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HomeMy WebLinkAbout32-Development Services ATTENDANCE SHEET II!:S /0/ TIME: ~ /I1t!c./(?~ ~ *~ J:.DI1 ~ ~ DATE: MEETING: LOCATION: Note: Pursuant to Government Code Section 54953.3 the signing, registering or completion of this document is voluntary, and all individuals may attend the meeting regardless of whether they sign, register or complete this document. ATTEND,:G: f? NAM~ / ~rl t -e..V(~'l> ~A'?V'1"'/ ~""",~1 ~6Y rP~A.~~ fYlA.<t--j ~e.f Pc..--k Lf1t5 'Z Lo / '-J I r:O(jfr.J.f' <;/ , --.J+VSfflV Cft-lL- '1 cL ~, '1m /J1 {/ LV,' 1-1- {L- L- --;;; yv"V 1: e.r '-0 ~e !-/A./r17P., tt::fi~ . t", Nt fNlI--hnif ~~v\d M \j~\G, /~;c ~s-rr#(d~ DEPARTMENT R r .R..---- /b/.If//kc/~~;y, fM,.,,,,,j-tn, CD A-- E D,q- y> ...Acl, c.. l.M:J C2{L J cvrr /)'VI't, ~ I c- 171 - tJi5"vE~ 5'VC5 t/(11 t;EYt;'U'JflAeIJ'1 &N1U;iS tl}'7 U-k( ~""T- ~JI';' ~pGM ("""it. {d. / l",1f'f? /' .rff ~ C-e:. ~/f aJ~ r2<5 US e- "If Cfu>f. /!>/l/j;c ,7(/9/( WAy ?: v4 -- mt"Xl(l MA:?LO '5.e>/ATC!... -=If '3 2- jj.S;-OI , . ATTENDANCE SHEET DATE: TIME: MEETING: LOCATION: Note: Pursuant to Government Code Section 54953.3 the signing, registering or completion of this document is voluntary, and all individuals may attend the meeting regardless of whether they sign, register or complete this document. ~ / eJ--., V:;.'J ~ "J,.~:::{-/~ ~ $'8V~ Q!j Df S.~. ~~ 7J:1 ;<;,r;r fr:;~~ Cv6; ~~- & ry {L,dC/ L- ~~~~. ~~ ~bU1 ' (2-,~c y (7 i,;'V ~I~ JI1A/t!:s t)4:'1a: ~NG~ _ I t ,J~..~ ~ fleD frJ ,{so r{ .----r;;-::. -~ ~~~~~..:C~ ;fit y; ~ ~GZ TA"''' (/Jlil( ~ f~ ~d~ ~Nl> ~<--,.---, Economics Research Associates ECONOMIC ANALYSIS FOR AN UPDATE OF THE LAND USE ELEMENT OF THE GENERAL PLAN PREPARED FOR THE CITY OF SAN BERNARDINO DEVELOPMENT SERVICES DEPARTMENT BY ECONOMICS RESEARCH ASSOCIATES NOVEMBER 5, 2001 PROJECT NO. 13;;;' ",{ '; """'~;~l.;,q ,11/5"/01__ r' d~_=__.__,_. . ()_.J.. h.~ ' y~ . "....._........_.__.~ 10990 V\I,l.,hlre Boulevard SUIte 1500 Los Angeles. CA 90024 310477.9585 FAX 310478,1950 www.econres,com ERA Is .ffili.t.d with Drly.,s Jon.s Lo:o Angele:o San Franci:oco San Diego Chicago O..lI.u Wa5hington DC London City of San Bernardino Economic Development Issues Summary ofIssues Ongoing and Contemporary Challenges . There are a number of factors that have continued to challenge the City of San Bernardino during the past decade. 1. The national recession of the early 1990s 2. The closure of the Norton Air Force Base, 3. Increasing regional competitive forces in the commercial/industrial sectors 4. Challenges posed by the oncoming economic downturn . The Closure of Norton Air Force Base had the most adverse effect on the City's economy, beginning with a loss of 10,000 :!: jobs (eventually affecting the City's reputation), a decline in retail sales, market shares and fiscal revenues, and less higher value residential developments and/or improvements. Assets . . San Bernardino, however, has many valuable assets, which could help restore its economic activity within the Inland Empire as well as Southern California. 1. Its geographic location: The "Transcontinental Hub" concept and, the surrounding mountain recreation opportunities 2. Reuse opportunities of the Norton Air Force Base facilities 3. Its consistency in attracting and retaining Federal, State, and County properties, facilities, grants, improvements, and employment location commitments 4. The location of two strong educational institutions: The California State University San Bernardino, and the San Bernardino Valley College. Community Image-Themes to Build On Events and Ceremonies . The annual Route 66 Festival has "captured the brand". Shows the City's hosting capacities. . Some shows "get lost", including the National Orange Show . The success of the new San Bernardino Baseball Stadium and Hospitality Lane Governments Center of the Inland Empire . A collection of governments of every level have clustered in the City, and have continually reinvested in public/govemmental, health, and other facilities, including the most modern buildings downtown. . Should sustain and further collect governmental offices. Educational Cluster . CSUSB and SB Valley College bring 25,000+ students, 1,000+ faculty, and 900 staff. Page 1 of 3 . Growth, in addition to a proactive policy towards incubator start-ups, will provide more growth, and should be encouraged by the City, its Redevelopment Agency, and in concert with the college and the university. . Initiation of a College of Engineering at CSUSB Geography/Topography and Historic Assets . Acts as a transcontinental hub and gateway; growing as a utility hub as well. . Transform the gateways and corridors into next generation hub functions (information, communication, energy, mass media). Needs to utilize these Iocational strengths as potential for growing businesses which utilize these locational assets. . The I-15/Devore Cutoff and the airport expansion were "victories" tor Ontario in the past, however, NOW San Bernardino may seize initiatives with next technologies and somewhat more intensive land uses than the warehousing fields of the California Commerce Center in Ontario. Gateway to the Mountains and Deserts . Could be the provisioning place and the recreational equipment stores cluster location. . Generate an effective additional reputational quality (Near Term) Economic Development Goals 1. Encourage economic activity expanding upon the existing and oncoming locational strengths of San Bernardino 2. Identify and attract new employment types/land uses that complement the existing employment clusters and foster long-term economic growth 3. Prevent retail sales leakage and recapture regional retail expenditure through key sectors 4. Prepare for oncoming economic activities through adequate infrastructure improvements, sensible plarming, and a business friendly environment S. Clearly signal the multiple opportunity locations in San Bernardino for retail, office, and industrial development _.______ Page2of3 )'! " "'Ii .. [ ~'ir;K---'" "/--J.li.J ' , ~ );,yy~, !, /' ,.;,- n'/ j""-\ , ~ / / \ .J~)~~/ / - J?f:" <'1/ \- ';J)~ f // tlh / Ir. , / \ yY' / ~---, > ~~ ~ 6-( ~~ ~( ",h ~)~ .ct, ' :2') , ::;<y 1// ( ~' J I i I I i en '15 6 {-J~ ' '- c'iTI I u ~.oill~ ~~ I f~j,~,'~ill~,"\ ,J1zl~ ~~' i I~ J '-'~I IilJ'-.",,,,"'hI~!' ( IiIJ "',,~ ~ "1 '/0 ~: .~:m '~I w r tr;/ +-L J ~ r~ ~,,~il I' I(,! , ~ "-. ~ ,_ 1l-1' ~",' (~:~~~1~ ' \ ~~~~,.~ ~__f ~ ~~~~~; ~ . /~, ,rr~,',~ .", '~~,B1~J,-. ^ (~Il( ~'. ' . "';'''----"te=" ;. r ,-;t'~~.~ i.~' : ,r- j1^,--G.~.~~~ ~ I ,-.~..' -. - / ~,;2::l1:,. .--- ~ "-"'ll'l ' -''',,- '''i~'t1 ';., ,'l.~ 3L$. ~, c.e ..-J 't'%\ ?~~ !~ ~ '-'::." 7..!~ J~ '- 'I ? " I!~~J'< ,L ~I+i'~ ' : --:! 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" ' , CO', !m?c.: ,"...:'13'; r" "'..1 ...., ~i c'!,~' + ,,: CO'' ~'y_";---14, '4 ~ /IAlfT W \ o'~ ~~ ~4 ~,rio ~ 1 /~~~rFr\, <C"~' ;:.;..~~ ,I' ; I- ~-;.; ~\ ., .,---,---"' , ~, ' idl" : PJ~~-'+'c,:-=:.. : I j,' I, /J' ,'1 ","lr'iI-:;-- 0''''''''-'' L /' J~i: i7 ~' -+0. n.:;~~ : ' ~ ,i' III,-;T'" ,-:: -,~~ Iii -. ~ 'm~, ~- I ! fit!'" ' I i~, -n 0, d, ~ ~ i: ," ,..".....J Z , ,,'.. .:r,~1 -;, ~ '~ ,L/ 'A-' . --'. ~! I L- I -1 , f=f , ii " .......:.lJ,4 , ~ c, City of San Bernardino General Plan Visioning Workshops w The City is preparing a new General Plan to guide the future of San Bernardino. Your ideas and concerns are important in the preparation of the new General Plan. Visioning workshops will be held throughout the City, focusing on issues and topics relevant to your community. Interested residents, students, property owners, business owners, and community leaders are encouraged to attend and participate. The input received at these workshops will be incorporated into an issues/opportunities report, and ultimately, included in the updated General Plan. What is a Vision: A positive description and image of the community at some point in the future. What is a General Plan:The General Plan sets the foundation for decision making by city officials concerning land uses, publiC services, the physical character of the community, and other important aspects of community life. It is a document that captures what is really important about a community and provides direction for making those important things happen. [!V- s fJ/ tI Workshop date~ time, and locations: 151 . Tuesday, November 13th - New Hope Missionary Baptist Church, 1667 rt Medical Center Drive, at 6:30 pm. . Thursday, November lSth - Scottish Rite Temple, 4400 N. Varsity Avenue, at 6:30 pm. . Tuesday, November 27th - Latter Day Saints Church, 3860 N. Waterman Avenue, at 6:30 pm. . Thursday, November 29th - Feldheym Library, SSS W. 6th Street, at 6:30 pm. For additional information contact the City of San Bernardino Planning Division at 909.384.50S7 City of San Bernardino General Plan Visioning Workshops ,. The City is preparing a new General Plan to guide the future of San Bernardino. Your ideas and concerns are important in the preparation of the new General Plan. Visioning workshops will be held throughout the City, focusing on issues and topics relevant to your community. Interested residents, students, property owners, business owners, and community leaders are encouraged to attend and participate. The input received at these workshops will be incorporated into an issues/opportunities report, and ultimately, included in the updated General Plan. What is a Vision: A positive description and image of the community at some point in the future. What is a General Plan:The General Plan sets the foundation for decision making by city officials concerning land uses, public services, the physical character of the community, and other important aspects of community life. It is a document that captures what is really important about a community and provides direction for making those important things happen. Workshop date~ time, and locations: . Tuesday, November 13th - New Hope Missionary Baptist Church, 1667 N. Medical Center Drive, at 6:30 pm. . Thursday, November 15th - Scottish Rite Temple, 4400 N. Varsity Avenue, at 6:30 pm. . Tuesday, November 27th - Latter Day Saints Church, 3860 N. Waterman Avenue, at 6:30 pm. . Thursday, November 29th - Feldheym Library, 555 W. 6th Street, at 6:30 pm. For additional information contact the City of San Bernardino Planning Division at 909.384.5057 ~ 0 C\l C') fI) -a . 0 as ~ 0 " Cl .c: .c c CIl Cl ~ Gic: :h ... 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Q)- 1lI_ C_ ... ClOg ~ e ~ u CIl -u en 0 Ou 0) ell c"Oc .- -.:: .... -ell 0) 'Q..c ~ E u- 0)... C.c C Q) Cc: +::... .;: 00)0 ell O).c -CIl CUO) .- 'Q)::J"O "0 c- >... .Ec cu > e Q) 0 .- c e"O e.> 0. Q).c.c ~ (,)- Q) ::J Q) 0.= =cu a: C..._ "0_ e.c w.c Q)cu _u a: en r ~ . ,.. ERA "'" ,. Economics Research Associates "'" ... "'" r .. ,- ... r .. ,. .. r ... ,. l.. r .... .. ... r ... .. ... .. I" ,.. " .. ... r . r ... ECONOMIC ANALYSIS FOR AN UPDATE OF THE LAND USE ELEMENT OF THE GENERAL PLAN PREPARED FOR CITY OF SAN BERNARDINO DEVELOPMENT SERVICES DEPARTMENT //:{".o( -=Ff5L I 1 I I 1 g I I I I I I I I I I I I :1 Economics Research Associates ECONOMIC ANALYSIS FOR AN UPDATE OF THE LAND USE ELEMENT OF THE GENERAL PLAN PREPARED FOR CITY OF SAN BERNARDINO DEVELOPMENT SERVICES DEPARTMENT PREPARED BY ECONOMICS RESEARCH ASSOCIATES SEPTEMBER 2001 ERA PROJECT NO. 13718 10990 Wilshire Boulevard Suite 1500 Los Angeles. CA 90024 ERA is .ftlll.tad with 0'1..... Jon.. 310.477.9585 FAX 310.478.1950 www.econres.com Los Angeles San Francisco San Diego Chicago Washington DC London ~ 1 I I g I 1 I I I I I I I II I II I I TABLE OF CONTENTS Section I EXECUTIVE SUMMARy.......................................................... Introduction................................................................................. . Population and Demography........................................................ Employment................................................................................. Real Estate Market ....................................................................... General Limiting Conditions ....................................................... II INTRODUCTION ....................................................................... III POPULATION AND DEMOGRAPHY ...................................... Introduction................................................................................. . Population Growth Composition ................................................. Housing Growth Composition ..................................................... Market Area Characteristics......................................................... Conclusion ................................................................................... IV EMPLOYMENT .......................................................................... Introduction .................................................................................. Regional Employment Growth .................................................... Employment Clusters ................................................................... Regional Shift.Share Analysis ..................................................... Concl usions.................................................................................. V REAL ESTATE MARKET ......................................................... Introduction .................................................................................. Office Market Trends ................................................................... Industrial Market.......................................................................... Retail Markel................................................................................ Hotel Market ................................................................................ Concl usions.................................................................................. VI MARKET DEMAND ESTIMATES ........................................... Introduction................................................................................ .. Office and Industrial Uses............................................................ Retail Demand.............................................................................. Overnight Visitor Market............................................................. Conclusion .................................................................................... 1 Pal!e 1- I 1- I 1- I 1- 2 1- 5 1- 8 11- I III. I III- I III- I III- 3 III- 7 III-I5 IV. I IV. I IV- I IV. 6 IV-20 IV-25 V- I V- I V- 2 V-13 V-I8 V-26 V-30 VI- I VI- 1 VI- 1 VI- 4 VI- 6 VI- 6 Economics Research Associates ERA Project No. 13718 City of San Bernardino Page iii I I I I I I I I I I I I I I I ,I I I I TABLE OF CONTENTS (Continued) Section VII SUMMARY OF MARKET OPPORTUNITIES ......................... Introduction .................................................................................. Office Development ..................................................................... Industrial Development ................................................................ Retail Development...................................................................... Hotel Development Opportunities ............................................... Concl usions.................................................................................. VIII FISCAL IMPACT ANALYSIS ................................................... Introduction................................................................................. . Conclusion ................................................................................... IX ECONOMIC DEVELOPMENT ISSUES, GOALS, OBJECTIVES AND POLICIES .................................................. Introduction................................................................................. . Summary of Issues ....................................................................... Community Image-Themes to Build On................................... Gateway to the Mountains and Deserts........................................ Goals, Objectives and Policies .................................................... Pal!e VII- 1 VII- 1 VII. 1 VII- 3 VII. 5 VII- 7 VII- 8 VIII. 1 VIII- 1 VIII- 6 IX- 1 IX. 1 IX- 1 IX- 3 IX- 5 IX- 6 Economics Research Associates ERA Project No. 13718. City of San Bernardino Page iv I 1 I I I I I I I I I I I I I I I I II Table No. 1- 1 III. 1 III. 2 III. 3 III- 4 III- 5 III- 6 IV- 1 IV- 2 IV- 3 IV- 4 IV- 5 IV. 6 LIST OF TABLES EMPLOYMENT CLUSTERS IN THE CITY OF SAN BERNARDINO, 1999-2000 ........................................................ CITY OF SAN BERNARDINO AND SAN BERNARDINO COUNTY HISTORIC POPULATION AND HOUSING ESTIMATES, 1990.2000 ............................................................ RESIDENTIAL PERMIT TRENDS ........................................... MEDIAN HOME PRICES (November 1997-January 2000) ...... SAN BERNARDINO NEW HOME SALES (Fourth Quarter 2000) ............................................................................................ POPULATION AND HOUSEHOLD CHARACTERISTICS.... INCOME CHARACTERISTICS ................................................ EMPLOYMENT GROWTH: RIVERSIDE- SAN BERNARDINO PMSA VERSUS CITY OF SAN BERNARDINO .................................................................. NON-FARM EMPLOYMENT TRENDS BY SECTORS IN RIVERSIDE-SAN BERNARDINO PMSA ................................ EMPLOYMENT PROJECTIONS: RIVERSIDE- SAN BERNARDINO PMSA ...................................................... EMPLOYMENT BY SIC CODES: CITY OF SAN BERNARDINO VERSUS SAN BERNARDINO COUNTY ..... ESTABLISHMENTS BY SIC CODES: CITY OF SAN BERNARDINO VERSUS SAN BERNARDINO COUNTY ..... SALES BY SIC CODES: CITY OF SAN BERNARDINO VERSUS SAN BERNARDINO COUNTY ................................ -<q Pal!:e 1- 3 III- 2 III- 4 III- 5 III- 6 III-I0 III-ll IV. 2 IV- 4 IV- 5 IV. 7 IV- 8 IV- 9 Economics Research Associates ERA Project No. 13718 City of San Bernardino Page v i I I I I I I I I ~ I I I I I I I I I Table No. IV- 7 IV- 8 V- I V. 2 V- 3 V- 4 V- S V- 6 V- 7 V.8 V.9 V.lO LIST OF TABLES (Continued) EMPLOYMENT CLUSTERS IN THE CITY OF SAN BERNARDINO ........................................................................... REGIONAL SHIFf-SHARE ANALYSIS: SAN BERNARDINO COUNTY VERSUS SOUTHERN CALIFORNIA FIVE-COUNTY REGION ................................. INLAND EMPIRE OFFICE MARKET INVENTORY VERSUS VACANCY ................................................................ INLAND EMPIRE OFFICE MARKET ABSORPTION. RENTS AND SPACES UNDER CONSTRUCTION ................. OFFICE INVENTORY BY BUILDING CLASS (2000 Third Quarter) .................................................................... OFFICE INVENTORY BY BUILDING SIZE (2000 Third Quarter).................................................................... CITY OF SAN BERNARDINO: CONTEMPORARY OFFICE MARKET CHARACTERISTICS ................................ CITY OF SAN BERNARDINO: RECENT OFFICE BUILDING FOR LEASE LISTINGS ......................................... INLAND EMPIRE OFFICE MARKET: SELECTED ONCOMING DEVELOPMENTS ............................................... CITY OF SAN BERNARDINO: RECENT OFFICE PROPERTY SALES .................................................................... 2000 THIRD QUARTER MARKET OVERVIEW.................... SAN BERNARDINO INDUSTRIAL MARKET OVERVIEW (Third Quarter 2000) .................................................................... Pal!e IV-ll IV- 23 V- 4 V- 6 V.7 V- 8 V- 9 V-lO V-lO V-ll V-IS V-I6 Economics Research Associates ERA Project No. 13718 City of San Bernardino Page vi i I I I I I I ~ I I I I II I I I I .1 I II Table No, V-ll V.12 V-13 V-14 V-IS V-16 V-17 V-18 V-19 VI- 1 VI- 2 VI- 3 VI. 4 LIST OF TABLES (Continued) INLAND EMPIRE INDUSTRIAL MARKET: TOTAL PRELEASING ACTIVITY AS OF THIRD QUARTER 2000... CITY OF SAN BERNARDINO RECENT INDUSTRIAL FOR LEASE LISTINGS.............................................................. CITY OF SAN BERNARDINO: RECENT INDUSTRIAL BUILDING SALES ..................................................................... TAXABLE SALES IN THE CITY OF SAN BERNARDINO... TAXABLE SALES COMPARISONS ........................................ TAXABLE SALES SHARES ..................................................... TAXABLE SALES PER CAPITA IN THE CITY OF SAN BERNARDINO AND ENVIRONS.................................... RETAIL CENTER CHARACTERISTICS IN SAN BERNARDINO CITY ........................................................ HOTEL MARKET TRENDS ...................................................... OFFICE AND INDUSTRIAL SUPPORTABLE SPACE ANALYSIS (1999) ...................................................................... OFFICE AND INDUSTRIAL SUPPORTABLE SPACE ANALYSIS (2004) ...................................................................... RETAIL MARKET DEMAND ................................................... ESTIMATED NUMBER OF BUSINESS VISITORS TO THE CITY OF SAN BERNARDINO (1999) ...................................... ~ Pal!e V-17 V-19 V.20 V-22 V-24 V-2S V-28 V-29 V-31 VI- 2 VI- 3 VI- S VI- 7 Economics Research Associates ERA Project No. 13718 City of San Bernardino Page vii ~ I I I I I I I I I I I I I I I g I I Table No. VIII - I VIII- 2 VIII - 3 VIII - 4 LIST OF TABLES (Continued) SAN BERNARDINO GENERAL PLAN FISCAL IMPACT ANALYSIS .................................................................................. BUILDING V ALUA TIONS........................................................ PROPERTY TAX VALUATION (NON-RESIDENTIAL)........ FISCAL IMPACT OF NON-RESIDENTIAL USES)................. Pal!e VIII. 3 VIII. 4 VIII. 5 VIII - 7 Economics Research Associates ERA Project No. 13718 City of San Bernardino Page viii ~ I I I I I I I I I I I I I I I IW I I Fil!ure No. III. 1 III- 2 IV- 1 IV- 2 IV- 3 IV- 4 IV. 5 IV- 6 IV- 7 LIST OF FIGURES MARKET AREA DEFINITION (CENTROID 1-215 AND 6TH STREET).................................................................... POPULATION DISTRIBUTION, 1999...................................... EMPLOYMENT DISTRIBUTION, 1999................................... NON-DURABLE MANUFACTURING ESTABLISHMENTS. TRANSPORTATION RELATED ESTABLISHMENTS........... FINANCE, INSURANCE AND REAL ESTATE RELATED ESTABLISHMENTS .................................................................. HEALTH SERVICES RELATED ESTABLISHMENTS .......... EDUCATIONAL SERVICES RELATED ESTABLISHMENTS PUBLIC ADMINISTRATION RELATED ESTABLISHMENTS 'i Pal!e III- 8 III.12 IV-13 IV-IS IV-17 IV-18 IV.19 IV-21 IV-22 Economics Research Associates ERA Project No. 13718 City of San Bernardino Pageix I I I I I I I I I g I I I I I I I I I LIST OF EXHIBITS Exhibit No. Pal!e y. 1 TAXABLE RETAIL SALES TRENDS IN SAN BERNARDINO AND ENYIRONS............................................. Y- 27 Y- 2 TAXABLE NON-RETAIL SALES TRENDS IN SAN BERNARDINO AND ENYIRONS............................................. Y- 27 y. 3 SAN BERNARDINO HOTEL MARKET TRENDS .................. Y.32 Economics Research Associates ERA Project No. 13718 City of San Bernardino Page x C I ~ g a i I I I I I I I I ; g II I I Section I EXECUTIVE SUMMARY INTRODUCTION In this assignment Economics Research Associates (ERA) has been tasked by the City of San Bernardino's Development Services Department to undertake an economic analysis for an update of the land use element for the City's General Plan. ERA was asked to examine the current market conditions in San Bernardino for development of nonresidential land uses. This report contains an extensive analysis of the market for these land uses within the City in the context of the broader real estate market of the Inland Empire and Southern California as a whole. In addition to the analysis of the real estate market, the report also includes an overview of population demography and economic conditions in the City, along with a review of San Bernardino's employment both in terms of the City's labor force, i.e., the job of residents who live in San Bernardino, and employment base, i.e., jobs in San Bernardino regardless of the place of residence of the employee. This report also contains an analysis of the fiscal impacts of development of nonresidential development in the City of San Bernardino, which can be used as a planning tool to assess the affects of new development on the General Fund revenues on the City of San Bernardino. Finally, this report concludes with a series of policy recommendations that can be used to inform the development of a new land use element for the City's General Plan. This includes a series of objectives that can be met by implementable policies that may be used directly in that effort. This Executive Summary contains an outline overview of the key findings of the report. POPULATION AND DEMOGRAPHY The 2000 census estimates population of the City of San Bernardino to be 185,401 persons. This represents approximately 11 percent of the total population of the County of San Economics Research Associates ERA Project No.13718 City of San Bernardino Page I-I g I I I U I U I I I I I I I ~ I I I I Bernardino. During the past decade, the City's population has grown at a rate of 1.4 percent annually which has trailed countywide growth (1.8 percent). While the population base of the City of San Bernardino has been growing, it has not kept pace with growth experienced in the County as a whole. The slower rate of population growth is coupled by a growth in concentration of persons under the age of 18 in family households. For 1999, the median household income for the City of San Bernardino can be estimated at about $32,000 which is considerably lower than the countywide median of just over $40,000 per year. One of the great strengths of the City of San Bernardino is the racial and ethnic diversity found among its residents. San Bernardino represents the core of the most ethnically and racially diverse areas of the entire Inland Empire. This community diversity has the potential to be a source of differentiation, and market strength now and into the future. For example, San Bernardino's linguistic diversity, in terms of its Spanish speaking labor force, could be a strength to attract (Spanish speaking) telephone call centers and employers requiring Spanish skills. In addition, diversity could also be an asset in terms of marketing niche retail/entertainment products (specialty stores, markets, festivals) or 'cultural theming' of existing retail enclaves. The City has enhanced eligibility for focused job training resources. EMPLOYMENT According to 1999 estimates, San Bernardino is the site of approximately 74,000 jobs. While the economy of the Inland Empire as a whole has been growing, the City of San Bernardino was more severely affected by the regionwide recession of the early '90s due to the closure of Norton Air Force Base and defense-service related establishments. Though the Inland Empire as a whole has shown a relatively fast-paced recovery from the recession, the City of San Bernardino's recovery has been able to keep pace. Currently, the City accounts for approximately 14 percent of total jobs in the County. An analysis of employment data shows the following key employment clusters for the City of San Bernardino (see Table 1-1). It is evident that the City of San Bernardino's decreasing share of regional employment can be attributed, for the most part, to its eroding competitive position within Economics Research Associates City of San Bernardino ERA Project No.13718 Page 1-2 I I I I I I I I I I I I I I I I I I I the region. The increasing strength of Ontario, in terms of transportation connections and readily available floor space, as well as the competitive labor force and amenity advantages available in Riverside, make both these communities strong competitors of San Bernardino. Table 1-1 Employment Clusters in the City of San Bernardino 1999-2000 Employment Sales Establishments Share Number Share $ Mil. Share Number Share of County Health Services 9,771 13% 1,122 15% 467 8.1% 17% Educational Services 8,498 11% 790 10% 137 2.4% 19% Public Administration 7,510 10% 0% 224 3.9% 29% Real Estate 2,251 3% 342 4% 280 4.9% 18% Business Services 2,084 3% 259 3% 266 4.6% 10% Special Trade 1,633 2% 224 3% 207 3.6% 10% Contractors Printing & Publishing 1,536 2% 82 1% 62 1.1% 28% Legal Services 1,112 2% 198 3% 187 3.3% 36% TOTAL 34,395 46% 3,017 39% 1,830 32% Source: Economics Research Associates and Claritas In addition, San Bernardino has undergone a relatively tough transition in recovering from the last recession due to the closure of Norton Air Force Base, which was a major economic engine for the city, especially in terms of creating high value civilian jobs through defense contracts. It would be wrong, however, to say that opportunities are limited for the future. The City has the potential for retaining and expanding certain key employment sectors that have traditionally located here. This would depend not only on the identification of these potentially strong sectors, but also in a proactive program to attract and retain employment through partnerships, alliances and marketing efforts. Some of these existing and expanding sectors are found to be: 1. Light industrial and manufacturing, especially in terms of non-durable goods and services. The city could build on the existing Printing and Publishing Sector. Market opportunities for full service publishing facilities that include Economics Research Associates ERA Project No.13718 City of San Bernardino Page 1.3 ~ ~ , I g , II I II II " I I I I I I I I I both design and production should be explored. Opportunities also. exist in apparel (production) and specialty food (preparation/packaging) sectors. These opportunities are not limited to low-skill employment, but could be in the form of a range of high value products and services. 2. The Health Services cluster that has a larger proportion of high value jobs provides tremendous opportunities. Note also that the City is adjacent to the significant potential growth medical center and research activities at Lorna Linda Hospital. 3. Partnerships and alliances with the Educational Services sector will be very important in not only creating a competitive labor pool, but also in providing a regional amenity. 4. Transportation is evolving as a core employment sector in the region and opportunities exist for continued capture of Transportation related jobs (both in terms of goods and passenger transportation). 5. It is important to retain the existing cluster of government offices, as they provide a sustained demand for business and professional services in the City. However, caution should be taken at the potential risks posed by relocation and downsizing of certain administrative sectors. 6. Call Centers and other services not dependent on product delivery will need a low cost environment and diverse (including multi-lingual) labor force. 7. Opportunities for Wholesale Trade related uses with frontage to the Interstate- 215 should be explored. Eventual completion of the 1-21O/Route 30 Connection (2005/2006) will provide significant locational advantage. REAL ESTATE MARKET In this analysis, ERA undertook a review of the broader real estate market for nonresidential land uses in the Inland Empire with a focus on the following: Economics Researcb Associates ERA Project No.13718 City of San Bernardino Page 1.4 ~ I I I I I I I I I I I I I I I I I I 1 . Office . Industrial . Retail . Hotel Sections V and VI of the report give detailed information regarding the performance of the real estate market in both the Inland Empire and the City of San Bernardino as a whole. Market indicators suggest that San Bernardino will experience increase in demand for industrial space, and to a lesser extent, demand for additional commercial office. However, given the current market conditions and the absence of a major market transforming project such as those represented by the Vision 2020 (lakes and streams plan), the City of San Bernardino is overbuilt in retail space. This does not mean, however, that the City will not see any new retail development in the near term. In fact, it is likely to be the focus of continuing interest by large- format retailers such as Wal-Mart, Kohl's, and home stores such as Lowe's or Home Depot. However, ERA anticipates that this will represent a marginal growth in retail demand which will make existing developments, particularly strip retail, highly vulnerable to new competition. As a result, only marginal increases will occur in the total net volume of occupied retail space in the City of San Bernardino. Office The demand for office space in the Inland Empire, particularly east of Ontario, is forecast to increase in the next 5 to 10 years. ERA's preliminary supportable space estimate shows that the City of San Bernardino's office market is currently overbuilt. However, projected employment growth estimates show that the City could capture as much as 170,000 square feet annually over the next five years. Most of this oncoming office demand in San Bernardino is likely to be fulfilled by infill development in the downtown area. From a land use perspective, the City should be proactive in promoting infill and mixed office commercial development in the downtown area. Ma~ket conditions which permit some lower-density office park type development can be accommodated in the northern part of the Economics Research Associates ERA Project No.13718 City of San BernardinocPage 1.5 ~ I I ~ I I I I I I I I I II I I I I I City either along the 1-215 corridor or adjacent to Cal State San Bernardino (CSUSB). This can serve as an effective buffer between oncoming new residential development to the north, and potential industrial uses that might locate along the freeway. Completion of the 1- 21O/Route 30 connection will also increase office location advantage. The City should also be proactive in promoting mixed office and commercial uses in the Downtown area and the area adjacent to CSUSB. The total over the life of the plan at saturation, ERA forecasts net new demand of slightly over 850,000 square feet of new office space in the City of San Bernardino, which would require approximately 27 acres to accommodate. Industrial Development Industrial vacancies in the City of San Bernardino (4.8 percent) are significantly lower than the regional market as a whole at 7.1 percent. Industrial rents, however, are still lower than the regional average. ERA's preliminary demand estimates show that the current industrial market in the City may be marginally overbuilt. The City, however, could absorb approximately 400,000 square feet annually over the next four years, with the capacity to accommodate approximately 2 million square feet by the end of the planning period. In the short tenn, most of the industrial growth is expected to be in the warehouse distribution sector due to the availability of prime locations with access to the regional interstate highway system. This could be expanded to include key manufacturing and R&D sectors if the City is able to establish pro-active alliances with existing educational and professional institutions (universities, medical facilities, and hospitals). ERA forecasts that over the planning period the market will demand approximately 2 million square feet in net new industrial space in the City of San Bernardino which can be accommodated on approximately 151 acres. Retail Development Although the City of San Bernardino continues to attract retail dollars from neighboring communities, its position as a retail center is declining. As evidence of this, Economics Researcb Associates ERA Project No.13718 City of San Bernardino Page 1.6 I I I I g I I I I I I I C I I II II I I g most of the multi-tenant retail centers in the City are experienced vacancies ranging from 15 to 40 percent. ERA's preliminary analysis shows that the existing retail stock is overbuilt by approximately 400,000 square feet. Given current growth rates, it is unlikely that all this space will be reabsorbed in the next 5 to 10 years. However, with oncoming new retail formats and the possibility for improved market conditions, it is safe to plan for a marginal amount of net new growth in retail space. For the purposes of this plan, ERA anticipates net new demand in retail growth to be approximately 10,000 square feet. Realization of the City's Vision 2020 project (lakes and streams) as a regional" town center" and recreation attraction, could be a significant catalyst in helping San Bernardino to retain its regional retail position. Hotel Development Currently, the hotel market in the City of San Bernardino shows moderate demand for new rooms. Both room supply and room demand have remained relatively flat over the past five years. However, the existing clusters of federal, state, and county offices will continue to demand a certain continuing level of moderately priced business hotels in the City. The current and future market conditions in the region do not suggest a strong demand for more hotel rooms in San Bernardino. This is particularly true because of the intense cluster of hotels/executive suites at Ontario airport environs. While demand for more total hotel rooms is not strongly demonstrated, certain hotel types may be under supplied such as modem business-serving hotels. Over the next four to five years, San Bernardino could potentially add approximately 200 mid.priced, business quality hotel rooms in the City. GENERAL LIMITING CONDITIONS Every reasonable effort has been made to ensure that the data contained in this study reflect the most accurate and timely information possible, and they are believed to be reliable. This study is based on estimates, assumptions, and other information developed by Economics Research Associates from its independent research effort, general knowledge of the industry Economics Research Associates ERA Project No.13718 City of San Bernardino Pagel- 7 I I I I I I I I I I I I I I 'I I I I I and consultations with the client and the client's representatives. No responsibility is assumed for inaccuracies in reporting by the client, the client's agent and representatives or any other data source used in preparing or presenting this study. This report is based on information that was current as of September 2001 and Economics Research Associates has not undertaken any update of its research effort since such date. No warranty or representation is made by Economics Research Associates that any of the projected values or results contained in this study will actually be achieved. Possession of this study does not carry with it the right of publication thereof or to use the name of "Economics Research Associates" in any manner without first obtaining the prior written consent of Economics Research Associates. No abstracting, excerpting or summarization of this study may be made without first obtaining the prior written consent of Economics Research Associates. This report is not to be used in conjunction with any public or private offering of securities or other similar purpose where it may be relied upon to any degree by any person other than the client without first obtaining the prior written consent of Economics Research Associates. This study may not be used for purposes other than that for which it is prepared or for which prior written consent has first been obtained from Economics Research Associates. This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions and considerations. Economics Research Associates ERA Project No.13718 City of San Bernardino Page 1.8 l I g I ~ I I I ~ I I I I I I I I I I I Section n INTRODUCTION In this assignment, ERA has been charged with determining the market demand for land uses within the City of San Bernardino. The market demand analysis is not intended to be a prescriptive document which would guide the General Plan process towards the selection of one particular mix of land uses over another, but rather sets out to identify the current factors of demand that are present in the market for the City of San Bernardino and the San Bernardino/ Inland Empire market area as a whole. We have been charged with identifying this market demand on the basis of the highest and best economic use of the parcels that are available for development within the City. This analysis takes the perspective of a private landowner by asking the question: "What is the most economically efficient use of a given parcel within the City?" However, the City planning process does not always require that the highest and best economic use be what is eventually incorporated into the general plan. There may be legitimate community planning reasons why one category of uses is preferred over another. These reasons may include aesthetics, community character, employment generation, or identified deficit of a certain service or land use category that is needed in the community - all of which can be addressed through the General Plan process. However, there are consequences (solely from a market perspective), to selecting less than optimal permitted land uses. The effects of making a less than maximal, economically efficient distribution of land uses fall primarily into two categories: (1) fiscal and (2) timing of development. In the first case, by choosing a lower valued land use, any development that takes place will have a resultant lower assessed valuation. That lower assessed valuation will result in less property tax revenue to the City of San Bernardino's General Fund or will reduce the increment (i.e., the new additional value of development available within the district) created for redevelopment projects. This would have the effect of reducing the amount of revenue that Economics Research Associates City of San Bernardino ERA Project No.13718 Page 11.1 l I I I I I I I I I I I II I I I I I I I I would be available to be directed towards infrastructure improvements and other capital investments that would support the implementation of the overall vision contained within the General Plan. An example of the second consequence, timing of development, is that while the community may have a specific outcome in mind, if market conditions are not in line with that vision land may remain underutilized or vacant until market conditions change. There may be certain strategic parcels, such as those with access to the 1-215 corridor, that may be appropriate to hold in reserve until a development that meets community goals for economic development or employment generation becomes feasible on that site. Underlying the whole discussion, contained within the market study, is the notion of land value. Land value is determined by four major factors: 1. Location -- Where a specific parcel or piece of land is located, and what are its physical limitations/strengths. 2. Infrastructure and neighboring land uses -- The presence of complementary or compatible land uses nearby, along with appropriate supporting infrastructure that either supports or prevents certain economic activities from taking place 3. Entitlements -- The legal restrictions on what can be built on a given parcel, zoning, and development standards. It is through the General Plan process that the entitlements will be established. It will therefore determine one of the critical components of the ultimate land value and therefore the ultimate disposition of land. 4. Demand - Market demand for types of land uses feasible on the site in order to determine the 'highest and best' use. Because the city is a mature market, there are some significant constraints that limit the ability to alter the trajectory of development; i.e., available parcels for development will likely need some reconfiguration or redevelopment of existing uses. There is, however, a significant amount of undeveloped or vacant land within the City of San Bernardino. Also many buildings will require some kind of reuse, adaptation, demolition, and/or clearance where the economics of redevelopment make sense. Economics Research Associates ERA Project No.13718 City of San Bernardino Page 11.2 1 I I I I I I I I I I II I I I I I I I I It is important to realize that in performing this market study, Economics Research Associates has been looking at a broader market area than just the boundaries of the City of San Bernardino. The districts that comprise the plan area are complicated in shape and have interactions with adjacent and other neighboring land uses. More importantly, no market analysis can take place in a vacuum which only considers conditions within the district without consideration of the broader economy. In this market analysis, ERA will be looking at how the City of San Bernardino fits in with market conditions in the broader area of the Inland Empire. It is with this perspective that ERA offers the following review of general market conditions affecting the City of San Bernardino. Economics Research Associates ERA Project No.13718 City of San Bernardino Page 11.3 I I I 1 I I I I I I II II II I I I II I I Section III POPULATION AND DEMOGRAPHY INTRODUCTION Economics Research Associates (ERA) was retained by the City of San Bernardino to assist in its update of the Land Use Element of the General Plan. This report presents an analysis of the City's economic and demographic base, potential trends and available markets. This base analysis lays the foundation for the City's commercial and industrial land use strategy, which will be formulated in the next task. POPULATION GROWTH COMPOSITION Table III-I presents population and housing growth in the City of San Bernardino compared to San Bernardino County, from 1990 to the year 2000. The 2000 census estimates the population of the City of San Bernardino to be 185,401. This is approximately 11 percent of the countywide population of 1,709,434. However, during the past decade (1990-2000), the City's population has grown at a rate of 1.4 percent annually, which is lower than the countywide growth rate of 1.8 percent. In absolute terms, the City's population has grown by 13 percent during the 1990-2000 period, compared to the countywide increase of 19 percent during the same period. Also, the City's share of countywide population has steadily decreased during this period, from an 11.6 percent share in 1990 to an 11 percent share in 2000. Though the City's share of 'non-household,] population is marginally higher at 3 percent of total, compared to the countywide share of 2 percent, this has been gradually falling over the years. 