in the project, except that
the developer ~ay request Town approval of substitutions for luxl.ll)' interior
finishes, appliances, or fixtures, if such substitutions do not violate any Town
code requirement." Eden will have its own interior finish schedule based on its
preferred specifications and will request Town approval of the finishes. These
materials and appliances will meet all local, state and funding requirements.
• Project Facilities: The Program requires that "all project facilities and amenities ,
including parking, must be available on the same basis to the BMP units as to the
market rate units in the project, to the extent feasible ." (emphasis added) As
proposed, and as required by State law, the affordable housing will have its own
5
facilities and amenities -many of which will be above and beyond what is
provided in the market-rate components. For example, the affordable senior
community will include the following amenities: a community room , a computer
center and a library or exercise room. Additional fees will not be charged for
parking, as with the market rate units. Residents of the senior housing will have
the same access to the walks and parks on t.he site as other residents.
Major Benefits of the Proposed BMP Program
• Deeper affordability.
Proceeding with the development as proposed will allow the development team to
provide up to 49 units targeted to extremely low and very low income seniors, and
will enable the Town to show production of these units in the Regional Housing
Needs Allocation (RHNA) process and its Annual Reports on Housing Element
progress .
As shown in the Town's recent history of affordable housing development, units
at these affordability levels are the hardest to produce. The Eden affordable senior
component will provide 49 units targeted to very low income and extremely low
income seniors, alo1;1g with one median income managers unit.
Amenity-rich and service-enhanced housing for low income seniors.
In addition to making deeper affordability financially feasible, providing all of the
affordable units in one central building allows Eden to provide supportive
services on-site. These services provide wrap-around services that help lower
income residents thrive -and are not available in typical disbursed BMP units.
For this development, Eden Housing Resident Services, Inc. (EHRSI) will
provide resident services programming , ranging from information and referrals
via regularly updated resident services guides . to comprehensive programming.
EHRSI's resident services staff is available to offer important information and
referral services and to develop key partnerships in our communities. EHRSI
works one-on-one with residents , coordinates and facilitates group educational
programming, develops community building activities, and brings in outside
speakers to present on topics of relevance and interest to our residents .
Eden has extensive experience working with a senior population. The primary
goal of our senior resident services is to allow our seniors to 'age in place' and
live independently in a dignified, healthy and productive way. To meet this goal,
we provide a range of programming tailored to each individual · resident. The
overall intention of services programming for our senior and special needs
residents is to:
• Reduce isolation by providing on-site programs and encouraging resident-
Jed programs
6
•
•
•
•
•
Provide residents with access to resources via information and referral
Provide programming designed to enhance the quality of life of our
residents ·
Address health and wellness issues faced by our diverse communities
including depression, physical fitness, assistive technology , nutrition/diet
and personal safety
Monitor the ability of our residents to continue to live independently and
safely in our housing community
Build strong communities by facilitating community events, collaborating
with resident associations and encouraging volunteerism in the community
(internally/externally)
As a testament to our ability to provide housing and services allowing our
residents to age in place successfully, nearly one quarter of our residents in senior
developments are over the age of 80 -with three residents over 1 00.
· • High quality design
Eden is recognized in the industry for its creative development approach that
includes collaborating with local governments and development partners to create
well-designed properties that meet the needs of the residents and tailoring projects
to suit the locale . In the recent past, Eden has completed entitlements for projects
in Palo Alto, Lafayette, Dublin, Novato, Orinda, and Fremont --all of which
required excellent design as well as the development and execution of thoughtful
and comprehensive community outreach strategiel!.
In addition, Eden places a high value on design through the work of talented
designers, builders and other professionals and is committed to crafting high-
quality developments that give careful attention to the needs of residents and the
surrounding neighborhood . Indeed , Eden has won more than 60 awards for its
work, including the recent recognition of Foss Creek Court in Healdsburg, which
in 20 II has received the prestigious national Charles L. Edson Award for Tax
Credit Excellence, a Gold Nugget Award of Merit from the Pacific Coast
Builders' Conference, and won the Affordable Housing Finance Magazine
Readers' Choice Award for the best Rural project in the country.
Eden will bring this same commitment to excellence, along with the rest of the
development team to deliver a high-quality, vibrant neighborhood that offers a
variety of housing types and sizes for a range of incomes -all of which will be
places that people are excited and proud to call home.
