Blogging Bayport Alameda

April 13, 2017

Waste of retail space

Filed under: Alameda — Lauren Do @ 6:03 am

CityLab had a great piece on the causes of the retail shopping decline.  Of course we’re likely to blame it on on-line shopping, which probably does take an enormous part of the blame, but there are other reasons for the decline of retail shopping which includes the shift in priorities from having things to having experiences.   Plus the fact that cost of living has risen and, particularly in the Bay Area, the cost of housing has increased leaves a lot of people with a whole lot less excess income to spread around to buying stuff.

From CityLab:

A deep recession might explain an extinction-level event for large retailers. But GDP has been growing for eight straight years, gas prices are low, unemployment is under 5 percent, and the last 18 months have been quietly excellent years for wage growth, particularly for middle- and lower-income Americans.

So, what the heck is going on? The reality is that overall retail spending continues to grow steadily, if a little meagerly. But several trends—including the rise of e-commerce, the over-supply of malls, and the surprising effects of a restaurant renaissance—have conspired to change the face of American shopping.

Not unique to Alameda, but definitely has shown up on the City’s sales tax quarterly reports is a steady increase in the food and beverage category quarter after quarter.   More from CityLab:

Travel is booming. Hotel occupancy is booming. Domestic airlines have flown more passengers each year since 2010, and last year U.S. airlines set a record, with 823 million passengers. The rise of restaurants is even more dramatic. Since 2005, sales at “food services and drinking places” have grown twice as fast as all other retail spending. In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores.

Although Alameda has seen some unsuccessful restaurants come and go, including Tava Kitchen at Alameda Landing and the very, very short lived Capone’s all in all Alameda has seen quite the boom in restaurant spaces.  Moving forward Alameda should definitely be very careful as to what sort of commercial spaces are approved in the future.  Straight leased retail may not be the answer and instead — if we need to go the retail route — perhaps we should look at the commercial/retail condo model that is prevalent in ethnic strip malls.  A major factor that will keep most businesses in business is knowing that their rents can stay predictable unlike commercial or retail leases.   It’s a lot easier to weather out economic bad times if you own your own storefront space.

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8 Comments »

  1. In addition to the other reasons listed, California’s decades-long twin scams of redevelopment and Prop 13 have contributed greatly to excess retail capacity. When cities’ property tax revenue was slashed and capped by P13 they naturally turned to sales taxes as an alternative. Many used redevelopment aka tax increment financing to build and/or finance new retail properties in hopes of generating sales tax. The result was a serious glut of retail properties.

    Even when it appeared to work it was always a lousy idea. Sales tax has never, will never and can never overtake property taxes — .75% of taxable sales simply can’t approach .29% of property value, particularly when the property tax increment is foregone for debt service. It didn’t take much of a shift in retail habits to turn that upside down.

    Comment by dave — April 13, 2017 @ 6:26 am

    • 7.5%

      Comment by MP — April 13, 2017 @ 7:15 am

    • i think the city overlay is 0.95%

      Comment by MP — April 13, 2017 @ 7:22 am

      • It used to be .75, maybe that’s out of date. Whether 75 or 95 bps, it still can never match property tax revenues.

        Comment by dave — April 13, 2017 @ 8:07 am

        • is the .29% a set amount or something like the average effect in a city or the state of taxing at P13 assessed value?

          Comment by MP — April 13, 2017 @ 8:47 am

        • Of the 1% base rate property tax, the city gets .29

          On a 1MM dollar property the base rate of 1% (just the base rate, not including special assessments) the city’s take is $2900/yr.

          Comment by dave — April 13, 2017 @ 9:59 am

        • got it, thank you

          Comment by MP — April 13, 2017 @ 10:27 am

  2. Ethnic strip malls in Alameda! Now there’s a concept!

    Comment by vigi — April 13, 2017 @ 9:47 am


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