1 Includes population in group quarters Economics Researcb Associates ERA Project No. 13718 City of San Bernardino Page ID-1 I I I I I I ~ .. OJ ~ ~ :.l .. c .,. = = .. .. -= c .. c .5: OJ :; '" ~ '" .C .9 ~ -=8 :: p~ ~ ; 0 -= = '" .. u '" ~ =" c i .. c ~ c .. 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" -8'" ; .~ ~E E g a~ " M f3 ~ 0<: ' zu~ '" '" '" " 6 ~ I I 1 I I I 1 I I I I II I I i I ~ I HOUSING GROWTH COMPOSITION Residential Permits Table III-2 presents residential pennittrends in the City of San Bernardino compared to the County. Annual residential pennit issues dropped significantly during the 1990-95 period in both the City and the County of San Bernardino. This period reflects the 'recovery lag' from the past recession, and low development activity should not be considered uncommon. However, pennit volumes in the City of San Bernardino continued to fall into the next year (1996), while the countywide pennit volumes increased rapidly. Similar trends are reflected in the pennit valuations. Consequently, the City's share of countywide pennit volumes also decreased. In 1990 The City accounted for 7.7 percent (848 units) of the total 10,990 single family residential pennits issued countywide, in 2000 this share fell to only 1.3 percent. The City issued no multifamily pennits since 1995, while the countywide share of multifamily penn its has been steadily increasing since 1995. Home Values Table III-3 presents median home prices in the City of San Bernardino compared to the County as a whole during the November 1997 - January 2000 period. Median home prices in the City of San Bernardino are approximately 20 to 30 percent lower than the countywide median. In January 2000, the median sales price of a home in the City of San Bernardino was $86,250 compared to the countywide median of $109,0002. However, home prices in the City have increased at a higher rate than the County as a whole. The average monthly growth rate in the countywide median home price (during the analysis period) was only 0.2 percent to the corresponding growth rate in the City of 0.6 percent. One of the reasons for relatively low home values in the City of San Bernardino is the lack of newer residential developments (with higher values). Most of the housing stock is smaller and older. Table III-4 presents new home values in San Bernardino County communities on a per-square-foot basis (as of the 4th quarter of 2000). Average new home 2 These prices reflect all residential types and do not necessarily reflect Single Family homes only Economics Researcb Associates ERA Project No. 13718 City of San Bernardino Page UI-3 1 I I Table 1Il.2 Residential Permit Trends Permits Issued , I 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 I I I SaD Bernardioo County SFU MFU ToIiJ/ 10,990 2,260 13,250 5,940 869 6,809 5,884 1,367 7,251 5,296 482 5,778 4,664 145 4,809 3,801 127 3,928 4,660 162 4,822 5,012 347 5,359 5,616 511 6,127 6,496 239 6,735 5,736 704 6,440 City of SaD Bernardioo SFU MFU ToIiJ/ 848 202 1,050 412 28 440 368 72 440 297 248 545 171 2 173 98 98 96 96 108 108 137 137 120 120 76 76 ValuatioD ($0005) City as a % of Couaty SFU MFU Total 7.7% 8.9% 7.9% 6.9% 3.2% 6.5% 6.3% 5.3% 6.1% 5.6% 51.5% 9.4% 3.7% 1.4% 3.6% 2.6% 0.0% 2.5% 2.1% 0.0% 2.0% 2.2% 0.0% 2.0% 2.4% 0.0% 2.2% 1.8% 0.0% 1.8% 1.3% 0.0% 1.2% I 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 I I San Bernardino County SFU MFU Total 1,240,622 122,605 1,363,227 652,331 51,754 704,085 649,166 71,817 720,983 592,693 24,305 616,998 576,207 12,774 588,981 481,373 12,185 493,558 616,393 10,937 627,330 722,007 21,963 743,970 884,666 27,069 911,735 1,140,669 13,087 1,153,756 993,235 44,888 1,038,123 City of San Bernardioo SFU MFU ToIiJ/ 92,126 7,703 99,829 46,038 1,327 47,365 42,458 4.669 47,127 33,303 8,745 42,048 18,846 171 19,017 10,590 10,590 11,317 11,317 13,035 13.035 17,192 17,192 15,061 15,061 10,096 10,096 Citv as a % of County SFU MFU ToIiJ/ 7.4% 6.3% 7.3% 7.1% 2.6% 6.7% 6.5% 6.5% 6.5% 5.6% 36.0% 6.8% 3.3% 1.3% 3.2% 2.2% 0.0% 2.1 % 1.8% 0.0% 1.8% 1.8% 0.0% 1.8% 1.9% 0.0% 1.9% 1.3% 0.0% 1.3% 1.0% 0.00/0 1.0% I Note: 1. SFU = Single Family Units 2. MFU = Multi Family Units I Source: Economics Research Associates and Economics Sciences Corporation 0.1 0.09 0.08 0.07 ~ E .3 0.06 ~ <> 0 0.05 It . .:1 0.04 : ~ U 0.. 0.03 0.02 0.01 Q 0 ~ ~ N ~ . ~ ~ ~ ~ ~ ;< ~ ~ ~ ~ ~ ~ . " I I I I I I 1 -<>-SFU "()"MFU -Total c I I I I I I I I I I I 130000 120000 110000 - u Ie 100000 - E :l! :; 90000 '0 i I I I I I I I Table m-3 Median Home Prices (Nov,'97- Jan.'OO) City or San San Bernardino Bernardino COUDty Nov.97 $73,500 $102,000 Oec.97 $72,000 $100,000 1an.98 $73,000 $100,000 Feb.98 $72,500 $105,000 Mar.98 $70,000 $102,000 Apr.98 $75,000 $105,000 May.98 $77,500 $105,000 1un.98 $75,000 $107,500 1ul.98 $79,000 $110,000 Aug.98 $74,000 $107,800 Sep-98 $77,000 $110,000 Oct.98 $79,000 $107,000 Nov.98 $76,750 $105,000 Oec.98 $79,750 $104,000 1an.99 $78,000 $101,500 Feb.99 $75,000 $104,750 Mar.99 $80,000 $105,000 Apr.99 $77,500 $102,000 May.99 $79,000 $110,000 1un.99 $81,000 $115,000 1ul.99 $81,000 $117,500 Aug.99 $80,500 $110,000 Sep.99 $79,000 $113,000 Oc1.99 $85,000 $115,000 Nov.99 $89,500 $117,000 Oec.99 $85,500 $110,500 1an.OO $86,250 $109,000 Source: Economics Research Associates and The California Association of Realtors " ;e' ....... 80000 .. ..... ,.'.. ~.. .... ... : '.... .... ............ .. 70000 .. ..... ..... 60000 ~ ~ ~ ~ ~ ~ ~ g: ~ ~ ~ g: ~ !j ~ '" 't '" ~ '" ; ~ . :;: e- > ! . :;: e- > ~ 0 i 0 i 0 z '" ~ z '" ~ z - - + - .CityofSan Bernardino ~San Bernardino County 1 I I I I 1 1 1 1 I I I I I 1 1 I I ~ TABLE m-4 San Bernardino County New Home Sales (4th Quarter 2000) CITY Chino Hills Upland Alia Lorna Redlands Rancho Cucamonga Highland Yucaipa Montclair North Park Chino Lorna Linda Rialto Colton Ontario East Highlands Grand Terrace Bloomington San Bernardino Fontana Apple Valley Victorville Baldy Mesa AVERAGE Average Lot Size (s.r.) 5,080 8,629 12,000 20,887 9,274 12,500 9,340 4,500 7,850 10,000 8,600 6,250 9,780 7,120 8,800 7,200 7,300 9,223 5,983 16,000 6,827 43,560 10,759 Price/s.C. $121.78 119.61 107.79 103.27 102.44 102.00 10 1.3 7 10 1.16 97.15 96.72 95.80 94.13 92.98 90.87 90.57 87.10 86.51 86.10 83.33 80.54 73.55 71.59 $94.83 140 S 0 i<l 120 ..: ;;. .<: 100 ~ ~ '" " E 0 80 ::t: ~ " Z 60 ~ 0 "' ~ 40 .:! ct: ~ ~ 20 " > ..: 0 ~ '" '" '" -" '" = '" = '" ~ t1l E OIl Co ~ .", .9 .", 0 = 0 :;: = .; '" = = .. '" .E .3 0 " 0.- ::J 8 '" ;: ;2 E :2 = 0 = .<: .1'1 & 0 = '" '" ~ t: '" OIl ti t1l :E ~ " 0 E :;: 0 :> > u = z .3 0 u ;; 2i ..: 0 OJ .<: " = '" " 1 Source: The Meyers Group 4th Quarter 2000 Report; and Economics Research Associates ~ 1 I 1 I I 1 I I 1 I I I I I 1 1 II I I I price In the County is approximately $95/sJ. compared to $86/s.f. in the City of San Bernardino. Note that average new home values in the City of San Bernardino are higher compared to the communities of Apple Valley, Fontana, Victorville, and Baldy Mesa. Average new home price in Ontario is approximately $91/sJ., which is also below the countywide (unweighted) average. MARKET AREA CHARACTERISTICS ERA has carried out an analysis of population, income, employment and economic characteristics in the potential market areas available to the City of San Bernardino from the perspective land use opportunities, labor pool, and access. The demographic analysis will discuss a number of critical variables, which will illustrate the type of consumer base that is present in each one of the market areas. The City will draw from multiple market segments that will include area residents and area employees. ERA has delineated three distinct markets based on factors such as competitive advantages/disadvantages of the location, regional freeway access, potential uses and available space, and geographic and reputational. The resulting markets are primarily based on drive times. The area covered by a 0.5 minute drive time from the City Center is defined as the primary market, a 5-10 minute drive time from the City Center is defined as the secondary market and a 10-20 minute drive time from the City Center is defined as the tertiary market. These market areas are illustrated in Figure III-I. It is important to note that the Market Area estimates are extracted from secondary data provided by CACI Inc., and there might be dissimilarities of this data to other sources (such as the Dept. of Finance or SANBAG). As such, direct comparisons of the absolute numbers in these data sets should not be made to data from other sources. However, these give us a fair estimate of shares, demographic distribution patterns and short-term growth patterns of the defined markets relative to the City and the County as a whole. Economics Research Associates ERA Project No. 13718 City olSan Bernardino Page III- 7 ~ I Figure I1I-l Market Area Definition (Centroid 1-215 and 6th St.) I I '.' , -'~:~~!:," ,"':;,:.1' r-i t/1:, ,~ I 1.. -11, .,,)l-. :.~- "'1 .t'-. , j .~~. _ -<~b~.}7): 'r 'f'.'!j} t o. I. .... .~ \. \1 \, \ ":"J'. ,. I ~_. I~'''}-'t.~........ J' I '.'t{i , / -~ I ... 6 ~ "I. ..'.'. ,. liF" ;' 2 "' 8' Miles .f".' . '~~ I. ;- \,~; .\. N 1 Source: Economics Research Associat~ and ESRI I 1 I I 1 I I I I I 1 I I I I I 1 1 1 1 1 Market Area PODulation and Household Characteristics The population and household characteristics of the area are summarized in Table IlI- 5, and the income characteristics are summarized in Table II1-6. These two tables display the counts and percentage distribution for the primary, secondary and tertiary markets and the market area as a whole. These figures can also be compared to the same values for the County as a whole. A second column shows each of the three market areas and the market area total expressed as a percentage of the total County value. This allows for the comparison of the market areas to the conditions in the broader regional context. In the instances where the variables are expressed as a percentage, the analysis of the market area as a percent of the County totals can be read like a cross tabulation figure. In other words, the instances where values are at 100 percent indicate that the characteristic is present at the same levels that it is throughout the County. Any value above a 100 percent indicates an over representation and any value below a 100 percent represents an underrepresentation. . Total Population: 1999 estimates show that approximately 192,900 people (192,917) live in the primary market area. This is approximately 11.8 percent of the total County population, and encompasses almost all of the City of San Bernardino. The secondary market is estimated to contain approximately 317,900 people (317,992) and the tertiary market is estimated to contain 824,700 people (824,717). The total market area (all three markets combined) contains almost 1.3 million people (1,335,626), representing an 81.9 percent share of the County totals. 2004 projections show that the primary market as well as the City will grow at a slower rate than the region. Compared to the Countywide growth of 7 percent during the 1999-2004 period, the primary market will grow only by 6 percent, while the tertiary market is expected to experience the strongest growth at 8 percent. Figure IlI-2 illustrates regional population distribution by census tract. As a result it is expected that the City, the primary market and the Economics Research Associates ERA Project No. 13718 City of San Bernardino Page 1lI.9 1 I I 1 I I I I I I 1 I I I I I 1 I 1 '" u ~ C2 '" t; ;;; :S U ~ "" ~ .!! ~ .Q", . ,:;, c 0 g a Q . Z ~ <: ] z - 0 . ~ :l1 ;, .. ~ ;; ~ ~ c o o U ~ o II . c ~ :l: . . . ~ ~ . :l1 0 . 0 '" - 0 c ;;:; ~ " - . ._ 0 u " u .ll ~ . " < s " ~ ~ ~ ::;; u :; 0 u 'i > " is ~ u :; 0 u 'i .< d .;.. u :; u 0 'i > 6 is s 0 '; 0 0 0 u :; 0 '" 0 0 ~ .<- E 0 ~ :!! ~ .. " ~ -<! i u :; 0 u 'i .< " d ~ u :; 0 0 'i .< :: d .;.. 0 :; 0 0 'i .< '" d c .... ~::?: ,*~<fe~~~ l""l1"'lY'l~Oll"l S~NS~"': **lft*** Xl ..co-eX) "cr.:"':NNr..: .....0-.....0-.0'1'"- ............ 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QC~OM:JI"1'.....O N.c>6~:i~~:e ................ ~__QCONMN N.,;.,;s:i~~e: *~~~~~** -r--OQCr--QC:JI:JI ..-i\t5.cN"':"':"':N __NN_ ................ <"'I\O>(;.....MO"O"O "':=o'!:::~~:ir-: ~uu~u __ wi a\"; ~~..; o--~. V'\ 5t:......-N.....~f""-f""- 51 V ' ......... ""...... e s~UU ^ IIil ""... ~ ~ .2 ...:::~;Q:qSl '; ............... ... " .. 'S ~ e .s $ -lI ] ~ o ~ . u ;; '0 ~ " ~ ~ ~ . '" ~ .. .. c ~ ~ " u -= [i 15 ~ . .. '" I Figure III.2 Population Distribution 1999 (1 dot = 100 persons) I ,', . ; I , , , -:t .' - : " , - " " . , " ., : '. . ~. . -. . ,. r;.!.. ; ~ 'I'" . ". ... .....-..1. '. .;' \. ., , . ~ : ;' , C I I I I I ,;. ~ ~ .-: .. ...., I ,..'< ' ~ I I I I 'f r ,..' " " . .' I .. , I Source: Economics Research Associates and ESRI . . I I '. .. " ., :, , ,. ., 8 Mil... 'r. .' N I I I I I I I I I I I I I I I I I I I secondary market will all experience slight decline in their relative shares of countywide population during the 1999-2004 period3. . Race and Ethnicity: Although the majority of the population across all market areas is white, the share of white population is lower in the market areas relative to the countywide average. According to 2000 census, 63.1 percent of the county population is white, compared to only 53.2 percent of the primary market, 49.4 percent of city, and 63.8 percent of the market area totals. Approximately 51.2 percent of the primary market population are ethnic Hispanic. The primary market also has a significantly higher share of African Americans, with a 13.8 percent share compared to the countywide average of 7.7 percent. Other than Asian/Pacific Islanders and Native Americans, the primary market exhibits a significant overrepresentation of all non-white racial groups, relative to the County. The City of San Bernardino's racial characteristics are also fairly similar to the primary market. This is also true for the secondary market, except for a relatively higher share of Asian/Pacific Islanders. The tertiary market's racial characteristics are the closest to the countywide profile. However, the tertiary markets presents a higher than average share of Asians, along with marginally lower shares of other non-white racial groups. Overall, the total market area presents a higher than average share of African American, Asian/Pacific Islander, and Other racial groups, compared to the countywide averages. . Total Households: Estimates for 1999 show that the primary market area contains more than 62,700 households with an average household size of 3.07 persons. The secondary market is estimated to have more than 103,300 households in 1999, with an average of 3.08 persons per household. The tertiary market is estimated to contain 266,365 households, which yields 3.1 persons per household. Estimates for 1999 for the total market area show that it contains 3 According to the Census 2000 PL94-171 data released in May 2001, San Bernardino County's population is 1,709,434, and the City of San Bernardino's population is 185,401. During the 1990-2000 period, the county grew by 20.5 percent, while the City grew by only 12.9 percent. It should also be noted that the combined Riverside-San Bernardino MSA grew by 25.7 percent during the same period. In fact Riverside County was one of the fastest growing counties in 1990-2000 period with a 32 percent absolute growth. Economics Research Associates ERA Project No. 13718 City oJ San Bernardino Page m.13 ~ I I I I I .1 I I I I I I I !. I I I I I more than 432,500 households and represents an 80.5 percent share of the County total. . Population by Age. Estimates for 1999 show that there is significant over- representation of three distinct population cohorts in the City of San Bernardino and the primary market area. These are the 0-17 years, 18-24 years, and the 65+ years age groups. In tenus of absolute share across all market segments including the County totals, there appears to be a large concentration of teen and pre-teen age groups (representing 30 to 35 percent of the total), followed by persons aged 18-34 years. Approximately 8 to 10 percent of the total population across all market segments fall in the 65+ years age cohort. . Household Income. The estimated 1999 median household income in the primary market area at $29,767 is considerably lower than the countywide median of $40,865. The City of San Bernardino's median household income during 1999 is estimated to be $32,573, which is also lower than the countywide figures. The secondary market has a higher median household income at $39,581 but is still marginally lower than the countywide averages. The tertiary market's median household income is 112.5 percent of the countywide median at $45,976, signifying dispersal of higher income households. It is also important to compare the median household income to the average income, as the magnitude of positive or negative differential between the two indicates the skews in the income distribution pattern. For example a significantly larger average income compared to the median indicates a positive skew in the income distribution and means that there are some significantly wealthy households in the area. Households by income analysis show that there are significantly high proportions of 'very low income' (<$10,000) households in the primary and secondary market areas as well as the City of San Bernardino. The tertiary market area is comparable to the countywide averages in tenus of households by income distribution, and is positively skewed towards moderate to high-income households. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page 111-14 I I I I I I I I I I I I ~ I I g I I I CONCLUSION One of the great strengths that the City of San Bernardino has is the racial and ethnic diversity found among its residents. San Bernardino represents the core of one of the most ethnically and racially diverse areas in the entire Inland Empire. In addition, this community's energy represented by its desire to strive for higher standards of living through improved employment opportunities is discussed in the section that follows. The simultaneous challenge is to improve resident labor pool job skills and connect the labor pool more effectively to evolving new/oncoming job types. Though it is not the primary objective of this report to specifically analyze residential land uses, it is evident that the City can encourage the development of a wide range of housing types catering to existing as well as oncoming population/workforce. However, it is important to realize that labor markets are usually regional, implying that employees working in the City may reside elsewhere in the region (but within reasonable commuting distance). As long as regional jobs to housing balance is met, the need to supply housing types for 'each' employee within the City's jurisdiction becomes a less significant issue. Economics Research Associates ERA Project No, 13718 City of San Bernardino Page III.IS I I I I I I I I I I I I I I I I I I I Section IV EMPLOYMENT INTRODUCTION The growth of new employment opportunities for the residents of the City of San Bernardino and the attraction of new commercial and industrial development has been a central focus of the City's policies through the 1990s. San Bernardino suffered greatly with the closure of Norton Air Force Base in 1994, and since that time, the City has been looking for major employers that could offset this loss. This section reviews the employment market in the City of San Bernardino, and within the Inland Empire, in order to identify key sectors with potential for employment growth that can be induced to locate and grow within the City of San Bernardino. This review considers both the labor force, i.e., residents of the City of San Bernardino regardless of where they are employed, as well as the City's employment base, i.e., jobs located in the City of San Bernardino. This analysis about employment potentials informs the discussion of market demand estimates detailed in Section VI of the report, as well as the goals, objectives, and policies described in Section IX. REGIONAL EMPLOYMENT GROWTH Labor Force Historic employment (by place of residence) trends reported by the California Employment Development Department (EDD), show that the post recession recovery in the region started after 1993, and employment growth has been strong ever since. However as seen in Table IV -1, the City of San Bernardino has been experiencing a slower rate of employment growth compared to the San Bernardino-Riverside Primary Metropolitan Statistical Area (PMSA) as a whole. The City also experienced a steady decline in its share of regional employment between 1990 and 1996. This period can be directly related to the closure of the Norton Airforce Base in March 1994. Though the base itself displaced approximately 4000+ military and civilian defense department jobs, numerous other defense Economics Research Associates ERA Project No, 13718 City of San Bernardino Page IV-I I I Table IV-' Employment Growtb: Riverside San Bernardino PMSA Vs. City orSan lIernardino I Year RiversiJe-San llernarJino PMSA San llernarJino City as % City of PMSA I 1990 1991 1992 1993 199-1 1995 1996 1997 1998 1999 2000 CAGR' I I I 1,128,700 1.113,000 1,12-1,600 1,1-13,300 1,159,500 1,180,800 1,201,900 1,259,000 1,297,300 1,3-19,510 1,-1-1-1,500 2.50% 63,930 62,830 6-1,370 62,870 6-1,230 65,030 66,0-10 68,860 70,950 73,700 78,920 2.13% 5.66% 5.65% 5.72% 5.50% 5.5-1% 5.51% 5.