7
8
RECEIVED
NOV 0 6 2015
TOWN OF LOS GATOS
PLANNING DIVISION
KEYSER MARSTON ASSOCIATES
ADMINISTRATIVE DRAFT
NORTH 40 PHASE 1
ECONOMIC REPORT
Prepared for:
Grosvenor Americas
Prepared by:
Keyser Marston Associates
November 2015
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................••..................•.. 1
NORTH 40 PHASE 1 ................................................................................................................. 5
DOWNTOWN CORE ................................................................................................................. 7
NORTH 40 PHASE 1 PROJECTED SALES .........................•................................................... 10
TRADE AREA EXPENDITURE POTENTIAL ..................................••....................................... 12
COMPARISON RETAIL ASSESSMENT .................................................................................. 15
FOOD AND BEVERAGE ASSESSMENT .....................................................•........................... 17
MARKET HALL ASSESSMENT ...................•.....................•..................................................... 19
DOCUMENTS REFERENCED .....................................•...........•.............•.........•.•..•.................. 20
APPENDIX ............................................................................................................................... 21
FIGURES AND TABLES
Figures
Figure 1: North 40 Phase 1 Site Aerial ....................................................................................... 5
Figure 2: Location of Downtown Core in Relation to North 40 .................................................... 7
Figure 3: Downtown Los Gatos Sales (2014) and North Phase 1 40 Projected Sales (2 020 ) .... 11
Figure 4: Map of Residential Trade Area ................................................................................... 12
Tables
Table 1: Downtown Los Gatos Retail Sales-Select Categories (2014) ...................................... 8
Table 2: Estimated Gross Sales at North 40 Phase 1 Project (2020) ........................................ 1 0
Table 3: Downtown Los Gatos Sales (2014) and North Phase 1 40 Projected Sales (2020) ..... 1 0
Table 4 : Trade Area Demographics in Comparison With Town, Standard Rings (2015} ............ 13
Table 5: Residential Trade Area Expenditure Potential through 2020 ....................................... 14
Table 6: North 40 Phase 1 Share of Comparison Retail Trade Area (2015-2020) ..................... 15
Table 7: North 40 Phase 1 Share of Food and Beverage Trade Area (2015-2020) ................... 18
Appendix Tables and Figures
Table A-1: Taxable to Gross Sales Conversion for Sales in Downtown Los Gatos ................... 21
Table A-2: Expenditure Potential of Workforce within 1 Mile of North 40 .................................. 21
Figure A -1: Grocery Stores Located Within 1 Mile of North 40 and Downtown ......................... 22
EXECU TI VE SUMMARY
The Town of Lo s Gatos requires an economic report assessing the competitiveness of the North
40 Phase 1 ("Phase 1 ") retail development program in relationship to the retail businesses in the
Downtown Core . The purpose of the analysis is to evaluate if the Phase 1 retail will have an
adverse impact on the retail environment in the Downtown Core .
Downtown Core
To create a framework in which to evaluate how the Phase 1 retail development program might
impact the Downtown , Downtown Core businesses were grouped into three major categories .
The purpose of the groupings was to provide a measure of Downtown Core sales to compare
with the proposed Phase 1 retail and to allow for a discussion of the Downtown Core retail
environment while prote cting the confidentiality of individual businesses. As agreed upon w ith
the Town , the groupings of retailers in the Core are :
• Comparison goods retail (appa rel , home furnishings, and other specialty retail)
• Food and beverage
• Grocery (including food and liquor stores)
Within the three groupings , the Downtown Core ("the Core") is comprised of approximately 247
businesses . Taxable sales for businesses in the Core were provided by the Town 's sales tax
consultant for each of the c ategories. Estimated 2014 gross sales (taxable and non-tax able) in
the Core are :
• Comparison goods retail :
• Food and beverage:
• Food and liquor stores :
Summary of Approach
$96.9 million
$76.9 million
$10 to $15 mill ion
The ana lysis evaluates if the anticipated Phase 1 sales can be achieved without having an
adverse impact on sales of the existing Downtown Core businesses. KMA's approach to the
assignment included the following :
1. Downtown Core Sales: Review of 2014 sales in the Downtown Core provided on a
confidential bas is
2. Projected Sales for Phase 1 Retail: Projected by three retail groupings provided by
Grosvenor
3. Trade Area Identification: Defining the trade area fo r each of the retail groupings
4. Trade Area Expenditure Potential: Estimating e xpenditure potential using data provided
by Census and state information
Keyser Marsto n A ss ociates , Inc .
\\Sf-fs2\wp\13\13890\001-001 .docx
Pag e 1
5 . Market Share Estimate for Phase 1 Retail: Estimating the market share of trade area
ex penditure potential that Phase 1 retail would achieve
6 . Differentiation in Market Position between Phase 1 and the Downtown Core
North 40 Phase 1 Retail Development Program
The Phase 1 retail development program is anti cipated to be up to 66,000 square feet as of the
writing of this report. The following is a summary of KMA's findings and conclusions.
A. Comparison Goods Retail
Phase 1 Comparison Retail
• Anticipated to have up to 26 ,000 square feet
• Anticipated tenants: apparel, shoes, home furnishings, and specialty shops
• Estimated annual sales of approx imately $15.6 M
Downtown Core Comparison Retail
• Achieved retail sales of approximately $96.9 million in 2014
• Comprises 172 businesses offering a d iversity of merchandise
• Strong regional destination with high image retailers in a pedestrian oriented
shopping district
The Phase 1 residential trade area for comparison goods is strong for reasons including
• Population Density: approximately 400,000 residents and nearly 150,000 households
with excellent regional access via Hwy 85 and Hwy 17
• Affluence: Median household income of $104 ,000 in the trade area overall, and
$139,000 within the Town of Los Gatos
• Expenditure Potential: Over $1 .5 billion annual expenditure potential for comparison
goods and the growth between 2015 and 2020 is estimated to be $164M, including
potential for visitors from beyond the trade area
Conclusion
• Phase 1 projected sales of $15.6 M can be achieved while only capturing a small
share of the trade area expenditure potential
• Downtown Core comparison goods retailers enjoy a unique retail environment with
strong sales approaching $100 million; the high volume of economic activity, in
combination with approximately $80 million in food and beverage sales, ensures the
Core will continue to be a regional destination
• Phase 1 comparison goods retail program can be achieved without having an
adverse impact on the sales of the ex isting Downtown Core businesses.
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B. Fo od and Beverage
Phase 1 Food and Beverage
• Anticipated to have up to 20,000 square feet
• Anti cipated tenants: restaurants , cafes, and a wine bar or brewery
• Estimated annual sa les of approximately $15 M
Downtown Core Food and Beverage
• Achieves sales of approximately $76.9 million in 2014
• Comprised of 62 establishments
• Strong re g ional destination fo r food and beverage in a pedestrian oriented shopping
district
Phase 1 Trade Area for Food and Beverage
• Employment within 1 m ile supports an estimated $10M in annual expenditure
potential
• Residential trade area ex penditure potential growth between 2015 and 2020 is
estimated to be $89.7 million
Conclusion
• Phase 1 projected sales of $15 M can be achieved while only capturing a small
share of the t rade area expend iture potential
• Downtown Core food and beverage establishments achieve strong sales of almost
$80 million
• Phase 1 food and beverage retail program can be achieved without having an
adverse impact on the sales of the e xisting Downtown Core businesses .
C. Grocery/Specialty Foods
Phase 1 Grocery/Specialty Foods
• Anticipated to have up to 20,000 square feet
• Anticipated tenants : Market Hall Grocer (anchor), envisioned as a collection of
specialty and gourmet food vendors which may include meat and fish shops ,
produce markets, wine shops, florists , bakeries, and confectionary
• Estimated annua l sales of $15 million
Downtown Core Grocery/Specialty Foods
• Achieves taxable sales of approximately $7 .7 Min 2014; estimated to be
approximately $10 to $15 million in gross sales
• Comprised of 13 stores: 3 wine shops/liquor stores and 10 convenience/ specialty
• Wine shops and liquor stores account for over half of taxable sales
• No existing sa les in the Core for produce, fish and meat markets
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Downtown Core Trade Area for Grocery/Specialty Foods
• Downtown Core specialty food offer is neighborhood-oriented and does not serve as
a destination location for grocery/specialty foods
• Neighborhood trade area within 1 mile of the Core supports annual food store
expenditure potential of approximately $46 M versus $10-$15 million in existing
sales by Downtown Core businesses
• Neighborhood trade area within 1 mile of the Core does not overlap with a similarly
sized trade area around North 40
Conclusion
• Phase 1 grocery/specialty foods retail program can be achieved without having an
adverse impact on sales on the existing Downtown Core businesses
• Downtown Core grocery/specialty food stores do not serve as a destination location
for grocery/specialty foods
• Tenant categories commonly associated with market hall grocers, including produce ,
meat and fish markets, are not found in the Core
• Beyond the study area, Phase 1 grocery/specialty foods could enhance Los Gatos
Boulevard position as a grocery destination and thus attract additional shoppers to
Los Gatos.
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NORTH 40 PHASE 1
North 40 Phase 1 ("Phase 1 ") is located in the North 4 0 Specific Plan Area adopted by the Los
Gatos Town Council in June 2015. The specific plan area is an approx imately 40 acre site within
the Town at the intersection of Highway 85 and Highway 17. The area has been approved for
commercial uses , including office , retail , and hotel, and housing . New commercial projects
within the specific plan area must submit an Economic Impact Study to the Conceptual
Development Advisory Committee evaluating the potential impa ct of the project on the
economic competitiveness of the Downtown Core . The subject analysis is meant to fulfill this
requirement for Phase 1.
Source: Google Earth, Town of Los Gatos, Grosven or America s
The proposal for North 40 Phase 1 submitted by Grosvenor Americas , SummerHill Homes, and
Eden Housing covers approximately 20 acres of the site (see boundaries above). Phase 1 is
anticipated to include up to 66,000 square feet of retail. Currently, the site plan application allots
60 ,000 square feet for reta il uses. At the direction of the applicant, KMA has assumed a 10%
increase in the retail square footage to account for modific ations to the development program
that may occur prior to the project's approval.