-19% 5.-17% 5.-17% 5.-16% 5.-16% I - . .- - - - . . -... ~ ~ ~ ~ ~ ~ ~ Y~ar - - '-' ./. - \ I pu ~ I: ~ , I:!(I , ~ ," . ! IIU ~ IlI~ < ! Illl .,~ ! I I I I 'IIMUI IIUU' I 14".' hIU.) '\Ill'" I ~u..) .\ton !lUIll I II.'" " ~ ~ E I -~I,,~.,....~.S;!l, B,'n~~.IIII" I''''SA . So.oI,lkm..,j..". Clly ~ [ ~ (,,11% ~.'I% c==ISdll 110.'<11.....11,,,, Clly 5.11'1> 5.7''" -+--(','y...'f,... PMS^ j,b% '.!i'L H% .5.3'" ,..!.... '.1'.1. j,V'$, ~ ~ ! ~ ~ ~ ~ ~ 'CAGR: CompounJeJ Annual Growth Rate Source: California Employment Development Department anJ Economics Research Associales I I I I I I I I I I I I I I II ~ U I I I I civilian employment were also forced to move. Year 2000 estimates show that the City of San Bernardino has a labor force of 83,960 residents of which 78,920 are employed resulting in an unemployment rate of approximately 6.9 percent. This is significantly higher than the year 2000 regional unemployment rate of approximately 4.8 percent. The unemployment rates may increase somewhat during the current recession now acknowledged to have begun before September 2001. Emolovment Base Table IV-2 displays historical non-fann employment trends in the PM SA by major industry groups, during the 1990-2000 period. It should be kept in mind that this is employment by 'place of work'. Historically the region has experienced strongest growth in the areas of Services and Transportation, Communication and Public Utilities (TCPU) related employment followed by the Wholesale Trade, Construction and Manufacturing sector. The Manufacturing sector grew at an average annual rate of 3.8 percent between 1990 and 2000, while the Finance, Insurance and Real Estate sector grew at an average annual growth rate of 0.4 percent. High growth in Services sector jobs (at 4.5% annually) is a common phenomenon in all fast growing regions, however it is important to keep in mind that this sector includes both professional and personal services. Job growth driven by the latter is often associated with lower skills and consequently lower wages. Rel!ional Emolovment Proiections Sectoral employment (by place of work) in the PMSA, as projected by the EDD for the 1997.2004 period are exhibited in Table IV-3. According to these projections, construction related employment is expected to experience the strongest growth at a rate of 5.4 percent annually. Transportation, Communications and Public Utilities (+3.9 percent), Wholesale Trade (+3.7 percent), Services (+3.6 percent), and Manufacturing (+3.3 percent) will follow this. Increased construction employment is an indicator of related real estate development, and most growth in this sector is expected to result from new residential . construction throughout the region. The region will further strengthen its role as the Economics Research Associates ERA Project No. 13718 City of San Bernardino PageIV.3 I I I ~~~~~~~~~~~~~~~~~~~~ ~~~~~~V=~=~~p.'~~~-~~~ <N~~o~o.o.oN.d~.~N9~ U ' . I I I I < '" :;: .. = = ~ . E . = = . '" ~ ... .E . . O! .5 .... ~ :: . "E .'" l5 . r: .~ :;: .. = . ... = ~ ... ;: . E i;' is. 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'" I I I I I I I I I I I I I I ~ II I I I 1 Table IV.3 Employment Projections: Riverside San-Bernardino PMSA MINING CONSTRUCTION MANUFAcruRING TRANSPORTATION & PUBUC UTlUTIES WHOLESALE TRADE RETAIL TRADE FINANCE, INSURANCE & REAL ESTATE SERVICES GOVERNMENT Total Nonfarm Employment 1997 1.200 52,200 104,800 42,500 40,100 177,800 29,800 221,500 171,600 841,500 2004 CAGR' 1,000 -2.6% 75,400 5.4% 131,300 3.3% 55,400 3.9% 51,800 3.7% 202,800 1.9% 33,400 1.6% 284,300 3.6% 198,000 2.1% 1,033,400 3.0% 1019971 _2004 z " z "' "' <l"' tIl 0 Z 0 ..J '" . "' I- "' C "' f=u~ <OJ < "'u< u l> ::> ~'" '" Uzl- ;;: ::> t; ~:J- ..J< I- ~<~ '" '" ",,,,I- 0'" ..J "' I- ~ O::l:i _I- ~ z"'..J tIl ~ -::>< tIl 0..0..- ""tIlUl Z ::> tIl<l1- 0 Z Z ::> '" ~'" U < < ::!: '" I- Employment Group !z: "' ::!: z '" "' > o " 'CAGR: Compounded Annual Growth Rate Source: California State Board of Equalization and Economics Research Associates I I I I I I I I I ~ I I I I I I I I I 1 transportation/distribution hub of Southern California with continued expansion of rail, road (trucking), and air transportation facilities, resulting in an increase in Transportation and Wholesale trade related jobs. Availability of affordable real estate, combined with transportation amenities, will also strengthen the region's manufacturing and warehousing base. Demand for services will continue to grow with oncoming residential growth. It should be kept in mind that construction growth is cyclical and the previously projected surge could be a short-tenn phenomenon, while the long-tenn regional economic sustainability will be dependent on pennanent job creating sectors like manufacturing. Also, the quality of jobs, especially in the services and manufacturing sectors will be key in shaping the longer tenn economic sustainability of the region. EMPLOYMENT CLUSTERS Emolovment. Establishments and Sales According to 1999 estimates, the City of San Bernardino has a total of approximately 74,100 jobs. As mentioned in the earlier sections, the entire region has gone through an economic transition during mid-1990s resulting in a regional decline in employment growth levels. The city of San Bernardino was more severely affected due to the closure of large defense and defense service related establishments. Though the region has shown a relatively fast paced recovery from the recession, the City of San Bernardino's recovery has not been able to keep pace. The City currently has about 13.9 percent.of total countywide jobs. In this analysis, ERA used data about employment provided by American Business Infonnation Service (ABI). Tables IV-4, IV.S and IV-6 present the distribution of employment, establishments and transaction values (sales) in the city of San Bernardino in comparison to the county, at the level of the two-digit standard industrial classification (SIC) codes. The database is tied to census tracts and is primarily based on credit requests and banking transactions of business establishments during 1999. The data set provides detailed infonnation on employment, number of establishments and sales, and is the most current data set available at present. 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'J1 N.otKl""...I'alllel:..o;)/>l,shl.....'1S SIC,,", " UJI'f> I 'rUrAL 7,7Zl1 S1;.U 1.\""" 1\i".e: Shar.....'h;u"'ek>W,,.''''u''he..''al~VCla;C'''''''e,ft''h''wn'llled The .bwc .Lila II '-'\I '..., ."I,Igj;ICg,~C ,ol \'('f1'lll' tr_U 1"'11 aKhllk.he C.y.... Sail Hcm....I".., huln.glll'''~'''"1KlIlccl\1Iywllhlhc'''''Yh"u,..L''1C5 I s.....w: <1"'"......1<1 1'.co.......nltCl HCI<';lfCh A9<l<l;IlC' I I I I I I I I I I I I I I I II I I I I Government and other Public entity related employment as their primary reliance is on financial transactions to determine employment. In the tables, the sectors that represent a higher proportion than the City's nominal total share of county employment are highlighted in red. In order to identify the strengths and weaknesses of the existing employment mix in the city, it is important to examine this data from a multitude of perspectives, the primary being: . Absolute employment shares by sector. Existence of large volumes of jobs in a few distinct sectors could indicate economic opportunities, but they could also translate into vulnerability. . Share of regional employment. Regional employment shares are often better indicators of clustering as they relate the absolute employment numbers to the regional context. An examination of both the absolute numbers as well as their regional shares provide a much clearer picture. . Establishments and sales transactions. A large number of employees in a particular sector distributed among a few establishments could mean that one is vulnerable to the economic cycles of that particular sector. While the same number of employees distributed among a larger set of establishments might indicate the emergence of a cluster. It is also important to connect all of the above relationships to sales and transaction values generated by each sector, in order to better understand the economic value of each. Closer observation of the employment, sales, and establishments data reveal about eight to ten distinct concentrations of employment types in the City of San Bernardino. Some of the sectors, which exhibit consistent strengths across all categories, are as follows: Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IV-I0 ~ I I I I I I I I I I I II 'I I I I I I Table IV- 7 Employment Clusters in the City of San Bernardino Employment Number Share Health Services 9,771 13% Educational Services 8,498 11 % Public Administration 7,510 10% Real Estate 2,251 3% Business Services 2,084 3% Special Trade Contractors 1,633 2% Printing & Publishing 1,536 2% Legal Services 1,112 2% TOTAL 34,395 46% Source: Economics Research Associates Sales S Mil. Share 1,122 15% 790 10% 0% 4% 3% 3% 1% 3% 39% 342 259 224 82 198 3,017 Establishments Number Share 467 8.1 % 137 2.4% 224 3.9% 280 4.9% 266 4.6% 207 3.6% 62 1.1 % 187 3.3% 1,830 32% Share of County 17% 19% 29% 18% 10% 10% 28% 36% The eight sectors listed m Table IV-7 account for 46 percent of the City's employment, 39 percent of the City's business volume and 32 percent of Its establishments. The top three sectors, namely, Health Services, Educational Services and Public Administration account for almost 24 percent of all citywide employment, 25 percent of all citywide sales and more than 14 percent of all establishments. These three sectors also represent 17, 19 and 29 percent of sectorwide employment in the county respectively. In addition, there are some emerging sectors showing signs of clustering, as well as certain sectors showing employment stability over time. A good example of the latter is the Transportation, Communication and Public Utilities (TCPU) sector, which will continue to be one of the City's stable employers, especially in tenns of location advantages in rail transportation (both for freight and increasingly for local passenger transport through the expansion of Metrolink)l. Printing and Publishing appears to be a strong sector in tenns of their employment base with 1,500+ employees in 82 establishments. Printing and Publishing employment in the City accounts for 28 percent of sector-wide employment in the County. As the top two sectors (in tenns of employment volume), Health and Educational Services, fall under the Services sector in general, it is not surprising to see that the services sector accounts for most jobs in the city, with almost 42 percent of the total. The large concentration of health services jobs could be accounted for by the concentration of several 1 Note that the SIC data shows minimal employment in Rail Transportation. However, ERA believes this to be a methodological error inherent to the data. Economics Research Associates ERA Project No. 13718 City of San Bernardino PageIV-ll I I I I I I I I I I '. I I I I I I I I health related establishments in and around the City, including the fairly large San Bernardino County Hospital, the St. Bernardine Medical Center, the nearby Patton State Hospital and the medical teaching facilities in Lorna Linda. Similarly educational services employment concentrations are due to the presence of the California State University Campus, the large community college district and the school district. The presence of a large number of Federal, State and County facilities in the City accounts for the large concentration of Public Administration jobs. This also results in the clustering of legal service jobs as is evident from the data shown above. SDatial Distribution of Kev EmDlovment Tv Des The above sections examined San Bernardino's employment characteristics in terms of its quantitative characteristics. It is also important to look into the spatial distribution of employment in order to better understand the relationships between location, transportation and regional adjacencies. ERA has put together a series of thematic maps to help analyze San Bernardino's employment geography. Figure IV-1 presents overall employment distribution in southwest San Bernardino County and parts of northwest Riverside County. The map clearly shows three distinct employment centers in the area, namely: 1. The City of San Bernardino 2. The City of Riverside 3. The City of Ontario In addition, there exists some 'secondary' clusters of employment in the Redlands and Moreno Valley areas. It is evident that there is a propensity of employment concentrations along the Interstate 215 on the north-south axis and along the Interstate 10 on the east west axis. In view of these observations, the following are some relevant issues pertaining to regional employment distribution: Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IV.12 I I I . I , Figure IV-I Employment Distribution 1999 (1 dot = 100 persons) -, r1 ) / , ._1 ~ v " ,~ ., .0 ~' , . J 1 I : . .. 2 r , J. . . N -.. 8 Miles . . . I Source: Economics Research Associates and ESRI I I I I I I I I I ~ g I I I I I I I I I . Ontario has grown rapidly, and will continue to grow in the near future as a primary employment core in the San Bernardino-Riverside region. Transportation connections by air and land, residential development resulting from recent and oncoming annexations to the south (dairy conversions), and the availability of large yet affordable floor spaces are some of Ontario's key competitive advantages. . Riverside also has similar advantages combined with the presence of a major research university, making it far more attractive to higher value employers. . Rapid residential growth that will continue in the region, especially in the eastern and the 'High-Desert' communities (Victorville, Hesperia, Apple Valley), will also continue to increase the demand for numerous service-related jobs. Though a lot of these jobs might not be in the high wage brackets, they will push up the volume of employment as well as (smaller) business establishments in absolute terms. A large part of the employment clusters visible in the Redlands and Moreno Valley areas are in fact due to increasing numbers of service jobs. ERA has also analyzed certain key employment sectors, which have traditionally clustered in San Bernardino, and could present opportunities for sustained employment growth and stability in the City. The spatial distributions of these sectors are presented in Figure IV-2 through Figure IV-7. Non-Durable Goods Manufacturing. This category includes Food and Kindred products, Textiles, Apparel, Chemicals and Allied products, Paper and Printing products. Typically a large share of these establishments, especially perishables like food, tend to serve the larger regional market. As seen in Figure IV-2, most of the non-durable goods manufacturing establishments are located towards the central and southern parts of the City, providing easy access to the Interstate 215 and the Interstate 10. Competing locations are in Ontario and Riverside. The City exhibits significantly high concentrations of Printing and Publishing establishments compared to the region as a whole. Though the primary reason City of San Bernardino Page IV-14 Economics Research Associates ERA Project No. 13718 ... I I Figure IV-2 Non-Durable Manufacturing Establishments ~ I I I I I I' II I I.' I I I ! . I... I " . _._ -1. . -, -. . v 1\ J . .:L. ,y...J ~I .' ~' , ., I .--.J . ) , , 6 8 Miles '-" . N Source: Economics Research Associates and ESRI I I I I I I I I I I I I I 'I II I I I I behind this would be to service the cluster of nUmerous government offices, this sector could provide opportunities for expansion. . Road and Rail Transportation. Figure IV-3 presents the distribution of road and rail transportation establishments in the region. Considering the location of a major airport and good regional freeway access, it is not surprising to see high concentrations of trucking and warehousing establishments in Fontana and Ontario. Besides a major rail yard, the City of San Bernardino shows a higher concentration of Local and Interurban Passenger Transit related establishments compared to the region. This is attributed not only to Metrolink, but also to numerous other private transportation services that are located in the City. It is important to note that the existing rail infrastructure is extremely important for San Bernardino's 'local' economy. This is not because of the direct employment that rail may generate, but the indirect employment that it can potentially generate by attracting other employers to the City (by being a valued transportation amenity). . Finance, Insurance and Real Estate. As shown in Figure IV-4, the cities of San Bernardino and Riverside have the highest concentration of Finance, Insurance and Real Estate related establishments. Once again in the case of San Bernardino, this phenomenon could be attributed to the demand for these services generated by the cluster of government administrative offices, and their many employees. It should also be noted that a large number of establishments in this sector are comprised of smaller real estate offices that have located in the region to service the tremendous growth of new residential development. . Health Services. Figure IV -5 presents the distribution of Health Service establishments in the region. As mentioned earlier, the City has a strong share of Health Service establishments due to presence of a number of large and quality health care centers. Lorna Linda and Fontana also exhibit similar characteristics. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IV-16 I I Figure IV-3 Transportation Related Establishments I I I I . . ':' iI. . '\ -' Source: Economics Research Associates and ESRI I .. . Railroad transportation iI. Local and interurban passenger transit . T rucl<ing and warehousing ~ c~ I _:f _1._ -.- ~ ., .J ~\- ,. ~ I V~ -, " \ _ \) I \__ 1 .r--I._. \ 2 " J ~ 6 ) .' 8 Miles .." N \ i I I Figure IV-4 Finance, Insurance and Real Estate Related Establishments .. ~ v ~. '''j' I, ~ , c I .. ...... -" I ..~.. ~~~i ..~ .. I I .. 6 ) " 8 Miles -'--. ~ I .. I N Source: Economics Research Associates and ESRl II I I Figure IV.5 Health Services Related Establishments + I +, + - , ; I I I I I I I I I I I I .. , V '\ ~. .. ~. I' + \ . .1-,...--1 I , .~ 1 6 .' I I 8 Miles ., " N \ Source: Economics Research Associates and ESRI I I I I I I I I I I I I I I I I I I II I ~ Considering the projected residential growth in the region, there could be a significant rise in the demand for healthcare and related services, and opportunities exist for San Bernardino to capitalize on its existing clusters. . Educational Services. The Educational Service cluster in San Bernardino is driven by the location of educational institutions at four hierarchical levels; a state university, a cluster of proprietary education and training institutions, a large community college district, and a fairly large school district. As seen in Figure IV -6, the Cities of San Bernardino and Riverside have the largest share of Educational Services in the region. This cluster should be viewed as a prime asset for the City. Partnerships and alliances across the sector, as well as between the various educational establishments and potential employers, could be a key economic development tool for the City. . Public Administration. As seen in Figure IV-7, San Bernardino has the largest concentration of Public Administration establishments, compared to any other community in the region. These are comprised of a number of Federal, State as well as County offices. It is clear from some of the above observations that some of the other important industry clusters in the City are driven by these offices, and hence the retention of these offices are important to the City (at least in the short term). Once again alliances and partnerships will be extremely important. REGIONAL SHIFf.SHARE ANALYSIS ERA carried out a simple Shift-Share analysis of employment growth in San Bernardino County compared to the five county2 region of Southern California, during the' 1997-2004 period, based on projections by the California EDD. The results of the analysis are presented in Table IV -8. The results of this analysis pinpoint important differences between the industry composition of employment growth in San Bernardino County versus growth in the region at large. 2 Los Angeles, Orange, Ventura, San Bernardino and Riverside. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IV -20 I I Figure IV-6 Educational Services Related Establishments J _1;1 'ili .I ~ I I I I I: I I I' I I I I I '. v " ;L "",,! I . --...._, ,~ .- ? ,. '1m 111,. , ---., ( 8 Mi~~.' D. -, N 1J:,p 6 III' D \ Source: Economics Research Associates and ESRJ .. I I Figure IV. 7 Public Administration Related Establishments ~ 1 o 0- A .J < A v i' t:. ~ , -I - .~ '-1 A 2 6 ! 8 Miles -'" N Source: Economics Research Associates and ESRJ I I I I I I I I I. I I .; ;;. oe .... ::~ .. u., ::c ~ El 'E " E .. = c " '" I I I I I I I 'I I c <: "s;, .. =: .... C " ., u .. ~ ~ " "~ = '; u E .. .c: ;; ., '" iti "0; .... '; " -< t " .c: '" .. :E '" '; c ., .s;, .. =: ." C ~ u 'E ~"~ OIl 0 ;C ]c..(::i . E Oi ~ c o 5 ~ o Q. E '" ~""""o-::l' NC_'<t"N >C t'-~ -. "l. t't ?l~~~ .c ~~c"" ~ ~ ~~}~vi D 1l N ~ . ." 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OIl -= ~ 8 ~ ~ i .g ,;! 8 'Oil.g .5 ~ c l:! _ -g u ';;; u:a <OS ~ i -=! l:! u eo ~ ] E u c ~ .... '- ~ ~ -g ] .s 8 ~:5 ,~ ;; ~ :; ~ l:! c 0 ~ ,- u ~ '&. >-!. oS ~ l:! = '" -g ~"~ ~ <OS ~ V. ~ :5.s .8 .g ~ ~"S ~ ,5 ~ "u t:: ;; .0 u 0 e ' ~E~g :5 ~ '- <OS U U <'II U :> I.:::: ..c oS .s ~ 'u "S ;j "S"O ~ t:: c t:::i v. ~~~6~ <OS ~ C5 ~ g;j .s ]~:;~-=~E .c: <'II .2 C:.5 e ~ ~ ~:s e"E S' ~~-giS'B~~ E "0 Q.. '" u;; >-;j.5;jE,~-c %-=..c-=~~g.~ E~~5~]:5~ ~ ~'i ~.5:;; i'~ ....c.Uc.i'E-:-g QE~E-uo'- ~-_"%-_"'C'e'C'E ~ C5 E C5 ':O.s 'j; '- fo u ~ u tIl.5.....5~;~= c~~fo.g=.g; ~;:>c:a~:a= ~"5;.g~ll!