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The tentative distribution of the 66,000 square feet of retail space is as follows :
• Up to 26,000 square feet for comparison retail
• Up to 20,000 square feet for food and beverage
• Up to 20,000 square feet for a market hall grocer
The applicant provided KMA with a preliminary list of targeted tenant categories. According to
this information, comparison re tail space would consist of apparel, shoes, home furnishings , and
other specialty stores (bicycle shop, book store, jeweler). A portion of comparison retail space
may also be dedicated to personal and financial services (gym, bank, hair salon). Food and
beverage retail would include a mixture of restaurant and related tenants such as cafes,
brewery or wine venues. Finally, the 20,000 sq. ft . market hall is envisioned by the applicant as
a cluster of specialty and gourmet food vendors with common customer seating . Similar markets
have been developed elsewhere in the Bay Area including Oakland, Emeryville , San Francisco
and San Jose. Typical market hall tenant categories include meat and fish shops, produce
markets, wine shops, florists, bakeries, and confectionary, with tenants varying in size from 400
sq . ft . to 3,000 sq. ft.1
1 Based on KMA's review of Rockdridge Market Hall retail program .
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DOWNTOWN CORE
The Town of Los Gatos contains several retail districts, including Downtown, Los Gatos
Boulevard , and several neig hborhood centers. Downtown has historically supported
approximately half of total retail sales in the Town of Los Gatos (BAE 2013 , 41 ). Downtown is
further divided into Downtown North, the Blossom Hill/University district and the Downtown Core
("the Core"), where approxi mately three quarters of Downtown retailers are located (BAE 2013,
24).
As agreed upon by the Town and the appli cant, the subject analysis focuses specifically on the
potential impacts of North 40 Phase 1 on the Downtown Core. The Core is located primarily
along North Santa Cruz Avenue, East Main Street, and University Avenue, approximately 2
miles south of North 40 (see map). A historic, pedestrian-oriented, main street commercial
district, the Core is comprised of approximately 160,000 square feet of restaurants and 350,000
square feet of specialty stores and personal services serving the Town and the region at-large,
according to a 2014 estimate prepared for the Town Council (Mclaughlin, 4).
Source: Google Earth , Town of Los Gatos , Grosvenor Americas
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To create a framework in which to evaluate how the Phase 1 retail development program might
impact the Downtown Core, existing businesses in the Core were grouped into three major
categories. The purpose of the groupings was to provide a measure of Downtown Core sales to
compare with the proposed Phase 1 retail and to allow for a discussion of the Core retail
environment while protecting the confidentiality of individual businesses. As agreed upon with
the Town , the groupings of retailers in the Core are:
• Comparison goods retail (apparel, home furnishings, and other specialty retail)
• Food and beverage
• Grocery (including food, wine and liquor stores)
Within the three groupings, the Downtown Core is comprised of approximately 24 7 businesses,
which generate approximately $181 million in annual taxable sales. Taxable sales were
provided by the Town's sales tax consultant for each of the categories . Sales by retail category
are summarized in the table below.
Table 1: Retail Sales in the Downtown Core-Select Categories (2014)
Downtown Core
Comparison Retail <1>
Food and Beverage
Grocery/Specialty Food <2>
Source: Town of Los Gatos 2015
Figures rounded
Total
Establishments
2014
172
62
13
Taxable
Sales 2014
$96,942,000
$76,878 ,200
$7,777,400
Gross Sales
2014
$96 ,942 ,000
$76 ,878 ,200
$12,962,400
<
1 > Includes apparel , home furnishings, electronics a nd appliance stores; miscellaneous stores; sporting
goods, hobby, book, and music stores.
12 > Includes grocery stores, specialty food stores, and liquor/wine stores. Conversion to gross sales
assumes 60% of category sales are ta xa ble . See appendix table A-1 .
The above table demonstrates that the Downtown Core's strengths are in the comparison retail
and food and beverage categories , which together contribute more than 90% of sales in the
selected categories. High volumes of comparison and food and beverage sales substantiate the
common perception of the Downtown Core as a regional-serving retail destination . Approaching
$100 million in sales, the comparison retail offer is comprised of destination retailers with a high
image. Primary tenant types include clothing, jewelry, sportswear, and specialty gifts, many of
which are local boutiques . Formula retail tenants include Anthropologie , Chico's, Gap/Banana
Republic , J . Crew, Apple Store , Restoration Hardware, Sur La Table , and Williams Sonoma.
The food and beverage offer in the Core is also significant, with close to $80 million in sales.
The Core features a wide selection of restaurants, bars, and cafes, a number of which appear in
surveys of the top dining establishments in the South Bay.
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In contrast with the above retail categories , the specialty food offered in the Downtown Core is
limited. Estimated gross sales between $10 million and $15 million ($8 million taxable) are
distributed across 13 establishments, including three wine shops/liquor stores and ten food/
convenience stores, with one-third to half of sales deriving from the wine/liquor shops. The
foregoing sales figures indicate that the majority of demand for food products is being met
outside the Downtown Core, even for residents living within 1 mile of the Downtown Core ,
where resident expenditure potential for grocery goods is estimated to be $46 m illion (ESRI
Business Analyst 2015). As highlighted by the market and urban decay studies for the North 40
Specific Plan , there are no reported sales in the Core for meat, fish and produce markets, all of
which are tenant categories targeted by the Phase 1 market hall (BAE 2011, 67).
While the Downtown Core's grocery and specialty food offer is limited, the prior market study
indicates that on the whole , the Town of Los Gatos has a substantial surplus of grocery sales.
Downtown Safeway is reported to be the closest supermarket to Monte Sereno and portions of
Saratoga (BAE 2011 , 67), and sales figures indicate that the cluster of grocery stores along Los
Gatos Boulevard draws customers from far beyond the Town 's boundaries . For a map of
grocery stores within 1 mile of the Downtown Core and North 40 , see appendix Figure A-1 .
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PROJECTED SALES FOR NORTH 40 PHASE 1
Projected Sales
KMA estimates that North 40 Phase 1 will achieve approximately $45.6 million in gross (taxable
and non-taxable) annual sales by its build-out in 2020 . Gross annual sales were calculated by
applying estimates of sales per square foot for newly constructed space to the anticipated
development program. Sales benchmarks are derived from a variety of public and confidential
sources , including surveys of shopping centers published by the International Council of Shopping
Centers, annual financial reports of representative tenants , and feedback from the applicant.
Table 2: Estimated Gross Sales at North 40 Phase 1 Project (2020)
North 40 Phase 1 at Build-Out (2020)
Estimated Sales Est. Gross
North 40 Phase 1 Sq. Ft. (1l Per Sq. Ft. (2) Annual Sales
Comparison Retail 26 ,000 $600 $15 ,600 ,000
Food and Beverage 20 ,000 $750 $15 ,000 ,000
Grocery/Specialty Foods (3) 20,000 $750 $15,000,000
Source: Grosvenor 2015, KMA 2015.
(1) Current development Phase 1 development program includes 60,000 sq ft of retail. At the
direction of the applicant, the retail GLA was increased by 10% to account for any subsequent
increase once the program is finalized .
(2) Based on industry benchmarks for newly constructed space.
(3) Includes both taxable and non-taxable sales .
Comparison with Downtown Core
Sales by category within Phase 1 are projected to be significantly less than existing sales in the
Downtown Core for comparison and food and beverage categories, but greater than Downtown
Core food stores, where the Downtown Core's offer is more limited . Comparison goods sales in
Phase 1 are projected to be $15.6 million versus $97 million in the Core. Food and beverage
sales are projected to total $15 million by 2020 in Phase 1, compared to existing sales the Core
of $77 million . On the other hand, grocery and specialty food store sales in Phase 1 are
projected to be greater than existing sales for the same categories in the Core.
Table 3: Downtown Core Sales (2014) and North 40 Phase 1 Projected Sales {2020)
Downtown Core 111 North 40 Phase 1 (Z)
Gross Sales
Comparison Retail
Food and Beverage
Food Stores
(1) See Table 1.
(2 ) See Table 2 .
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2014 2020-Projection
$96,900,000 $15,600 ,000
$76,900,000 $15,000 ,000
$13 ,000,000 $15,000 ,000
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Figure 3: Downtown Core Sales (2014) and No rth 40 Phase 1 Projected Sales (2020)
"'
$1 20
c:
~ $100 ~
$80
$60
$40
$20
$-
Comparison
Retail
Food and
Beverage
Food Stores
0 Downtown Core
lSI North 40 Phase 1
Source: Town of Los Gatos 2015 , California Board of Equalization, Grosvenor 2015.
Includes taxable and non-taxable sales .
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TRADE AREA EXPENDITURE POTENTIAL
Definition of Residential Trade Area
The residential trade has been defined to encompass the project's primary customer base for
comparison and food and beverage categories upon full build-out of the Phase 1 retail program .
KMA determined the residential retail trade area for the project in consideration of (a) the likely
drawing-power of comparison and food and beverage retailers anticipated at the project, (b)
regional access, and (c) the location and nature of existing and planned competition. The
residential trade area is shown in the figure below. The trade area is primarily contained within a
five mile radius of the subject site, and includes the communities of Los Gatos, Saratoga, Monte
Sereno, Cambrian Park, Fruitdale, and Lexington Hills, as well as portions of San Jose and
Cupertino. As illustrated below, the trade area extends beyond five miles along key
transportation corridors including Highway 85, Highway 17, Route 9 and the Almaden
Expressway, where superior access is likely to draw customers living farther from the project
site.