~'S ~.LilJl~f~ '" N '" .... "l ;;; '" .... <i is on e '" N <i N .... '" :& '" '" :! ::E '" .:: i o z ...0 ~ ~ Q Q w . .e ~ C ." C . . o .. ] .0 ~ ~ '" ~ .e o c ~ ~ , ~ I I I I I I I I I I I I I I I I I II II San Bernardino County is expected to grow at a faster rate in terms of overall absolute employment compared to the five county region (during the analysis period). However, a few key findings of the shift-share analysis indicate that there are some significant differences in the patterns of growth in the county and the region. These are listed as follows: . Overall standardized growth in the county at 14.4 percent is marginally lower than the overall growth in the region at 14.6 percent. This indicates that the mix of industries in the county is slightly tilted towards slower growing industries compared to the region as a whole. . The above observation is further clarified by examining the 'shift-share' components in the second table. It is seen that the county has a negative overall 'industry mix' effect. This means that the industry composition employment for San Bernardino County is tilted towards slower growing industries (compared to the region). Other than the Construction, Services and Transportation and Public Utilities sectors, all of the industries in the county have a negative industry mix effect. The 'regional-shift' effect computed the gain or loss in local employment from an industry growing faster or slower than its regional counterpart. All of the sectors other than Finance, Insurance and Real Estate will experience faster growth than their regional counterparts. In summary, San Bernardino County will experience fairly positive employment growth during the 1997-2004 period, compared to the region as a whole. However, a large proportion of the county's employment growth will be in sectors that are typically 'slow growing' in the region as a whole. The county's share of Finance, Insurance and Real estate employment is expected to decline over the period. City of San Bernardino Page IV -24 Economics Research Associates ERA Project No. 13718 , I I I I I I I I I I I I I I I I I I I CONCLUSIONS It is evident that the City of San Bernardino's decreasing share of regional employment can be attributed, for the most part, to its eroding competitive position in the region. The increasing strength of Ontario, in terms of transportation connections and readily available floor space, as well as the competitive labor force and amenity advantages available in Riverside, make both these communities strong competitors of San Bernardino. In addition, San Bernardino has undergone a relatively tough transition in recovering from the last recession due to the closure of Norton Air Force Base, which was a major economic engine for the city, especially in terms of creating high value civilian jobs through defense contracts. However, it would be wrong to say that opportunities are limited for the future. The City has the potential for retaining and expanding certain key employment sectors that have traditionally located here. A lot of this would depend on not only the identification of these potentially strong sectors, but also in a proactive program to attract and retain employment through partnerships, alliance and marketing efforts. Some of these existing and expanding sectors could be: 1. Light industrial and manufacturing, especially in terms of non-durable goods and services. The city could build on the existing Printing and Publishing Sector. Market opportunities for full service publishing facilities that include both design and production should be explored. Opportunities also exist in apparel (production) and specialty food (preparation/packaging) sectors. These opportunities are not limited to low-skill employment, but could be in the form of a range of high value products and services. 2. The Health Services cluster that has a larger proportion of high value jobs provides tremendous opportunities. These may also be opportunities for linkages with the adjacent Lorna Linda teaching and research hospital/medical cluster. 3. Partnerships and alliances with the Educational Services sector will be very important in not only creating technical skill increments in a more competitive labor pool, but also in providing a regional educational opportunity amenity. Economics Research Associates ERA Project No, 13718 City of San Bernardino Page IV -25 "1 I I I I I I I I I I I I I I I I II I il 4. Transportation is emerging as a core employment sector in the region and opportunities exist for continued capture of Transportation related jobs (both in terms of goods and passenger transportation). 5. The City should continue to work closely with the Inland Valley Development Agency (IVDA) and San Bernardino International Airport Authority (SBIAA) in order to preserve the airport facility and aggressively promote commercial/ industrial land uses around it. It is important to note that SBIA is an asset and losing the potential future airport usage (international trade and cargo, commercial flights) and FAA air traffic pathways will be an irreversible process. ERA understands that developers have expressed interest in eliminating the facility and expanding the rail infrastructure. It is desirable that any expansion of rail infrastructure attempts to integrate itself with the airport, rather than replacing it. 6. It is important to retain the existing cluster of government offices, as they provide a sustained demand for business and professional services in the City. However, caution should be taken at the potential risks posed by relocation and downsizing of certain administrative sectors. 7. Call Centers and other services not dependent on product delivery will need a low cost environment and diverse (including multi-lingual) labor force. 8. Opportunities for Wholesale Trade related uses with frontage to the Interstate-2IS should be explored. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IV -26 I I I I I I I I I I I I I I I I I I ~ Section V REAL ESTATE MARKET INTRODUCTION This section will review the current state of the real estate market in the City of San Bernardino and in the environment in which the City competes, and the Inland Empire as a whole. This section will focus on the most immediate near-term trends in the real estate market, but it should be understood that the Inland Empire as a whole has undergone a tremendous transformation over the last 15 to 20 years, and has become a major industrial center for Southern California. Much of this new commercial development has been located in the City of Ontario east of the City of San Bernardino, along the 1-10 freeway, particularly around the Ontario International Airport. Also, in late 2001, it is now probable that major industrial/commercial development will commence at San Bernardino International Airport (former Norton AFB). The rate of growth has been so dramatic that in many respects the 1-10 corridor and airport corridor of the Inland Empire can be seen as mature markets with many of the best developable sites having been taken. As a result, industrial development is seeking locations farther afield in the high desert in locations such as Hesperia and elsewhere in the Victor Valley. San Bernardino is strategically placed to take advantage of these market conditions with the City's access to the 1-10, 1-215, and I-IS freeways. This will improve further by 2006 when the I-21O/Route 301I-215 connections are finally completed. In the near term, San Bernardino will increasingly be a site of interest for new commercial and industrial development along these corridors. This section will examine trends in the Inland Empire's real estate market with a focus on the City of San Bernardino including the following commercial land uses: . Office . Industrial . Retail . Hotel Economics Research Associates ERA Project No, 13718 City of San Bernardino Page V-I I I I I I I I I I I I II I I I I ~ I I OFFICE MARKET TRENDS It is only in the past four to five years that the Inland Empire has started to emerge as an attractive location for office development. Historically, office development in the region was concentrated around the Ontario core, and typical leases were always embellished with a multitude of concessions to sustain demand. As seen in the previous sections, the primary force behind the region's growth has been strong residential development cycles driven by affordability advantages relative to Los Angeles and Orange Counties. This was followed by a gradual expansion of supporting retail and service establishments that were developed primarily to serve the growing local market. As the more mature office markets in Los Angeles and Orange counties have continued to lease space at record levels, tenant interest in the Inland Empire has been growing. Initial increased demand in the west and southwest end of the San Bernardino Riverside County area is expected to move gradually to the east. It is important to note that the increasing value of office locations in the Inland Empire is not merely due to cost pressures from the west. There have also been a number of internal catalysts that continue to add value to office locations in the region. These include: . Continuing expansion of passenger traffic in the Ontario International Airport makes the area more attractive for offices which generate and attract business travel. The airport is currently served by 11 major airlines and connects every major city in the nation. 1999 passenger traffic of 6.5 million people made Ontario one of the busiest hundred airports in the world and one of the fastest growing in the nation. The airport opened its 530,000 square foot expansion of the passenger terminal in 1998. Passenger traffic in the airport may cross the 8.5 million mark this year, 2001, despite the economic slowdown and the events of September 11, 2001. . A wider range of residential products in the region that are of increasingly higher quality and yet remain affordable acts as a magnet for a competitive labor force. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page V-2 " I I I I I I I I I II II I II I I I I . An improving network of freeways is making in-commuting an easier task. The toll road (231) and the 71 freeway (connecting the 91 and the 60) provide easy access from west and south Orange County into the Inland Empire. The Foothill Freeway will be completed within 5 years to connections in San Bernardino, and will connect with the 1-15 by October 2002 from the west. Over the past year and a half, the core airport market has shown some signs of maturity. Office tenant concession lists are becoming shorter and lease rates have been going up. This has also triggered a series of speculative development projects outside this core market area. While these are signs of overall market maturity, office development in the Inland Empire is not entirely without risks. It should be kept in mind that one of the major forces behind this growth is cost pressures from the west (though it is not the only one), and one can expect the Inland Empire market to be fairly sensitive to market slowdowns in Los Angeles and Orange Counties. This will be especially true if the large volumes of oncoming speculative developments are not absorbed. With the recent tech-bust and a falling stock market, it is extremely important to recognize these risks in the near term. As seen in Table V-I, the Inland Empire market has added approximately 1.48 million square feet of space during 1995-2000, to reach a rentable inventory of approximately 13.5 million square feet as of the third quarter of 2000. Of this approximately 3.7 million square feet are located in the San Bernardino area, which also includes the communities of Colton, Redlands and Lorna Linda. Vacancy rates in the region have fallen from a staggering 21.1 percent in 1995, to 14.4 percent in 2000. Vacancy rates in the San Bernardino area are marginally lower than the regional averages. The other large concentrations of office space are located in the Riverside (Riverside, Moreno Valley Corona) and Airport (Ontario, Rancho Cucamonga, Fontana) submarkets. While the former has a 2000 (Q3) vacancy rate of 18.5 percent, the latter has a vacancy rate of only 13.4 percent. n . I I Economics Research Associates ERA Project No. 13718 City of San Bernardino Page V.3 I I I I I I I I I .; .. t' - = ;;. c ~ ~ ;. :c.s ,:- .f ~ ::E ~ .- E o t .is, E :.l '" = ~ :s I I w ~ I I g I I I ~ g ~ . . ~ 0: > I " ~....: E ..; " 0: ~ ~ ~ ~ 0: > ~~. '" ~ Ii > " ~... c ..; " 0: ~ ..: .; ... = ~ <> e ~ g !:! . . ~o: > ~ t' = e ~ .. " ~...: 'E '" " 0: ~ ~ ~ ~ 0: > Sj ~. '" ~ ,,; > ~ 5. '" ~ ,.; > ~ ~ " ~ " . 0: > ~~~ > .,..,."'.,..,."'''' 0-..,.........,::(1),(:'1:1 ...-i..-ioci..fNo,,: ....---- - '" " E . u . > ~~o-::;;#.""'!'.O ..,.r-VI ~ ..er--cC7'1I'l r-..,OCNXl ::;r...,.Nr-N f"i..,f"i "'''''''''''''.,.''' NOC>af""lI'"'lV'lN =:ri~~"c:!~ '" " E ~ . > ~~ ~.;1,;e N ~ ~ N r- VI f""l.... II'l l'--\O l""I::Q 00 0\ N.N."'l.N ~...~ "''''''''''.,. :101""ll'"'-QilO f"i..t~...:..; NNNN_ N ~ ~;; ~..,.~ ... " :E . 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E :::I 1i 1: :: " E i tI) - :::l C. "''''--.~''~~''' :::l ::::. E.1I r.: CIl .. 11\ ~:;; ~] ;;,~g.2lL~tuc E~<Q2C1l;I;CIl- z . ." C ::l . E .s v. " c :!2 .; "' E " E :: " > o " ." C . .. u 'i; " E .,; " .s. , ~ ~ " g ~ ~ ~ . " ~ 0: ~ .E o ~ ." C . ." Iii olj "' "' , <3 ~ . .Ii , I I I I I I I I I I I I I I I I ,. I I Table V -2 shows net absorption, average rents and space under construction in the various Inland Empire submarkets. Net absorption in the market has been increasing steadily since 1996. As of the third quarter of 2000 (year to date), the San Bernardino submarket had absorbed 268,000 square feet and the Riverside submarket had absorbed 172,000 square feet. These two markets accounted for 80 percent of office space absorption in the region, up to the third quarter of 2000. Average rents have also been increasing steadily since 1996. Average asking rents in the region is approximately $1.45 per square foot per month as of the third quarter of 2000, compared to approximately $1.42 per square foot in the San Bernardino submarket. Average asking rents in the region had risen to $1.70 per square foot at the end of 2000. Table V -3 and Table V -4 show the distribution of office space by building class and building type as of the third quarter of 2000. The largest share of the San Bernardino office inventory is Class B space with approximately 42 percent, followed by Class A space with a 36 percent share. The remaining 22 percent of the inventory is comprised of Class C space. However, 65 percent of new space absorbed in the San Bernardino submarket falls in the Class A category. Approximately 84 percent of the submarket is comprised of 20,000+ square foot space, and approximately 84 percent of all new space is absorbed by this type of property. These patterns are fairly consistent with the region-wide distribution of class and type. Table V -5 presents an inventory of major multitenant office properties located in the City of San Bernardino. The approximate volume of multi-tenant space located in the city is 3.03 million square feet. This does not include single use governmental space. About 551,300 square feet of this total is vacant resulting in an overall vacancy rate of 18.2 percent. Average lease rate derived from this data set is approximately $14.18per square foot per year or $1.18 per square foot per month, full service. Note that this list is not all-inclusive. Table V -6 presents a sample of office properties in San Bernardino that have recently been available for lease. Table V -7 lists some of the major oncoming office developments in the Inland Empire Market. 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'" .. c:: ij .s o ~ I I I Table V-6 City of San Bernardino: Recent Office Building for Lease Listings I Building Name Brier Corporate Center Office Buildings NEC Building Hospitality Plaza Highland Commons HDS Plaza Exchange Place Fairway Commerce Center Address 860 Brier SlIee & 834 Hardt Street 825 E. Hospitality Lane 164 W. Hospitality Lane 2210 Highland Avenue 268 Hospitality Lane 1845 South Business Center Drive 1535 South I I No. of Floors 4 2 2 Available Sq.FL 51,000 32,000 22,000 16,742 14,166 2,294 1,916 Building Sq.FL 25,514 32,000 52,000 16,742 104,178 83,874 18,000 Rent per Sq.FL S1.40-1.45 SO.85 S1.20-1.35 S0.50 S1.45 S9.00 S1.10 I Source: Loopnet.com and Economics Research Associates Table V-7 Inland Empire Office Market: Selected Oncoming Developments I Project North Main St. Plaza Corona Corp. Center 1 & II California Ave. Ontario Center Fairway Business Park Springs Gateway II Location Corona Corona Corona Ontario Rancho Cucamonga Riverside I I Size (s.f.) 70,000 120,000 85,000 72,000 90,000 18,500 Type Class A Class A Class A Class A Class A Class A Status Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Source: Grubb and Ellis and Economics Research Associates I I I I I I I I I I C Table V-II I City of San Bernardino: Recent Office Property Sales Recording Date Property Description Sale Price Square Ft. Pricel SF Year Built I CitylZip 12/22/99 Multi Tenant Low Rise(1 - 3 sty) $5,500,000 63,834 $86.16 1986 San Bemardino92408 I 6/8/00 Mid Rise (4 - 8 sty) $1,600,000 38,000 $42.11 1967 San Bemardino9240 1 11112/99 Multi Tenant Low Rise(1 - 3 sty) $900,000 8,800 $102.27 1997 I Big Bear Lake92315 2/24/99 Mid Rise (4 - 8 sty) $780,000 33,500 $23.28 1970 San Bemardino92401 6/25/99 Single Tenant Low Rise $700,000 14,070 $49.75 1980 I San Bemardino92408 5/4/00 Multi Tenant Low Rise(1 - 3 sty) $600,000 20,000 $30.00 1966 San Bemardino92401 I 10/1/99 MedicallDental Office $420,000 5,336 $78.71 1984 San Bemardino92401 3/1/00 Lodge/Meeting Hall $380,000 35,370 $10.74 N/Av I San Bemardino9240 1 8/10/99 Single Tenant Low Rise $290,000 1,664 $174.28 1989 ,. Highland92346 I 4/28/00 Single Tenant Low Rise $275,000 11,992 $22.93 1989 San Bemardino92408 11/24/99 MedicallDental Office $235,000 13,793 $17.04 1965 San Bemardino92404 I 6/23/00 Single Tenant Low Rise $175,000 3,488 $50.17 1970 San Bemardino92405 6/22/00 Single Tenant Low Rise $160,000 1,710 $93.57 N/Av I San Bemardino92408 12123199 Single Tenant Low Rise $155,000 4,432 $34.97 1985 Yucca Valley92284 I 3/11199 Single Tenant Low Rise $150,000 4,197 $35.74 N/Av San Bemardino92401 7/16/99 Multi Tenant Low Rise(l - 3 sty) $150,000 10,094 $14.86 1960 g San Bemardino92405 12/9/99 Multi Tenant Low Rise(1 - 3 sty) $150,000 3,000 $50.00 1985 Yucca Valley92284 I Average $742,353 16,075 $54 Source: eComps and Economics Research Associates I I I I I II g I I I I I I I I II I ~ I I I U I II City of San Bernardino. Most of the recorded sales are of properties older than 15 years. Sale prices have varied from the $11 to $94 per square foot, with an average of approximately $43 per square foot. The range of prices and sizes are fairly wide, but only a few properties are more than 20,000 square feet. INDUSTRIAL MARKET The Inland Empire has been a top industrial location for a number of years due to a combination of location advantages that include the following: . Interstate 10, 15, and Highway 60 provide east-west access. The new Route 71 connecting the 60 and 91 freeways continues to expand market access to the south and west. The construction of the new Eastern Corridor toll road linking Corona and Irvine will further improve connections with Orange County. . There are 10 major truck terminals located in the market, with more than 80 contract and independent trucking firms. The San Bernardino Valley is essentially a transcontinental trucking hub. . The San Bernardino/Riverside area provides access to one of the largest markets in the nation. Approximately 47 percent of California's 34+ million population is within an hour from here. . And there is still available land in the region that is also at fairly competitive prices relative to other markets. . Both the Union Pacific and Santa Fe railroad lines serve the Inland Empire. Union Pacific's Colton Yard is considered to be one of the most technologically advanced freight terminals in the world. . Excellent air cargo services in the Ontario International Airport are a big plus for potential manufacturers and distributors. Ontario has handled more freight in the last two years than the previous twenty years combined. UPS has a $53 million sorting facility at the airport. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page V-13 '1 I I I I I .J I ~ I I I I I I g I o I ,I . The region is home to the second largest international airport in the greater Los Angeles region, two transcontinental railroads, three interstate highways (1-10, 1- 15, 1-215), a foreign trade zone, enterprise zone, and is near the two adjacent largest harbors on the west coast. Table V -9 presents a snapshot of the Inland Empire industrial market as of the third quarter of 2000. The total regional market inventory is approximately 215.9 million square feet, of which approximately 92.9 million or 43 percent is located in the Ontario/Mira Lorna submarket. The San BernardinolRedlands submarket contains approximately 11.8 million square feet or approximately 5 percent of the regional total. Of this approximately 9.5 million square feet are located in the City of San Bernardino. The 6.0 percent industrial vacancy in the submarket is lower than the regional average of 7.1 percent. Vacancy rates in the City are even lower at close to 4.8 percent. But lease rates in this submarket are approximately $3.56 per square foot per year (NNN) and are slightly lower than the regional average $3.83 per square foot per year (NNN). Comparatively, Corona and Chino have the highest lease rates at $4.50 per square foot per year and $4.22 per square foot per year, respectively. Almost 60 percent of all new construction are concentrated in the Ontario/Mira Lorna and Chino submarkets. Table V -10 presents the characteristics of available (vacant) industrial space located in the City of San Bernardino as of the third quarter of 2000. About 40 percent of the existing leasable industrial space in the city is in the 100,000- to 149,999 square foot range, about 22 percent are in the 25,000- to 49,999 square foot range, and about 19 percent are in the 10,000- to 24,999 square foot range. A majority of the new industrial product built in the Inland Empire during the year 2000 is comprised of speculative projects, which account for about 63 percent of total new buildings. 24 percent of all new construction is comprised of Build-to-Suits and the remainder is owner built. Almost all the submarkets have some construction activity going on, and pre-leasing activity has been vigorous. Table V -11 shows total pre-leasing activity in Economics Research Associates ERA Project No. 13718 City of San Bernardino Page V-14 I I I ~tl N 0 M '" 0 0 '" '" 00 ... M I z C N t- '" "1 - V> - on '" <Xl 00 Z .. .j ..; ..; M .j .j ..; ..; ..; M ..; ~Cl: - ~Ji I ::2 .. '" .. <::; ... ... .. C 00 0 '" N - 00 25 on V> 00 .. ." " 00 '" M 00 ... M = '" ... C ;: - 0 V> 00 M t- O. 00 "'- N " ...' ~ ~ ..; vi' ..; ~ -a I ;:> 2 - - ;; M N t- N ... t- M t- '" 00 - 0 M M '" t-. N, 00 - "l '" '" ..; N ~ 0 " c - - - " N " < u I l. - 0 - N 0 - '" - N 8 ... .. V> '" ... - V> - 00". 