Figure 4: Map of Residential Trade Area
~
Source: Google Maps
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Trade Area Demographics
As of 2015, the residential trade area contains a population of nearly 400,000. The trade area
population is greater than the population livi ng within five miles of the subject site , due to the
modifications to the five-mile ring primarily along Highway 85, described above . While median
household incomes of the residential trade area ($104,000) are below those of the Town of Los
Gatos ($139,000), trade area incomes are higher than the county and region overall. Aggregate
income of trade area residents is estimated to exceed $20 billion, of which the Town of Los
Gatos contributes approximately 1 0%.
Table 4: Trade Area Demographics in Comparison With Town, Standard Rings (2015)
Population
HH
Median HH Income
Per Capita Income
Aggregate Income($ million)
Town of
Los Gatos
30,301
12,701
$138,557
$71 ,308
$2,161
Rings from North 40
3miles
132,192
50 ,957
$107,782
$54,647
$7,224
Smiles
342,647
129,482
$101,792
$51,463
$17,634
Residential
Trade Area 111
396,120
147,368
$103,669
$51,660
$20,464
Source : ESRI Busine ss Analyst 2015
t,> Residential trade area consists of a modified 5-mile radius from the site, with the trade area extending
along key transportation corridors including High way 85, Highway 17, Route 9, and the Almaden
Expressway. (See Figure 2 .)
Expenditure Potential
Over the next five years, the trade area is projected to grow by nearly 19,000 residents, while
per capita income is projected to increase at 1% per year (in real terms), based on projections
published by ESRI Business Analyst, a private demographic firm . Population and income growth
in the trade area will add approximately $1.8 bill ion to aggregate income (Table 5).
KMA calculated growth in the trade area expenditure potential for comparison and food and
beverage retail categories between 2015 and 2020, when the project is anticipated to be built-
out. The likely share of aggregate income to be spent on comparison and food and beverage
categories was determined using data from the California Board of Equalization and the US
Census. It is estimated that residents have the potential to spend 7.6% of their incomes on
comparison retail and 4.9% on food and beverage . Applying these factors to growth in
aggregate income, KMA estimates that comparison retail expenditure potential will increase by
$139 million and food and beverage expenditure potential will increase by $90 million over the
next five years (Table 5). This increment represents expenditure potential not currently captured
by retailers in the Downtown Core or elsewhere in the residential trade area .
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Table 5: Residential Trade Area Expenditure Potential through 2020
Residential Trade Area (1) 2015 2020 Growth 2015 -2020
I. Trade Area Demographics
Trade Area Residents
Households
Per Capita Income
Aggregate Inc ome <2>
II. Retail Expenditure Potential
Comparison Retail 7.6% of income <3>
Food and Beverage 4 .9% of income <3>
396,120
147,368
$51,700
$20 ,479,404,000
$1 ,550 ,128,000
$998,832,000
414,832
154,682
$53,800
$22 ,317,962,000
$1,689,292,000
$1,088,503,000
Source: ESRI Business Analyst 2015, California Board of Equalization (BOE) 2013
<1
) Refer to Map of Trade Area .
18,712
7,314
$2,100
$1,838,558,000
$139,164,000
$89 ,671 ,000
(2) 2020 income projections prepared by ESRI adjusted for inflation assuming 1.9% per year.
<~)Share of aggregate income spent on goods within each category, based on a comparison of taxable sales
reported by the California Board of Equalization (BOE) for the county and aggregate income reported by the US
Census. Shares reflect gross sales.
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COMPARISON RETAIL ASSESSMENT
Expenditure Potential
Residential expenditure potential on comparison goods is projected to increase by $139 million
between 2015 and 2020 (Table 5, above). The comparison reta il category includes apparel,
home furnishings, electronics and appliance stores, miscellaneous stores, and other specialty
stores including sporting goods, hobby, book, and music stores. Assuming that 15% of trade
area sales derive from visitors living beyond the trade area, total trade expenditure potential is
estimated to increase by approximately $164 million over the next five years {Table 6).
Phase 1 Projected Sales and Capture Rate
With up to 26 ,000 square feet of space dedicated to comparison retail , Phase 1 comparison
retail sales are anticipated to be $15.6 M (Table 2). This level of sales would requ ire a capture
rate of approximately 10% of the growth in comparison goods expenditure potential, including
trade area res idents and visitors from beyond the trade area, and less than 1% of the total trade
area comparison goods expenditure potential projected in 2020 (Table 6).
In other words, projected sales in Phase 1 can be achieved without having an adverse impact
on the sales of the existing Downtown Core businesses. Furthermore, by 2020, roughly $150 in
comparison retail expenditure growth would remain available to support other shopping districts
in the trade area, after accounting for Phase 1 sales at build-out.