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I t- N - 0 N 00 '" ". M V> M " " '" '"' t- N t- '" '" - "'."1. N "', t-. ""- " '" 0 vi' ..; ~ vi' ~ ". on vi' - - ~ B ex: ] V> M 0 00 '" t- V> N V> 0 '" " " '" "', 0 V> 00_ "l '" o 00 q V> 00 > 0. " ~ r-: vi' N - ~ r--:_" '" ..; :i " '" .5 N - '" N - - - ." :l N "'" 0 I - " c "feu 8 .- c <ll '" " .- ." ~ " ." C '" ;;; c " " " g 1i ." ~ '" t ." C " " .;: 'is. " .s: iii ." E "" Cl: ~ ::l U c -0 e " 33 0 ~ " o<l e c r.l 0. ~ .0 0. " ~ .!! >< ;;; " B ." " .0 I ;:> ~ " ;; c c 2 ~ " ;; " " 8 -.0 > .! ~ U C2 E " " 0 " .; ." o C '" ~ 0 " - .. " ii 0 c U ";: ..c c c = .;;; c- o; E ." " E B ~ ~ " c E " " 0 " :l " " c ~ :E 0 E c ~ 8 c > 0 -0 ex: ::> " I &: " 8 .. ~ 0 u ::E 0 ex: '" C2 ::E z '" I I I ~ I I Table V-IO I San Bernardino Industrial Market Overview (3rd Quarter 2000) Available Available Total Leasing Sales Total Act. Total Act. Total Act. Size Range Dinct Sublease Inventory No. Activitv Activity 3Qoo YTD Prev. Yr. . . I 5,000.9,999 sq. It Existing 19,418 19,418 3 5,400 5,400 10,640 28,800 Under Const. Planned I 10,000-24,999 sq. ft. Existing 91,551 91,551 6 19,375 45,243 64,618 103,458 265,621 Under Canst. Planned 20.856 20.856 2 I 25,000-49,999 sq. ft. Existing 101,795 101,795 5 36,619 36,619 155,199 Under Const. Planned 100,937 100,937 3 I 50,000-74,999 sq. II. Existing 55,000 55,000 65,654 65,654 124,124 58,000 Under Canst. I Planned 75,000.99,999 sq. ft. Existing Under Const. 28,000 28,000 I Planned 100,000.149,999 sq. fl. Existing 188,904 188,904 2 107,320 101,250 Under Const. I Planned 106,140 106,140 150,000.249,999 sq. fl. Existing 235,000 Under Const. ~ Planned 250,000-349.999 sq. fl. Existing Under Const. I Planned 275,000 275,000 350,000+ sq. fl. Existing Under Canst. I Planned 1,017,100 1.017.100 Total Existing 456,668 456,668 17 127,048 45,243 172,291 735,741 453,671 Under CODsL 28,000 28,000 1 I PlaoDed 1,520,033 1,520,033 8 Source: Grubb & Ellis and Economics Research Associates I I I I I I I I I I I <:> <:> <:> M .. ... ... .. '" = 0' "Cl .. :c ... ... Q '" '" >> ... :~ ... .- -<I: OIl = ~ 0;; .... '" . ... >.. ... .. :ell. '" OJ ... ... Q ... I I I I I I I I I I I I I = 0 co: >. co: Cl c: c - c ;:=852 !:iu888 oS '" " '" .;;: ~ =- 1: (j c.. u = c ... .s "-.8 G.l eo r/; ~.5"fi .~ E iU v: ~ I- 0 &: "C E -;;; :;j 8 -u-'"o ::E E c. E E " 8 00 ~ ~ ... OIl c " o >. " - c c 0 " ~ o 0 uu ... OIl C " o >. " - c c 0 " ~ 88 :s o iU ilJ >.. t'O ~ co c; c E en en en " j ~~~8 000 " 8oo:S~ (.) ti ~ . c .s~ogB _ 'eD ! :" ~ ~ ~ z ~ .2 "i) bO B C; '0 c CJ') c.... 's..- t - Co. ~ C c .,g ::E i3 '" Jjj; 'j~8~8~~~~~ il "''''8_-000''''[0''; ; - t'('f")~Vi2::~ " " '" =- .. ... J.j .. '" :; OJ 'j;; ... '" = "Cl = .. ... .. 'is. = w "Cl = '" c .. ~>'iUQ. ... 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's o c ~ "0 C " ~ w 0($ .0 .0 2 " ;; ... ~ " o '" "I I I I a I I I I I I I I I I II 10 I II Ii Ig the Inland Empire as of the 3,d quarter of 2000. Close to 6 million square feet were pre- leased in 24 different properties and about 40 percent of the new tenants were from outside the Inland Empire. Table V -12 presents a sample of industrial properties in San Bernardino that are currently available for lease. Table V -13 lists recent industrial property sales in the City of San Bernardino. Most of the recorded sales are of properties older than 10 years. The average property size is 28,000 square feet and the average sales price is approximately $50 per square foot. Most of the recorded sales are of single tenant industrial properties. RETAIL MARKET Taxable Retail Sales Trends Table V-14 presents taxable sales in the City of San Bernardino during the 1990-1999 (latest full year available) period, in constant 2000 dollars. The total taxable sales in the City during 1990 was $2.5 billion of which approximately $2.0 billion was from retail sales. The strongest retail categories in 1990 were General Merchandise and Auto Dealers. Between 1990 and 1993, retail sales in San Bernardino experienced a steep drop. Total taxable sales in 1993 fell to $1.9 billion (-$0.6 billion) and retail store sales fell to approximately $1.6 billion (-$0.4 billion). The sectors that were hardest hit were the very ones that were traditionally considered the strongest. The big losers included Home Furnishings and Appliances (-36 percent), Apparel Stores (-28 percent), food stores (-25 percent), General Merchandise stores (-21 percent), and Auto Dealers (-20 percent). This period also coincides with the closure of Norton Air Force base and subsequent loss of a large share of the City's employment base. While the base closure might not be the only reason behind the City's falling retail activity, the loss of a large disposable income base certainly did not help. Increasing retail competition from the newer regional centers (Ontario Mills etc.) have also continually eroded San Bernardino's regional retail market base. Taxable sales growth remained relatively flat between 1993 and 1997 and was accompanied by marginal losses across all sectors. Overall taxable sales has grown at an average annual rate of 4.3 percent since 1996, but has still not. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page V-18 I I I I I I I '" CIl .S - '" ::l .. '" " ~ .. .s -= 'C - '" M = -~ , = ;>- - ~ = J:l .. " '" ...cli! C> = ~ " = .. .. == = " '" ... C> ;.., - 1:) I ~ I I I I I I II I I' II .. .. ... c.~~lrl- _ . rt1 = . 0 0 ~ C" VA- vq. 0::'" CIl = :9 'S == .. 8 :;5...0 ,!""", ',,_ .0 c:l"- >'" < o o ...0 """, .0 C'- '" o V) ~ "d: I' 00V) ~~~ "" OlrlOO ONOO o-~o \0_1.1)00 .;-- V) \,0 VI 00 \ONO\O --vO\ N_V) N_ '" " ~ c..>~ c; >" - 'C C1.. C Q ~ c..> ~ " cil U .2 .5 ..-g ~ - OIl" ~ ::C 0 ~ ~i:2iCliE Mlr)OMc..l 0\0\000(; <,>ooN.;-,,- --v-;;> o C lI.l :.a '" - t " ~ E ~ .. <= c " '" .. E " .... Z :;; .:0: 0 0.. .. c _ = :.a .~ 0.. _ - " Vi -; = ::::s 'C .... "C _ ~ c '" -- = c ... "CS t':S ;; .s"'O ~ u ('fje.: 0\ 'u <'> " _0.. ..... ...... ; ~ t) C1.. ; c ~ c... v g]U 'r;; .::: ~ " <Il .. CO .g .5 '" c <Il - - " .;;; >, = - - - Q.) .- C'I:l .:: u ~ c .- c ;:l~:.:l <Il .. 0; 'u o <Il -< .c u - " .. <Il .. '" <Il U 's o c o u ~ "0 C " E o '-! " c c.. o .3 ;; u - = o '" I I Table V-13 I CITY OF SAN BERNARDINO: RECENT INDUSTRIAL BUILD LING SALES Recording Date Property Description Sale Price Square Ft. Pricel SF Year Built I CitylZip Single Tenant Industrial Building 5/16/00 San Bernardino92408 $ 3,760,000 235,000 $ 16.00 1978 I Multi-Tenant Industrial Building 9/15/00 San Bernardino92408 $ 3,069,000 70,145 $ 43.75 1990 Single Tenant Industrial Building I 9/2/99 San Bernardino92407 $ 3,000,000 35,760 $ 83.89 1990 WarehouselDistribution 5/5/00 San Bernardino92408 $ 2,910,000 107,320 $ 27.12 1981 I WarehouselDistribution 5/28/99 San Bernardino92407 $ 2,350,000 68,500 $ 34.31 1990 Single Tenant Industrial Building I 513/00 San Bernardino92408 $ 2,079,000 59,400 $ 35.00 . 1986 Industrial Park 2/26/99 San Bernardino92408 $ 1,825,000 74,502 $ 24.50 1986 I WarehouselDistribution 1/14/00 San Bernardino9241O $ 1,725,000 58,470 $ 29.50 1963 Single Tenant Industrial Building I 6/30/00 San Bernardino92408 $ 1,400,000 47,957 $ 29.19 1975 Single Tenant Industrial Building 1/28/00 San Bernardino92408 $ 1,115,000 41,633 $ 26.78 1980 I Single Tenant Industrial Building 4/30/99 San Bernardino9241O $ 725,000 28,324 $ 25.60 1969 Radio Transmission Facilities I 3/26/99 San Bernardino9241O $ 700,000 1,531 $ 457.22 N/Av Multi-Tenant Industrial Building 10125/99 San Bernardino92401 $ 600,000 64,654 $ 9.28 N/Av I Single Tenant Industrial Building 7121/00 San Bernardino92408 $ 550,000 16,880 $ 32.58 1985 Single Tenant Industrial Building 4/13/00 San Bernardino9240l $ 540,000 16,750 $ 32.24 1987 I Auto Salvage Yard 2[7/00 San Bernardino92410 $ 500,000 5,000 $ 100.00 N/Av I Multi-Tenant Industrial Building 6/16/00 San Bernardino9240l $ 482,500 15,080 $ 32.00 N/Av Single Tenant Industrial Building 4/9/99 San Bernardino9241O $ 460,000 19,802 $ 23.23 1984 I Single Tenant Industrial Building 2/16/00 San Bernardino92408 $ 460,000 12,600 $ 36.51 1951 Single Tenant Industrial Building i 1213/99 San Bernardino9241O $ 450,000 13,400 $ 33.58 N/Av Multi-Tenant Industrial Building 9/15/00 San Bernardino92408 $ 450,000 11,583 $ 38.85 1990 I Multi-Tenant Industrial Building 3/16/99 San Bernardino9241O $ 425,000 22,000 $ 19.32 1993 WarehouselDistribution I l I I Recording Date Property Description Sale Price Square FL Pricel SF Year Built I CitylZip 10129199 San Bemardino92408 $ 422,100 12,600 $ 33.50 N/Av Single Tenant Industrial Building I 8/6/99 San Bemardino92408 $ 415,000 8,000 $ 51.88 N/Av Multi-Tenant Industrial Building 7127/00 San Bemardino92410 $ 415,000 16,660 $ 24.91 1950 I Single Tenant Industrial Building 12/13/99 San Bemardino92408 $ 380,000 5,977 $ 63.58 1989 Single Tenant Industrial Building I 9/8/99 San Bemardino9241O $ 366,500 16,000 $ 22.91 1947 Single Tenant Industrial Building 3113/00 San Bemardino92407 $ 360,000 15,000 $ 24.00 1980 I Towing & Storage Yard 1/12/99 San Bemardino92408 $ 350,000 2,023 $ 173.01 N/Av Single Tenant Industrial Building i 8n/00 San Bemardino92407 $ 350,000 6,000 $ 58.33 N/Av Single Tenant Industrial Building 3/31/99 San Bemardino92408 $ 325,000 5,000 $ 65.00 1980 I Single Tenant Industrial Building 7/9/99 San Bemardino92410 $ 287,500 19,375 $ 14.84 1943 Single Tenant Industrial Building 7127/00 San Bemardino92408 $ 262,000 5,600 $ 46.79 1961 I Single Tenant Industrial Building 12/17/99 San Bemardino92408 $ 250,000 7,090 $ 35.26 1986 Single Tenant Industrial Building I 5/16100 San Bemardino9241O $ 250,000 6,640 $ 37.65 1962 Single Tenant Industrial Building 4/11100 San Bemardino92410 $ 245,000 12,510 $ 19.58 1965 I Single Tenant Industrial Building 9/8/99 San Bemardino9241O $ 200,000 10,531 $ 18.99 1989 Single Tenant Industrial Building I 4/27/99 San Bemardino92405 $ 182,000 4,042 $ 45.03 N/Av Single Tenant Industrial Building 2/19/99 San Bemardino92408 $ 174,000 3,324 $ 52.35 1985 I Single Tenant Industrial Building 4130/99 San Bemardino92408 $ 165,000 8,413 $ 19.61 N/Av 2 Single Tenant Industrial Bldgs I 3/8/99 San Bemardino92407 $ 150,000 4,000 $ 37.50 1945 Single Tenant Industrial Building 8/31/99 San Bemardino9241O $ 150,000 5,884 $ 25.49 1962 I Warehouse/Distribution 3/31/00 San Bemardino92410 N/Av N/Av N/Av 1988 Average $ 840,000 29,000 $ 49,06 i Source: Economics Research Associates and Ecomps I I I I I I I I I I I I = C I 'E~ = ~ E .!! . - c: . ." 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""'. >Q. q ~ ~V\g~~;;: ~~~S1N ~_l":I__...,_NXl~..;;, N ~ ~V\~e;!.~::!Xl~?ilXl= QCI.;q -..:q....... eEl. aq. q oct O. g.~ ~t!:~~:O~G~:O~;~ "-1"1--""-1"10.""'1 N N . . E . ~ - . . CI.:.= u ~ .~ .. g, ~ Q. . iii Q. ~ . ~ . " .. ~~ "5 '5 .: = ~ . ~ " .. c ~< c ~ ~ ~-! ~ .= . :; . ~ . ..g c ~ = 2 . -0 . " .. 2 '0 . e . .e . " ~'::! . " . ~ " . 'ii . ;; ~ c ..: .. " ;; ;; ." .. . :,; . ~ ~ e ~ ~ '" =.. :; ~ ] .= '"'. .E . " 0" ~ - ~ . . .li . - = . 0 . ~~ " < " :I: '" < '" " ~ ~ :; ~ g ; '= . ~ c ~ -;&" . ~ . <"E ~ ~ . ~ c . 8.~ E ':: IH " . a:::~ oa L u ~ E = z~ . . " .~ .( 1l . ~ o:! ~ .e . ] ~. ~ ~. 8 :i "'1 :. = ~ ~ ! ~ c ~ . ~ ~ 0 t 0 666\ . . . . 0 11661 . . . (( '66\ 0 9661 Q '66\ (( "61 0 '661 . . , 0 '661 . . 0 1661 066\ ~ g ~ 8 ::! ~. ~ ~. ~ UI[1O(] OOOi:: JW3AJOS()()() U! nllS 3,qn:l~ I I I I I I I I I II II I~ I II I I g I I reached the levels of 1990. Overall taxable sales in 1999 were approximately $2.2 billion, with retail sales of approximately $1.8 billion. During the first three quarters of 2000, the City experience total taxable sales of $1.72 billion, of which retail store sales were $1.38 billion, suggesting that the pace of sales during 2000 would be roughly the same as 1999. During the period 1999 through the third quarter of 2000, the City experienced a modest increase in retail stores, rising from 1996 to 2046 stores. New stores were added in the following categories: . Apparel + 10 General merchandise +6 Food stores +7 "Other" stores +41 . . . Fewer stores were reported as follows: . Home furnishings and appliances-5 . Building materials-2 . Auto dealers and supplies -3 . Service stations -6 Table V-15 compares taxable sales trends of San Bernardino to the surrounding communities of Colton, Lorna Linda, Redlands, Highland and Rialto. In terms of retail sales, San Bernardino experienced the slowest growth among all of the above communities during the 1990-99 period. With an average annual growth rate of -1.2 percent during this period, San Bernardino lagged far behind the countywide growth rate of 1.5 percent. San Bernardino's retail sales growth during the 1996-99 period was slower than all but one of the communities (Highland) listed above. The City's non-retail sales, which include a large portion of business-business transactions, recovered much faster relative to retail sectors. Taxable sales shares of County totals are presented in Table V-16. San Bernardino's share of taxable retail sales has fallen from 19.8 percent in 1990 to 15.6 percent in 1999. The City's share of total taxable sales has also fallen from 17.0 percent in 1990 to 12.9 percent in 1999. Though most of the other communities in the vicinity have maintained or marginally increased their shares, the volume of growth is marginal in absolute terms. This is further Economics Research Associates ERA Project No. 13718 City of San Bernardino Page V.23 I I I I I I I I I I I I I I I I I I I II a . .C . .. ::l E , . >U . . :E~ ~., . :<; . . ~ ~ .. . e e . '" M . " .8 ~ ~ zE .. >~ ~~ .N . . . . . . . .. "'.. . . . . "'~ .. . . = ... " . "'~ . ;; ;e .e ~ ;; '" ;; ;; '" . :0 . . ,: "'- .,: ~:. ; ~~~~~~ N r--......, 0 \C -i-iS"';"':.o "'- ,,: -Co "'~ ; ~lftl!ftl!ftl!ft* NNO....r--ao -:'=f.o9-ici ~ ~ !: _100 NDO <"'I .., or \0 DO"""" 0'00_0.\0110 ";.0"':,0,0"; o "'10 r--N ~.,.....,., "'I '" ~ !: 0-a.00'l00 _ONf"-_1lO "'1. N~ '"'!.. ~ '<t.0I. 0-_'" 00..... \C .,.,10....\01"-1'-0 ~....._..,. N ~ ~ ~ 10010_1'000 I"- 0' N.... 0'0 on .....\0.0<.00........... ""a.....\C....V\ llO NO.,.,..... 00 "'1."'1....., N ~ ~ !: """"01"1"'0\ O'\ON.,.,....ao ~"I...,.r--........ <"'I..,r--,.......,... o ""o.....r-. >,0 5-'"" .... 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'E r5;= ~ 11 <:l ~ . 8 = .. :; .:!~'l I I I I I I I I I I I I I I I I I I II i Table V-16 Taxable Sales Shares Total Taxable Retail Sales Sbare (or County Totals) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 San Bernardino 19.8% 19.4% 18.5% 17.9% 17.4% 17.0% 16.5% 15.9% 15.8% 15.6% Colton 4.1% 4.0% 4.3% 4.0% 3.9% 3.9% 3.6% 3.3% 3.4% 3.5% Lorna Linda 0.8% 0.9% 0.9% 0.9% 1.0% 1.0% 1.0% 1.0% 1.1% 1.1% Redlands 5.0% 4.9% 5.0% 4.9% 4.7% 4.6% 4.4% 4.6% 4.5% 4.4% Highland 0.5% 0.5% 0.6% 0.5% 0.7% 0.7% 0.8% 0.7% 0.7% 0.7% Rialto 2.9% 3.2% 2.8% 3.0% 2.7% 2.8% 2.7% 2.9% 2.6% 2.8% San Bernardino County 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: California State Board of Equalization and Economics Research Associates Total Taxable Sales Share (or County Totals) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 San Bernardino 17.0% 16.6% 15.7% 15.1% 14.6% 14.0% 13.7% 13.0% 13.1% 12.9% Colton 3.6% 3.5% 3.7% 3.5% 3.4% 3.3% 3.1% 2.8% 2.8% 3.0% Lorna Linda 0.9% 1.0% 1.1% 1.2% 1.1% 1.2% 1.1% 1.2% 1.2% 1.2% Redlands 4.0% 4.0% 4.1% 3.9% 3.8% 3.7% 3.6% 3.7% 3.7% 3.6% Highland 0.6% 0.6% 0.7% 0.6% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% Rialto 2.9% 3.0% 2.8% 2.9% 2.8% 2.8% 3.0% 3.3% 3.5% 5.3% San Bernardino County 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: California State Board of Equalization and Economics Research Associates Taxable Sales Share in the City or San Benardino Vs. San Bernardino County 25% III 20% u .. '" U ." I 15% C = 8 10% 'C e . -" en 5% --'. ..'...,. "'.'" .. ... ........,... .... . Retail Sales ___Total Sales 0% ~ ~ N ~ ~ ~ '" ~ '" ~ .,. ~ '" ~ ~ Source: California State Board of Equalization and Economics Research Associates , I I I I I I I I I I I I I I I I a I I evidence of the City's eroding market share. Exhibit V-I and Exhibit V-2 graphically presents the taxable sales growth trends in San Bernardino and its environs. Taxable sales per capita in the City of San Bernardino and its surrounding communities are presented in Table V-17. San Bernardino continues to enjoy taxable sales per capita that are higher than all of its surrounding communities as well as the countywide averages. However taxable sales per capita in the City has fallen considerably over the past decade. In 1990 San Bernardino had a taxable sales per capita of $12,279, which was approximately 170 percent higher than the countywide average. This has fallen to $9,786 in 1999, amounting to only 140 percent of the countywide average. However, high taxable sales per capita relative to surrounding communities and the regional average often indicates positive taxable sales leakage into the City. In other words, the City is still able to attract a fair amount of customers to its retail centers from outside its boundaries, but this capacity has been steadily declining. Table V -18 lists the characteristics of most of the multi-tenant retail centers located in the City of San Bernardino as of mid-year 2000. Approximately 42 percent of the total retail inventory of 4.1 million square feet are comprised of community serving centers and neighborhood centers. The 29 year old Carousel Mall with 1.0+ million square feet is the largest regional center in the City. This is followed by the 35 year old Inland Center, also with approximately 1.0 million square feet. There are an estimated 465+ stores in all of the multi-tenant centers in the City, with distributions ranging from 4 to 100 stores per center. Vacancies have plagued many of the centers. No multi-tenant center reported greater than 87 percent occupancy, except for the Tri-City Shopping Center and the University Valley Center. The occupancy rates for properties above 85,000 square feet vary from 60 to 85 percent. Some of the centers have serious vacancies. HOTEL MARKET The City of San Bernardino hotel market appears to be relatively static during the five-year analysis period of 1994-99, with a marginal decrease in room supply and a moderate increase in demand. Based on an independent survey conducted, total room supply Economics Research Associates ERA Project No, 13718 City of San Bernardino Page V -26 I ~ Exhibit Vel Taxahle Retail Sales T~nds in San Bernardino and Environ.~ I 1'J(1 I t711 ~ '-."S"O . lkm.v.lm" j --O-C.~l.... . I~l ] --...1...."'..1.111.... D .' .. ,&" " j no "', ..*..K~..IJ.m.l' . ..... " . ~ ---+-lhgl1lall.1 , , ~ ~ 110 ! ~Ku.II" ., . ~ ;.. -+-S.m ... lkrnd.....,~' (',""My I I I I I 7n ~ ~ ~ ~ ~ ! ~ ~ [ ~ I Stmrcc:: California Stale Ih)an.l t lilualil.ati(Ul and I~OI1t)mics Research ASS(lCimcs I Exhlhit V.2 Taxable NOII~Rctail Sales Trends in Sm. Uern:mllno :lIId EnvinUls .~., ,.' "+"Sall l\c'",'hll"" 1')0 I 1711 I ~ ii 1511 I ~ . ! 130 ......6t...... I D .. " ~ 1111 " S ,. i ." , ~ ~ ! . ~ ;.. ....~. --O-Cl~lo'" ,IiI." I ._ $~':. -:.~.:.... .x..... "'~' ~.." .....[.UIl...I..."'" I ,,*"K.",Jlalld, '. ---+-1 h!(hLmd ...". ..... .." " --0-- Klalh' 7U I -+-Sall llo.'m"r<lmo C"'lI\ly .10 ~ ~ ~ ~ ~ ~ ~ ~ [ ~ I S'llIn:c: California St.ale: Board ()f I~ualil..lli()fl ,md ECOIulmics Research Ass(x.:iaLcs I I I I I I l'rIC.1'11311.('\31ISlltC$lrc'arlOOlI,k.lhnl ~ r ~ :: ~ ~ ~ ~ N :; ~ ~ g g ~ g g I , t x If' . I X I . . ; 2 ~ "!< , / l X + : . ~ >:c . . ;c . . : .. I ~ . . .. f~ . ~~ " . ~ " 1\ .... 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'c ~ u....o u u c E u u U "U ~ ~~tEQl) 'is. u iii _~ C I.l .S: III Cl.cE: 5:UUU~N .,g~~ ; ooU OOO..!!! en >.U 0 '5.~'a.;;S c.. ulllu 1S ~Cl.-Cl.~'; >:lE:!lllu....,:go>1ll0C-U < ~ 0 III 5: .... CIl.J:. .J:. Cll CiG ; 0 = 5: ~ 5.: ~ .~ ~ ~ ;;; E u [;- ~Vi U !! "tJ ~ 0 ;.;: u..:l ~.a~~;;;~;.~ ~=:;~~o ;.~~05~~~~~~~~~ ~ ~ u ] ~ ~ . u , u '" ~ .E . . o ell ." " . " ~ '" ~ is - u E U '" " .6- Q. o ~ '" . . ~ . o ~ ~ ~ u '" .. . .s .. z ~ . ~ ~ I I I I I I I I I I I I I I I I I I I in the City has fallen from 700,070 room nights in 1994 to 695,325 room nights in 1999. In contrast, room demand has increased from 384,878 room nights in 1994 to 406,111 room nights in 1999. Both supply and demand fell sharply during 1999 due to a decrease in room inventory as well as reduced occupancy rates. Though overall occupancy rates have increased from 55 percent in 1994 to 58 percent in 1999, it fell by 2 percentage points during the 1998-99 period. In absolute terms, room rates increased from approximately $46 in 1994 to approximately $58 in 1999, but the level of increase is less significant if inflation is considered. The cluster of government offices in the City generates much of the local hotel demand. The hotel market in the remainder of the county has been relatively more dynamic during the analysis period. This has largely been driven by growth at the Ontario airport's cluster of hotels. Room demand in this market has increased from 2.2 million room nights in 1994 to 2.5 million room nights in 1999. Room supply has increased from 3.7 million room nights in 1994 to 3.9 million room nights in 1999. Occupancies moved up from 59 percent in 1994 to 64 percent in 1999. Room rates have increased to $61 in 1999 from $45 in 1994. Six new properties were added during this period increasing the room inventory by 643 rooms. Table V-19 and Exhibit V-3 shows hotel market trends in the city of San Bernardino relative to the remainder of the County CONCLUSIONS While the Inland Empire as a whole has seen a tremendous amount of development activity in recent years, much of this growth and development has been located along the 1-10 corridor farther west towards the City of Ontario and the airport core, and on "greenfield" newly developable sites. However, much of that inventory of space has been consumed and demand for new industrial, and to a lesser extent commercial space, continues in the market. The City of San Bernardino has several key strategic sites where the combination of infrastructure, accessibility, and developability for industrial land can be exploited to a greater extent. Key areas include the 1-215 corridor north of Cajon Boulevard in the northeast comer of the City, and areas adjacent to the San Bernardino International Airport. Economics Research Associates ERA Project No. 13718 City oj San Bernardino Page V -30 I I I I I .1 I I I '" "C = I::: ~E-< . - ;;. OJ OJ'!: :is <\I ~~ 1l - Q ::r: I I I I I I I I I I ~ " ~ .5: - - u~ ';' .5 c ... 'E.s: " "C " ~ ... '" .. = =:;, " " " c '" = .: g: '" '"' 0;- 'Q"';' ::;8; - '" '" ~ e ~ ~ g 0'1.. U=:- '" .. "i", !io", E co. .. = " .... .. '"' ~ 00 .. 