Table 6: North 40 Phase 1 Share of Comparison Retail Trade Area (2015-2020)
North 40 Phase 1 -Comparison Retail
Est. Gross Annual Comparison Retail Sales at North 40 Phase 1 111
Comparison Retail Expenditure Potential
Residential Trade Area Growth (2015-2020) (Z)
Sales Inflow 131
Trade Area Expenditure Potential Including Visitors
North 40 Phase 1 Share of Comparison Retail Exp. Potential
I l l Table 2 .
12' See Table 5 .
1~1 Refers to sales to customers from outside the trade area.
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15%
2015-2020
$15,600,000
$139 ,1 64,000
$24,555,000
$163 ,700 ,000
10%
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Comparison Retail Conclusions
KMA concludes that 2 6,000 square feet of comparison retail at North 40 Phase 1 would have no
impact on the Downtown Core :
• The Downtown Core is a well-established , pedestrian friendly shopping district, whic h
draws customers f rom a regional trade area ,
• Current Downtown Core sales volumes in comparison retail categories ($97 million)
significantly exceed what is anticipated to be generated by North 40 Phase 1,
• There is sufficient growth projected within the trade area to support comparison retail
development in Phase 1 without having an adverse impact on the sales of existing
Downtown Core businesses .
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FOOD AND BEVERAGE ASSESSMENT
Expenditure Potential
Residential expenditure potential on food and beverage is projected to increase by
approximately $90 million between 2015 and 2020 (Table 5). Factoring in expenditure potential
by visitors from beyond the trade area (assumed to comprise 15% of sales), trade area
expenditure potential by residents and visitors is estimated to increase by approximately $106
million over the next five years .
In addition to trade area residents and visitors, the project is likely to draw customers from the
sizable daytime population working near the project. More than 10 ,000 workers are employed
within 1 mile of the project, anticipated to increase to approximately 12,000 by 2020. Major
employers include Netflix, Roku , and Good Samaritan Hospital. Based on food and beverage
spending patterns of office and clerical workers, KMA estimates that local workers have the
potential to contribute an additional $10M million in annual expenditure potential (see detailed
analysis in appendix Table A-2), Including growth in resident and visitor expenditures, detailed
above, combined trade area expenditure potential is estimated to be $116 million {Table 7).
Expenditure potential for workers is defined in terms of total expenditures, as opposed to
growth, considering that North 40 is a more convenient destination than the Downtown Core for
workers within the daytime trade area. Additionally, it unlikely that workers within one mile of
North 40 represent a significant share of the approximately $80 million in existing sales for
restaurants in the Downtown Core, given that the Core is two or more miles from most
employers within the Phase 1 daytime trade area, and office workers, more so than residents,
are likely to prioritize convenience in their dining choices.
Phase 1 Projected Sales and Capture Rate
Food and beverage sales are anticipated to reach $15 million upon build out of Phase 1, which
includes 20,000 square feet of food and beverage uses (Table 2, above). This level of sales
represents approximately 13% of the combined residential and worker trade area expenditure
potential as defined above .
As with comparison retail, projected food and beverage sales at Phase 1 can be achieved
without having an adverse impact on the sales of the existing Downtown Core businesses.
Furthermore, by 2020, roughly $100 million in food and beverage expenditure potential within
the trade area would remain available to support other shopping districts in the trade area, after
accounting for new sales in Phase 1.
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Table 7: North 40 Phase 1 Share of Food and Beverage Trade Area (2015 -2020)
North 40 Phase 1 -Food and Beverage 2015-2020
Estimated Gross Annual F&B Sales at North 40 Phase 1 <
1
> $15,000,000
Food and Beverage Exp . Potential
Res identi a l Trade Area Growth (2 01 5-2020 ) <2> $8 9,67 1,000
Sales Inflow (J) 15% $15,82 5 ,000
$105 ,500,000
Office Employee E xpenditure Potential (2020) <41 $10,271 ,000
$11 5,771,000
North 40 Phase 1 Share of F&B Expenditure Potential 13%
<1>T a bl e 2 .
<
2> See Table 5.
(JJ Refers to sales to c ustomers f rom o uts id e th e trade are a .
<4 > Accounts for expenditure potential from local offic e w orkers. See Table A -2 .
Food and Beverage Conclusions
The Phase 1 food and beverage retail program can be achieved without having an adverse
impact on sales on the ex isting Downtown Core businesses:
• Downtown Core food and beverage establishments currently achieve strong
sales of almost $80 million
• Phase 1 projected sales of $15 M can be achieved while only capturing a small
share of the trade area expenditure potential.
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MARKETHALL/GROCERYASSESSMENT
Grocery is the only retail category in which sales at Phase 1 are projected to exceed the
Downtown Core . Given the limited offer and neighborhood orientation of food stores in the
Downtown Core, however, KMA has concluded that projected sales at the Phase 1 market hall
can be achieved without having an adverse impact on sales of the existing Downtown Core. In
large part, the Phase 1 market hall concept is not anticipated to be competitive with nor
comparable to the specialty food store offer in the Downtown Core . The proposed market hall
has the potential to bolster the Town's position as a regiona l food destination by complementing
existing supermarkets clustered along Los Gatos Boulevard.
Market Hall Conclusions
The Phase 1 grocery/specialty foods retail program can be achieved without having an adverse
impact on sales on the exi sting Downtown Core businesses :
• The Core 's food store offer is limited. The above analysis of Downtown Core sales
demonstrates that the Core's strength lies in food and beverage and comparison retail
categories , whereas its specialty food store offer is limited . Many of the common market
hall tenants, such as fish, meat and produce markets, are not found in the Core. The
nearest grocery store, Safeway, is located just outside the Core, while the majority of
grocery stores in Town are clustered along Los Gatos Boulevard (see Appendix Fig. A-1).
• The Core 's food store offer is neighborhood-oriented. The volume of sales at existing
Downtown Core food stores suggests an orientation toward a neighborhood trade area .
If defined traditio nally as a 1 mile radius from each site, neighborhood trade areas of the
Downtown Core and Phase 1 do not overlap; in other words, primary customer bases for
neighborhood-serving food stores in the Core and Phase 1 are distinct. Moreover, most
of the $46 M in expenditure potential of residents living within 1 mile of the Core is
currently spent outside the district.
Beyond the Downtown Core, an urban market could strengthen Los Gatos Boulevard's position
as a grocery destination and thus attract additional shoppers to Los Gatos. As highlighted in the
market study and urban decay studies prepared for the North 40 Specific Plan , the lack of
specialty food stores in Town represents "an opportunity to broaden the retailing mix and
enhance the Town's strong position in this category" (BAE 2011 , 76). Grocery stores clustered
along Los Gatos Boulevard are reported to draw from a regional customer base. By offering
unique , specialty foods not found in traditional grocery stores, the market hall planned for Phase
1 can complement the existing supply, as is seen with similar market halls located elsewhere in
the Bay Area . For example, Rockridge Market Hall in Oakland is located several blocks from a
Trader Joe's and within a half-mile of two Safeway supermarkets.
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DOCUMENTS REFERENCED
The following technical reports previously prepared for the North 40 Specific Plan are
referenced in this report:
BAE Urban Economics. Market Study & Business Opportunities Assessment Town of Los
Gatos . August 12, 2011 .
BAE Urban Economics. Urban Decay Analysis North 40 Specific Plan. November 20 , 2013
Mclaughlin, Ralph . Retail Resilience in Downtown Los Gatos: Potential Impact of Alternative
North 40 Development Scenarios. 2014.
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APPENDIX
Table A-1: Taxable to Gross Sales Conversion for Sales in the Downtown Core
Downtown Core
Comparison Retail
Food and Beverage
Grocery/Specialty Food 12l
Taxable Sales 2014
$96,941 ,974
$76 ,8 78 ,230
$7 ,777,431
Conversion Factor11 l
100%
100%
60%
Gross Sales
$96,941,974
$76,878,230
$12,962 ,385
Source : Town of Los Gatos 2015, KMA 2015, California Board of Equalization 2012, US Business Census 2012
PI Based on a comparison of taxa ble sales reported by the Board of Equalization for Santa Clara County and
corresponding gross sales reported by the US Census .
121 Sales factor determined based on weighted average of specialty food and beer/ wine/liquor store factors .
Table A-2: Expenditure Potential of Workforce within 1 Mile of North 40
Food and Beverage Expenditure Potential
Workforce Within 1 Mi. of North 40 2015 Estimate~'' 2020 Projection 111
Total Workers, 1 mile from site 10,710 12,190
Bachelor's or Higher 4,859 6,269
Remaining Workers 5,851 5,921
Commute Adjustment 121 @ 12% 9,425 10,727
Bachelor's or Higher 4,276 5,517
Remaining Workers 5,149 5,210
Per Capita Food & Beverage Spending 131
Bachelor's Or Higher $1,250 $1,380
Remain ing Workers $460 $510
Expenditure Potential by Nearby Workers
Food and Beverage $7 ,714,000 $10 ,271 ,000
Source: US Census, /CSC
111 Estimates and projections based on 2013 data reported by Census adjusted using historical2002-2013
growth rate . 2020 projection also incorporates estimate of expected growth at Netflix and Roku campuses .
<~>Based on share of local workforce living in communities contained by the trade area (US Census).
P> Based on employee food and beverage spending in the vicinity of the office, as reported in the ICSC
report, "Office-Worker Retail Spending in a Digital Age" (2012), for suburban workers . It has been assumed
that employees with less than a bachelor's degree will spend in the same range as clerical office workers.
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[A] Trader Joe's
[B) Nob Hill Foods
[C) Whole Foods Market
[D) Lunardi's
[E) Safeway
Source : Google Earth, Database USA 2015
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