00 Cl:.... 5~ g - Cl: "C " " 5 .. Q 5 " " Cl: OOOOMvlli --M('<")O 0'1.. 0\.. 0"1.. a-... 0\.. - - NNMMN NNNNN "'".... "''''''' "''''''' oOoN 0" "''''''' 0\.. 00 0\ occr-i -"'''' 00'" .... '" 00 '" .;" 00 '" '" '" "'.... "'0 - " ,,)0\ - - "" .... 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Ii 11 Ii ~ Ii! r- ~ :;r; s. s. ~ ~ " . i s. ~ 111{!!NWOO'd , . ~ ~ ~ -. ~.- ~~ _1! .!:.J o. ~ ~E 0 . , a~ . ~ a-;;- ~ a 0;- f -~ ~'-"" . f . . / 'e. ~ ~ , ~ . : . . ~ ~ ~ ~ ~ ~ ~ . -. ~ :;; ~ '" ~ N -. .buWI\Xl() ~ . ~ . - .!! -0 ~ Q ~ .. .. .. > ... - . . ~ t- o ~ . '" -. E ~ 8 '" ~ ~ ~ ~ " . , .. 8 " ~ 8 g ~ 8 Q -. ~ $;lrM wOO1l ~ . ~ ~ . . > ~ ~ . ~ o 8 ~ ~ go '" ~ . " ~ g ~ ~ ~ " ~ S -. II u 0: > ~ ~ .s 0 c ~ -. ." C ~ . ~ ~ . . -. . . 0: ~ 0: > . ,:: -5 .s '" ~ 0 ~ ., l I I I I I I I I I I I I ~ I I I I I I Future land use planning should be cognizant of the potential demand for these uses and avoid the siting of incompatible land uses on these prime developable locations. The volumes of land that can be absorbed by San Bernardino in the short to medium tenn (5 to 10 years) is further described in the section which follows. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page V.33 , I I I I I . I . . I . I I I . I I !. I Section VI MARKET DEMAND ESTIMATES INTRODUCTION This section provides some preliminary forecasts for the potential market demand of different types of commercial space in San Bernardino. This information is designed to inform the land use planning process, rather than be determinative of outcomes. This section will consider likely oncoming demands for office, industrial, and retail floor space in the City of San Bernardino. This section will also look at the overnight visitor market and estimate the potential volume of overnight visitors to the City of San Bernardino. OFFICE AND INDUSTRIAL USES The need for new office and industrial space in San Bernardino is based on projected employment growth in the City. ERA's forecast uses the near-term analysis for growth by industrial sector by the State of California Employment Development Department's Labor Market Information Division's projections and planning information series for San Bernardino County as a whole. These sectoral growth rates have been applied to 1999 employment estimates provided by CACI Inc. Supportable space is calculated by applying an area per employee ratio of 500-800sJ. for industrial and 200 sJ. for office space. ERA has further adjusted the office space estimates by excluding government and health services related offices, as they are not included in the existing office space estimates by secondary sources. The supportable square foot analyses are presented in Tables VI-I and VI-2 and are constructed as follows. Table VI-l shows the supportable square foot analysis for 1999. This shows that San Bernardino had an unmet demand for 65,000 square feet of office space and 172,000 square feet of industrial space in 1999. Note that the existing occupied space estimates do not include government and medical offices, owner occupied buildings and smaller offices located in infill or mixed use projects. Hence, it is likely that the 65,000 square feet currently Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VI-I I I I I I I ~ ... = = t!, '" - '" >- ..J <: ~ r.l U :: '" r.l ..J =:I ~~ >CI:: .S!o ""c.. "c.. "'0 '" ..J ~ !;; o Q Z - Q ~ r.l U - r.. r.. o I I I I I I I I I I I I I ~ :c ~ 1:_ 8,"'; g.~ ;/',I ~ t; ii !. 's 1;; r:I:l "'l = il ~ ..:: < ~ I;;: ..: 0 ~ ~ " ~ '" '" ~ := ] ~ .. &.~ '" . = ~ '" $ ~ .c I;;: '" 0 c 0 ~ c ~~ o ~ .q t UOl N " " I;;: o ~ ...; ~ gggg ~ ~g~~ V'J.~Vl~ X 15 ...; gg~gg M ~g~~ '" r- '" ....:t"'i''''':r''i ] <; '0 ~ <f N :s~ ~~~~ !;8>D8~8 il .:; ~ >C " ... s c<i } '" 8~:<:~ r- ~'" ~~~cO ~ ~ ;; ,~ :c l, ." C ~ ~ s c ~ .!: ~ '5 -; 'c G.I = 0:: E ." E Ii e ~ e c.c 1:1 -= = ~c'2~~G.I= ~=~CIj~~ !"I t: 1: 'ii "",- "c.5~&.~E-l':J ~=C~=~O==Cl 'j5 C " e.c: .:: ~ ~ e:o...~C::li: g~ e~ 00 r- >C 000 '..,; g ...; ggg ON~ r-Nr- OOO>C ....:..; ~ g ...; <f g, ~~~ 8~8 <f >C .., '" ~g;~ ..n r-: r.I'J~ .., = ,S! ~ ~ 'S '8 ." :l< " " 'E :s r)Jl, 8 -< on "'. .., = = = ~ - - ~ 00 r- '" t-' g .... ... q - = ... "l. Q1; ~ o ... g e :: ...; g = -< on Ie g = e ... = <i: g = ..; ... ~ - ~ ..: ~ 13 ~ '" ~ ~ ;;; = ." ,: 5 " " <= ~ o ~ c ,2 C " > c 8 " ~ = '0 c o ." ;; -5 ~ C " E ..: .c wi .::2 ~ ~ c ;;; ~ " E ~ ~ " <= 'E - " ~ ~ E ~ = ." ~ -n WI .S = " e. ~ = ~ '" - ~ " ~ '" '" ii '6, = ~ o 8 i - ii - ~ .E ~ O;l U <l ~ '" o .c ~ ~ '; '" ~ o ;; ~ ..; ~ E " c '0 ..; 'il '0 .c ~ ~ .c " = ~ . " ~ ~ o C " E E " > g, ." C ~ -;;; " :;; " E " ." = U ,: '0 c o ." ;; -5 . " . ~ .c ~ ;; ." .. ..; . '~ " -5 '~ ~ ~ c. E 8 c. 'il .c .Q c " E >- o 'E. E ~ " " c () .9 E u o 2 ;;; c 8 c " E E OIl y ... .: > 0 i;l o ~ 'j;( o 0 " ." ... ." C ." " :: E c; y ::J .~ .~ III i;l ;: ~ Go) " ~ ~ ~ ~ ~ ~ .c ..c -;;; " :I: N ;;; w -, --- 'U :0 ~ '; > ~ '0 c ,"l '" o " -5 ~ ..Q ~ ;; ." U ~ ~ " ~ " ." '5 o .~ '" " ~ Ci '" c ~ ~ ~ olj .c .c = o Q Q W ~ 'E ~ a u c u < U ..; " '~ ~ < .c ~ ~ " ~ " ex: Ij 'E o c ~ < '" .w u ~ = ~ 1 I I I I I I I I I I I I I I I I I I I demanded is already being satisfied in other types of properties, Similarly, the 172,000 square feet of industrial space currently demanded is more than likely to be satisfied in owner occupied properties. Hence, the current office and industrial market is probably in equilibrium and might even be slightly overbuilt. Note that there is demand for an additional 3.4:t million square feet of space for government and medical uses, however. It is not known at this time as to how much of that demand has already been met. Also these estimates include only 20 percent of educational services needs. Table VI-2 shows the supportable square footage analysis for 2004 based on forecast employment growths from the State of California EDD by industrial sector. Major groups are assigned either an industrial or office real estate use. Not considering, medical, government and 80 percent of the education sector, San Bernardino's unmet office demand will rise to 851,000 square feet in 2004. Industrial demand will increase to 1,474,000 square feet based upon anticipated employment growth, and no significant loss of employment and business types already in place. RETAIL DEMAND Table VI-3 shows a demand schedule for supportable square feet of retail space in San Bernardino. This analysis is based on the following assumptions. . Retail expenditures (excluding transportation costs) are about 27 percent of gross household income. . Penetration rates will vary with distance . New retail space will be supported at $175 per square foot in 1999 dollars. Though this might appear low in absolute terms, it should be noted that this is an average of all qualities of retail outlets in the City. This will make new development difficult as most new space will normally require upwards of $200 per square foot. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VI-4 ~ I I g g g g ~ g g g g g g g cO e e g g ;;f cO e ~ cO g cO ((l 00 on on N >C '" I 00 '" on '" .., '" '" r- N N' ..; .,; N ..; ..; I 0 0 g 8 g c 0 ~ 0 c ~ ((l N :;; 0 ~ 00 ~ v;- cO N ~ cO ..; e c 00 N c - ~ .., ~ 0 - on ~ - 00 " " al ..; ..; <i: al - v;- I '" ~ r- >C 00 '" "" '" - "" "" "" "" "" c <f <f <f c ~ <f <f I ,9 on N N .9 on N N ~ >C ;; >C - ~ <l <l c c " " "- "- I ~ g g g ~ g g g ;; .c ;; .c <l ~ <l " '" " v;- v;- ~ 0' e 8 I 5 ::E i!l ((l ::: ::E 00 '" '" 0 ~ -;;; .; ~ .; -;;; N t-' - ~ ~ " " 0 r- " .., '" '" c >C '" c >C .., N ~ " "" ..; ~ " "" , ..; ; D "" "" ; S "" "" ~ I > > "0 = " " " e E g g g E ~ g, g I '" .. 8 8 . Q 8 8 8 8 8 8 - -= -= > - '" on on .., '" '" N on ~ g: gg v;- .; .; 0 gg N~ vi cO .. '" on N 0 >C '" on :c ... - < N r- r- '" < -~ r--: ..,.~ " N ..; ..; I " :; .., '" - ... "" "" - "" "" N "" "" - 'OJ - c:= ~ ~ ." 0 00 on '" 00 '" N I '0 r- r- >C '0 r- i!l - .c >C .., .., .c .., '" " N ..; .; " .; ~ t-' ~ >C ::: >C ~ >C i!l = N ~ - 0 0 :I: :I: I " " E 0 - '" E N ;::: :;; .., ~ '" 8 00 0 8 >C 0, '" -= v;- .; v;- -= t-' - ..; .., '" on '" >C I'- I :I: "" "" "" - "" "" "" ~ :I: :I: .0 .0 < > < I ~ B ~ 'g ~ ~ ~ I '" '" .( ::: ::: .c ~ ~ ~ ~ " ~ ti Ii: ." ~ C C " .,;. ~ ~ ~ E .,;. E " I '" ~ on " '" .. .. 0 '" Ij ..5 ;; .: ;; '" '8 '" ~ " .. " - '~ E .~ E 0 .: c " W c W c ~ I " ." ~ " " ." 2- "" " S1 S1 " " S1 S1 " ""' :i! S1 ;; " S1 '" " ii '" - .5 e. '" s .5 e. '" "I .l! '" .... " 3 '? - Jj '? ~ .:, Jj '6 .;. '" e:; " .;. e:; " z 0 '" - on '" ~ '" on I I I I I I I I I I I I I I I I I I I I !I I Table VI-3 shows that the existing retail market demand in 1999 would yield a citywide demand of approximately 3.58 million square feet of retail space. Assuming that there is already 4.0 million square feet of space in the market, it appears that there is a surplus of 420,000 square feet. Retail demand increases marginally by 2004 to 3.76 million square feet. Compared to the 1999 base of 4.0 million square feet, there is still a surplus of 240,000 square feet (considering supply levels constant). New market entrants will normally build new store space, however (Lowe's, Kohl's, Walgreens, etc.). This can mean that some existing space may become vacant and that new centers or freestanding stores are built in the community. OVERNIGHT VISITOR MARKET As shown in Table VI-4, ERA has estimated the total number of overnight visitors to San Bernardino to be over 600,000 annually. Applying typical shares of business travelers, it is estimated that more than 137,000 of the trips are business related. The estimates of overnight visitors are primarily based on 1999 Smith Travel Research hotel census data, U.S. Department of Transportation data and ERA estimates. It should be noted that these figures slightly underestimate overnight visitors visiting friends and family. ERA understands that the region would have a fairly large share of tourists visiting friends and family. Unless an existing property closes or is converted to other use there does not seem to be an essential unmet demand. Year 2001 travel has been down and will likely remain so through mid-2002. Thereafter, either property replacement or a new hotel entrant might pursue a project of up to 200 rooms. CONCLUSION At this time, market indicators suggest that San Bernardino will experience increasing demand for industrial space within the City and to a lesser extent create demand for cornmercial office space. However, given current market conditions and the absence of a major market-transforming project such as those represented by the Vision 20/20 plan, the Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VI-6 "'I I I I I Table VI-4 ESTIMATED NUMBER OF BUSINESS VISITORS TO THE CITY OF SAN BERNARDINO (1999) I I I I I I I I I I I I I. I I Number of Rooms' 1,905 Average Occupancy Rate' 58.4% Room Nights Sold Per Annum 406,070 Average Length of Stay (Nights)' 2.2 Number of Parties Per Annum 184,600 Average Number of Persons Per Party 1.3 Number of Persons Staying in Hotels & Motels 240,000 Estimated Total Overnight Visitors Per Annum' (Including visiting friends and family) 612,200 Percent of Total Travel Business Related' 22.5% Total Business Travelers 137,700 I Smith Travel Resrech , Average for all overnight visitors staying in hotels/motels. , Multiple visits per person are included in this total. , U.S. Dept. of Transportation, Bureau of Transportation Statistics Source: Economics Research Associates I ~ I I I I I I I I I I I I I I I I I I II City of San Bernardino is overbuilt in retail space. This does not mean, however, that the City will not see any new retail development in the near term. In fact, it is likely to be the focus of continuing interest by large-format retailers such as Wal-Mart and home stores such as Lowe'slHome Depot (ERA understands that Wal-Mart has already secured a site at the northwest corner of University and the 1-215). However, ERA anticipates that this will represent a marginal growth in retail demand which will make existing retail developments, particularly strip developments along Highland and Baseline Avenue, as well as Mt. Vernon and Waterman, highly vulnerable to this new competition. As a result, we forecast only marginal increases in the total net volume of occupied retail space in the City of San Bernardino. Also, some of the key efforts that may help alleviate the current challenge of retail leakage are to modernize/upgrade existing retail space and to identify and aggregate prime retail parcels to attract larger tenants. It is also important to realize the long term outcomes/implications of all proposed new developments. For example, the Hopkins/ Pearlman development project in the Santa Fe Depot area is ideal as a mixed cornmercial development at that location, as long as it does not interfere with the regional transportation networks from its traffic and other consequent impacts. As for hotel development, it is possible to anticipate with the growth of new commercial office and industrial space that there will be eventual demand for modest expansion of hotel room inventory in the City. Likely locations for this expansion would be along the 1-10 corridor in the hospitality lane cluster, or possibly as a site along the 1-215 freeway. This will become especially attractive with the expansion of the Foothill Freeway west toward Fontana, which will create a major transportation nexus in the northeast corner of the City of San Bernardino. ERA is aware of a resort type project (Arrowhead Springs) being proposed in the foothills. The success of such a high-end facility is more dependent on their unique marketing and management capabilities than absolute market demand (competing facilities, if any, will be a key factor) Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VI-8 1 I I I I I I I I I I I I I I I I I il II Section VII SUMMARY OF MARKET OPPORTUNITIES INTRODUCTION This section provides a preliminary list of potential market opportunities, strengths and challenges for office, industrial, commercial and recreational land uses in San Bernardino. OFFICE DEVELOPMENT . As noted in the previous sections, the Inland Empire office market is primarily concentrated around the Ontario Airport core. Governmental and government- related offices do remain clustered in San Bernardino and Riverside. . The airport market has matured over the last few years, and has been able to attract a significant number of office users from both Los Angeles and Orange Counties with minimal lease/tenant improvement concession incentives. . The demand for office space to the east of Ontario is likely to increase in the next 5 to 10 years, but will be dependent on a number of factors such as: - Availability of high quality housing for employees. Cost pressure from the west is already making the Inland Empire an attractive location for new residential development. This trend will continue at a very rapid pace, and the growing population base (or labor force) in the region will be the key magnet for new office users. The ability of the various Inland Empire communities to capture this oncoming "labor force", however, will depend on each community's "attractiveness". Image of the City will be increasingly important. As mentioned earlier in this report, it is important to realize that labor markets are also regional, hence shortfalls in certain types of housing within the City's jurisdiction does not always mean that it will be unable to attract employers (as long as regional jobs to housing balances are met). Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VIM I I I I I I I I I I I I I I I I I I II ~ - Agglomeration with existing and emerging employment clusters will also be attractive to certain sectors of office employers. Identification and marketing of any existing and emerging clusters will be helpful in capturing potential employers. It is important to note that a large share of the current speculative office development in the Inland Empire still depends on absorption resulting from higher costs in Los Angeles and Orange counties. Though this will be less of an issue as the market matures, it will be important in the short term. The implication of this phenomenon is that any short-term slowdown of the economic cycle that leads to increased vacancies (and decreased rents) in the west, might have a far more adverse effect in the Inland Empire market. Keeping this in mind, it is important for the Inland Empire communities to build on long-term value and competitive position, relative to the regional market. - Quality of available space will be an important factor for new office users. The market currently has a slightly higher share of Class B space that Class A space. . ERA's preliminary supportable space estimates show that the City of San Bernardino's office market is currently overbuilt. Projected employment growth estimates show, however, that the City could capture as much as 170,000sJ. annually, over the next five years. . Much of the oncoming office demand in the City of San Bernardino is likely to be fulfilled by infill development in the Downtown area. From a land use perspective, the City should be proactive in promoting infill and mixed office/commercial development in the Downtown area, in view of their longer term Downtown Revitalization strategy. This will be one of the steps in preserving and reinforcing the image of Downtown as a "center" of the city. A lot Economics Research Associates ERA Project No. 13718 City of San Bernardino Page vn.2 I I I I I I I I I I I I I I I I I II II 1 of this new development might involve both 'use' and 'class' conversions to meet market needs. . An increase in concentrated Downtown employment will also result in an increased employee expenditure base, which in turn will be able to support an increased amount of retail space in the Downtown core. . If market conditions permit, some lower density office park type developments could be accommodated on the northern part of the City, along 1-215. Specific market demand for office park properties may arise after 2005 when the 1- 21O/Route 30/I-215 connections are completed. This will be an effective buffer use between the oncoming new residential enclaves to the north and potential industrial uses that might locate along the freeway to capitalize on access. There is also infill space available along Hospitality Lane in the southerly quadrant of the City. . In the long term, opportunities for office development encompassing a range of densities might also be possible in the Norton Air Force Base area, subject to the overall reuse plan and initial developer successes in luring industrial and fIexi- space users. INDUSTRIAL DEVELOPMENT . Unlike the emerging office market, the Inland Empire industrial market is far more mature, and has established itself as a top location. This is due to a range of competitive advantages that include: - Access to a significant International Airport (Ontario), two transcontinental railroads, three interstate highways, and a number of 'incentive zones'. Potential for industrial uses at San Bernardino International Airport. - Availability of large assemblies of land at competitive prices, with access to service and utility infrastructure. Economics Research Associates ERA Project No, 13718 City of San Bernardino Page vn.3 I I I I I I I I I I I I I I I I I I !I . Industrial vacancies in the City of San Bernardino (4.8 percent) are significantly lower than the regional market (7.1 percent), as of the 3rd quarter of 2000. However, industrial rents are still marginally lower than the regional average. . ERA's preliminary demand estimates show that the current industrial market in the City might be marginally overbuilt. It is estimated, however, that the City could absorb approximately 400,000:t: sJ. annually in the next 5 years, with a total capacity to accommodate approximately 2+ million square feet at the end of the period. We understand that KolI Co. has already submitted plans for a 650,000sJ. warehouse in the Airport area. . In the short term, most of the industrial growth is likely to be in the warehouse and distribution sector, due to availability of some prime locations along the 1-215 and 1-10. However, in the longer term there could be opportunities to attract certain key manufacturing sectors, which would capitalize on the City's educational institutions and attractive labor force. Examples of this could include technology hardware, printing and publishing specializations, medical manufacturing. . It is extremely important for the University to have their engineering faculty in place in order to attract some of the above sectors, especially the ones requiring a highly skilled labor force (medical manufacturing etc.). . It will be a challenge to attract hi-tech R&D firms (especially bio-tech) unless strong programmatic links between the university and the potential tenants are possible. For R&D tenants, proximity to a strong research institution is extremely important (ongoing academic research will have to complement the R&D company needs). Opportunities do exist in the Bio-tech R&D sector if programmatic alliances can be forged between prospective tenants and the Lorna Linda Hospital. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VII-4 I I I I I I I I I I I I I I I I I I I ~ . Technology sectors oriented towards production and manufacturing (as opposed to R&D) are more likely to locate in San Bernardino, either near the former Norton Base or in a future CSUSB Research Park. Programmatic ties with research institutions are not the primary concern of this type of industries. However, infrastructure costs and availability (utilities, access, transportation, optical networks) and availability of skilled labor will be very important. This re- emphasizes the need for the University to set up an engineering faculty. . Larger assemblages of land exist on the northwest part of the City in the 'Northwest' redevelopment project area. Some of these sites with frontage along the 1-215 could be ideal locations for warehouse-distribution and light industrial/manufacturing centers. There are also opportunities of infill and development in the "Southeast Industrial Park" redevelopment project area, and the "Tri-City" redevelopment project area. . Proactive alliances between the City and the existing educational and professional institutions (the Universities, medical facilities, and hospitals) could be an effective tool to attract high value industrial employers to the City. This includes University owned land to be made available for such developments, creating/enabling endowments (jointly with the City) to attract funding for the new engineering faculty, identification of potential programmatic links to the university that can be offered to prospective tenants. RETAIL DEVELOPMENT . Although San Bernardino continues to attract retail dollars from neighboring communities, its retail position as a regional retail center is rapidly declining. This can be attributed to two primary reasons: - Dilution of the regional market with the emergence of newer and higher quality shopping facilities. - Peripheral developments of "shop for value" retailers in the region. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page vn.5 ~ I I I I I I I I I I I I I I I I I I il "1 - Steady decline of resident buying power since the closure of the Norton Airforce base. This was further exacerbated by the general economic recession of the 90s, and now may recur in late 200llearly 2002. . Most of the existing multi-tenant retail centers in the City are plagued by vacancies ranging from 15 to 40 percent. . ERA's preliminary analysis shows that the existing retail stock is overbuilt by almost 420,000sJ.:t. Given current growth rates, it is unlikely that all of this space will be reabsorbed even in the next 4 to 5 years. . At present the City should concentrate its efforts to prevent any leakage of community shopping expenditure. This should at least ensure that close to 100 percent of the day-to-day shopping needs of the resident population is fulfilled within the City. . The next objective should be to increase regional retail capture. Though this is unlikely to result in the development of new shopping centers, it will however involve the redevelopment and revitalization of existing ones. The commercial developments along Hospitality Lane, with proximity to both the 1-10 and 1-215 freeways should be able to recapture some of the lost regional retail expenditure once the development achieves a critical mass of complimentary tenant mixes. . Realization of the City's 'Lakes and Streams' project as a regional recreational attraction could be a significant catalyst in helping San Bernardino regain its regional retail position. . Other retail opportunities exist in the downtown area in the form of redevelopment and infill projects. However, this has to go hand-in-hand with other mixed use residential and/or office development projects, which will justify the addition of new retail space in the area. (Starbucks is an example) It is likely that future retail site locations may be on the periphery of the City in locations such as the eventual 1-210/1-215 intersection. . Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VII-6 . I I I I I I I I I I I I I I I I I I I . The City will therefore probably experience some replacement of existing retail floor spaces during the next 5 years, but may not achieve significant net new floor space occupancies. HOTEL DEVELOPMENT OPPORTUNITIES . Currently the hotel market in the City of San Bernardino shows moderate demand for new rooms. Both room supply and room demand have remained relatively flat over the past five years. . The overall occupancy and room rates in the City are marginally lower than the remainder of the County. The decline of defense related establishments and the relocation of defense contractors from the City also resulted in a significant drop in the demand for business accommodations. . The existing clusters of Federal, State and County offices will continue to demand a certain ongoing level of moderately priced business hotels in the City. However, at present most of the overnight business visitors still prefer airport locations. . Tourist usage of hotels is currently minimal and it is estimated that a large number of non-business overnight visitors to the City prefer to stay with friends and relatives. . The current and future market conditions in the region do not suggest strong demand for more hotel rooms in San Bernardino, unless actions are taken that would increase room-night demand, such as the development of a university- based conference center to induce group-business demand. While demand for more total hotel rooms is not demonstrated, certain hotel-types may be under- supplied, such as modern business-serving hotels. Over the next 4 to 5 years San Bernardino could add one or two mid priced, quality business hotels in the City (200:i: rooms). Economics Research Associates ERA Project No. 13718 City of San Bernardino Page Vll-7 I I I I I I I I I I I I I I I I I II II CONCLUSIONS These market opportunities represent the likely level of forecast demand for key non- residential land uses in the City of San Bernardino. The square footages have been used in supplying the estimates for the fiscal impact analysis and policy recommendations sections which follow. Please note that the fiscal impact analysis represents an estimate of near-term development to potential market saturation rather than some achieved end state through the much more lengthy duration of the master plan horizon (10 to 20 years). However, the City of San Bernardino should be cognizant of the larger term potential demands in both its land use planning and economic development efforts in order to attract and retain both employers and future development. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VIl-8 , I I I I I I I I I I I I I I I I I Ig I Section VIII FISCAL IMPACT ANALYSIS INTRODUCTION As part of the scope of services, ERA was requested to forecast the fiscal effects of the market demand for new non-residential land uses in the City of San Bernardino. The purpose behind this exercise is to allow the City to understand the net potential effects of new development on the General Fund revenues of the City of San Bernardino. That is to say, this analysis will provide planning factors that can be used in assessing the fiscal impacts of various categories of non-residential development. For the purpose of this analysis, we have chosen to estimate the fiscal impact of market saturation at levels identified earlier in this report. However, it should be understood that these are planning guidelines only and do not necessarily represent some end state that will finally be reflected in the possible long term build out of the revised land use element of the City's General Plan. Assumotions of the Model The fiscal impact model utilizes the following assumptions: . It is based on the assumption of near term (next 5 years) development. That is to say, the model represents the fiscal impact of non-residential land uses at a hypothetical point in time in which all of the forecast elements are built out in their entirety. . The model only measures the fiscal impact of development on the General Fund revenues of the City of San Bernardino. Any other jurisdiction such as San Bernardino County, San Bernardino Unified School District, any special districts, and any others are explicitly excluded from this analysis. I. . The model measures revenues and expenses on a recurring annual basis only. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VUI-I .. . . . ~ . .. . . . . I I I . . . I II n . All values are presented in 2001 dollars. . The model assumes no change in the level of service provided by the City of San Bernardino, and costs are based on the analysis of the City's fiscal year 2000- 2001 budget. Table VIII-l shows the non-residential land uses by gross square footage estimated by ERA to represent near term/next 5 years market demand. This represents approximately 2.8 million square feet of total new net demand of which approximately 2 million square feet are anticipated to be demanded by industrial land users. In addition to the square footage estimates, ERA has also supplied for planning purposes only an estimated scale of this development in terms of acreages which cumulatively total an estimated 181.3 acres. These estimated acreages are provided as planning factors only to be considered in future land planning efforts by the City of San Bernardino. The lower half of the table shows the City of San Bernardino's current land use inventory for each of the non-residential land uses under consideration in this report. This forms the basis for estimating the per square foot costs and revenues based on existing levels of service. Table VIII-2 displays ERA's estimate of average valuations per square foot that have been used in forming the fiscal impact model. Note again, these will vary from project to project, but these costs represent realistic estimates based on current market conditions. Fiscal Imnacts Table VIII-3 shows the non-residential property tax revenue distribution at 5-year 'build-out' in 2001 dollars. Total net new demand can be forecast to account for $158.4 million worth of new assessed valuation which would yield slightly over $1.58 million in total property tax revenues. Assuming an average split by tax rate area with 11.5 percent of the total property tax returning to the City of San Bernardino, this would result in an annual reoccurring property tax value of approximately $182,100 per year available to the City of San Bernardino (most this would probably be available as redevelopment tax increment). Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VIII.2 I I I I I I I I I I I I I I I I I I I Table VIII-I -~ SAN BERNARDINO GENERAL PLAN FISCAL IMPACT ANALYSIS FINANCIAL AND PROJECT ASSUMPTIONS Net New Demand (sq. ft.). 861,000 851,000 10,000 Land Use Designation General Commercial Office Retail Industrial Hotel (units) Total . ERA Estimate City of San Bernardino Composite Land Use Inventory Use Units Office Retail Industrial Hotel 1,974,000 250 2,835,000 3,300,000 4,128,064 9,500,000 1,905 Estimated Acreage 27.7 27.4 0.9 151.1 2.0 181.3 Source Grubb & Ellis NRB Grubb & Ellis STR Source: Economics Research Associates and the City of San Bernardino ~ I I I I I I I I I I I I I I I I I I I Table VIII-2 BUILDING VALUATIONS (Valuations based on a square footage basis) Total Valuation Average cost Use Land Value Building Cost Is.f. per unit Office 20 60 80 Retail 18 30 48 Industrial 8 25 33 Hotel 25 95 120 $ 72,000 Source: Economics Research Associates . I I I I Table VIII-3 Property Tax Valuation (Non-Residential) Valuation Less Existing Annual Net New Assessed Land Building Tntal Valuation (Estimates)' Valuation Office $ 23,828,000 $ 51,060,000 $ 74,888,000 $ 11,914,000 $ 62,974,000 Retail 720,000 300,000 1,020,000 $ 360,000 660,000 Industrial 52,640,000 49,350,000 101,990,000 $ 26,320,000 75,670,000 Hotel 2,178,000 18,000,000 20,178,000 $ 1,089,000 19,089,000 Total $ 79,366,000 $ 118,710,000 $ 198,076,000 $ 39,683,000 $ 158,393,000 I I I Property Tax G<:neration' Net New Assessed Property Tax @ City Share @ Valuation 1% 11.5% Office $ 62,974,000 $ 629,740 $ 72,420 Retail 660,000 6,600 759 Industrial 75,670,000 756,700 87,021 Hotel 19,089,000 190,890 21,952 Total $ 158,393,000 $ 1,583,930 $ 182,152 I I I I I I I I I lane half of the estimated land assembly costs shown on Table VIII,2 , Significant portions, probably the huge majority, will go to the Redevelopment Agency as Redevelopment tax increment, and IIll1 to the General Fund. Source: Economics Research Associates I I I '"': I I I I I I I I I I I I I I I I I I I Table VIII-4 allocates the fiscal impacts in terms of expenses and revenues to the City of San Bernardino's General Fund. Note that a large portion of property taxes may go to redevelopment tax increment funding and may not be available for the General Fund. Exnenses Expenses are allocated by department with a pro rata share for costs by each of the non-residential land uses. ERA forecasts that total annual expenses from all four non- residential land uses to amount to approximately $1.7 million at five year 'build out'. Revenues Revenues are forecast using two methods. Business License taxes, sales taxes, Utility user taxes, and transient occupancy taxes are derived by using ERA's estimates of performance and gross receipts from the oncoming new developments. However, franchise taxes, licenses/permits, and fines/penalties are calculated on a square foot basis and their pro rata share associated with non-residential land uses. Total revenues for all four land uses at stable year are forecast at just over $2.2 million excluding property tax revenues, and a little over $2.4 million if one were to include property taxes. This would yield a total net fiscal impact from non-residential land uses of approximately $654,600 annual recurring revenue dollars available to the City of San Bernardino's General Fund accounts. This result occurs because the estimated market demand mix for near term land uses does not provide for significant retail growth. CONCLUSION These results are in line with the general experience that most non-residential land uses tend to have positive fiscal impacts. However, office uses in San Bernardino tend to yield net negative direct impacts due to the relatively low revenues generated compared to fiscal costs. It is important to note that office uses will produce other positive impacts indirectly through employee expenditures in the City resulting in sales tax generation. Note . that the levels of revenue outlined in this analysis indicate a balanced fiscal result from all Economics Research Associates ERA Project No. 13718 City of San Bernardino Page VID.6 I I I I I I I I I I I I I I I I I I I ~ Table VID-I Fiscal Impact of Non.Residential Uses (UliUziDg City Budget .fFY 2000-2001) FYnPnuo<i Portion Portion Portion Assignable Portion Ponion 10 non-residential Assignable to - Assignable to As.o;.ignable 10 As.'iignable to Total Expenses uses @ 25% Office @ 22% Retail @ 28% industrial @ 20% Hotel @ 7% Departmental Expenses Fire Dept. S ]8,128.900 S 4.532.225 S 997.090 S 1.269,023 S 906.445 S 317.256 Police Depl. 36.145.800 9.036.450 1.98S.019 2.330.206 1,807,290 632.352 Public Service & Facilities ManaJZemenl 11.458.600 2.S64.650 630,223 802.102 572.930 200.526 Total S 65.733.300 S 16.433.325 S 3.615.332 S 4,601.331 S 3.286.665 S 1.150.333 Fynf'n'le!l oer!l r Office per s.f. Retail pers.f. Industrial per s.f. Hotel Pers.!. Departmental Expenses Fire Depl. S 0.30 S 0.31 S 0.10 S 0,32 Police Dept. 0,60 0.61 0.19 0,63 Public Service & Facilities Mana~ement 0.19 0.19 0,06 0.20 Total S 1.10 S 1.11 S 0,35 S 1.15 Total Estimated Office Retail Industrial Hotel Expenses Annual cost of new development S 932.317 S 11.146 S 682,934 S 150.962 S 1.777.360 Revenue!l from new develonm,.nl from Office From Industrial Total Estimated U... From Retail Uses U... From Hotels Revenues Taxes (Rough Estimates) Business Ucense Taxi S 423.798 S 1.875 S 49.350 S S 475.023 Franchise Tax2 32.979 394 51,938 5.340 90.652 Sales Tax3 42.550 25.000 98,700 8,213 174,463 Utility User Tax. 272.320 3.200 631.680 42,000 949.200 Transient Occupancy Tax! 465.375 465.375 Ucenses and Permits' 17.5S1 206 33,999 3.131 54.919 Fines and Penalties' 12.851 151 24.852 2.289 40.142 Sub Total S 802.079 S 30.827 S 890.519 S 526.34S S 2.249.773 Net Fiscal Impacls (ExdudiDg Property Taxes) S (130.238) S 19,680 S 207.585 S 375.3S6 S 472.413 R~enues from property taxes (if not pledged 10 redevelopment tax increment) S 72.420 S 759 S 87.021 S 21.952 S 182.152 From Office U... From Industrial U... TOlal Eslimated From Hotels Revenues (costs) From Retail Uses Net POleDtial Fiscal Impacts IndudinK Property Tans (57,818) 654,564 20,439 294.606 397.338 IBusiness license taxes are calculated on the basis of estimated gross receipts@S2.49/SI,OOOforoffices.SO.75/S1.000 for retail and SO.25/S1.000 for industrial uses 2ERA assumes thai If3rd of all franchise taxes are attributed to the above land uses. Of this 22% are from offices. 28% from retail. 43% from industrial and 7% from hotels. ERA has applied Is.f. revenues derived from existing inventories as shown in Table VlII-} 3ERA assumes retail sales will yield S250/s.fJyr. It is also assumed thai office and industrial uses will have a 2% relail component, and hotels will generale S 15/room nighl in retail sales. City retail tax rale of 1 % is applied .ERA assumes utility usage of S4/s.fJyr. For all non-residential uses on an average. City tax rale of 8% is applied ~ransient occupancy tax rate of 10% is applied to the new hotel rooms assuming a 60% occupancy rate and $85 room rate 6ERA assumes that If3rd of all Iic./permits fees are attributed to the above land uses. Of this 20% are from offices. 25% from retail, 48% from industrial and 7% from hotels. ERA has applied Is.f. revenues derived from existing inventories as shown in Table VIII-I 'Same methodology as License and permit fees 48% from industrial and 7% from hotels. ERA has applied Is.f. revenues derived from existing inventories as ~hown in Table VlII-} Source: Economics Research Associates ~ I I I I I I I I I I I I I I I I I I I sources. If the City is able to capture higher values of retail sales within office (leasing agencies) and industrial pad space (direct sales from loading dock) the results will be improved. This perspective may be useful in forming a long-term strategy for the City independent of efforts to attract additional retail sales. It should be noted however, that the likely near-term future developments will occur within existing project areas. Thus some existing property tax revenues are already assigned to redevelopment tax increment bond retirement (and do not flow to the General Fund). Similarly, upcoming new development projects will likely generate additional redevelopment property tax increment which may not be available to support the General Fund. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page Vlli.8 - I I I I I I I I I I I I I I I I I I I Section IX ECONOMIC DEVELOPMENT ISSUES, GOALS, OBJECTIVES AND POLICIES INTRODUCTION This final section of the report enumerates a set of key goals, objectives, and policy statements for the City of San Bernardino in view of the current and anticipated market trends. ERA anticipates these goals, objectives and policies to set a planning framework for the City's Commercial and Industrial land uses in the context of market forces. Though these strategic initiatives are not a part of any formal policy document, they are intended to form the basis for the economic development component of the City's General Planning efforts and could be incorporated into the Economic Development Element of the General Plan. SUMMARY OF ISSUES A combination of factors including the national recession of the early 1990s, the closure of the Norton Air Force Base and increasing regional competitive forces in the commercial/industrial sectors, have continued to challenge the City of San Bernardino during the last decade. The present economic downturn, acknowledged to have begun in early 2001, is also an evolving challenge. Among the above, the closure of Norton Air Force Base had the most adverse effect on the City's economy. San Bernardino instantly lost the multiple levels of economic activity generated by the base during the last 50+ years of its presence. The first and most obvious loss was of course in terms of employment. Since the closure of the base that resulted in the loss of 1O,000:t jobs, the City has been unable to attract significant concentrations of higher quality jobs. The massive loss of jobs also affected the reputation of the City, which is often being identified with concentrated welfare dependent populations. There was a sudden drop in taxable retail sales, resulting in escalating retail vacancies, loss of regional market shares and a decline in fiscal revenues. These issues have also resulted in the City's inability to attract significant higher value residential developments or significant improvements in existing residential sales values. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX-I I I I I I I I I I I I I I I I I I I I On the other hand, San Bernardino has a number of valuable assets which could help the City to successfully reposition itself as an important focus of economic activity in the Inland Empire as well as the Southern California region. One of the City's most important assets is its geographic location relative to the regional road and rail transportation network. The City's prime location within the "freeway ring" consisting of the 1-10, 1-215 and the SR- 30, combined with rail access via the BNSF intermodal yard, offers tremendous potential to promote the "Transcontinental Hub" concept. Reuse opportunities of the Norton Air Force Base facilities and development as the San Bernardino International Airport (SBIA), could become significant economic catalysts if successful. Indeed, there are strong signs that SBIA property reuses have become highly viable in the regional marketplace. ERA does not feel that rail spur lines into the industrial areas at the former Norton base will provide any significant advantage for the success of these developments, given prior experience in Ontario and Corona. We understand that a rail connection to the former Norton base would present significant north-south traffic issues that can only be mitigated with very expensive grade separations. There are also numerous other reuse/development opportunities at a relatively large scale at well-accessed locations. The City has managed to consistently attract and win Federal, State, and County properties/facilities, grants, improvements, and employment location commitments. San Bernardino is not only the seat of the largest county in the nation, but also has been the preferred location for most Inland Empire government, office/administration centers. The San Bernardino Community College District (San Bernardino Valley College) and the California State University at San Bernardino provide a valuable institutional support for higher education and technical educatiOn/training capabilities. The two institutions have combined enrollments of 26,000+ and combined faculty totals of 1,000+. The City is immediately ringed by some of Southern California's finest (and affordable) mountain recreation facilities. In fact, the above regional amenities combined with the City's affordable housing stock could prove to be a significant asset to attract and retain some of the evolving competitive labor force. San Bernardino has been consistent Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX-2 I I I I I I I I I I I I I I I I I I I with its success in positive intergovernmental relationships, and has a reputation of delivering Affirmative Action and Equal Opportunity results. COMMUNITY IMAGE-THEMES TO BUILD ON In this assignment ERA was requested by the City of San Bernardino to establish a thematic approach to improving the general image of the community. It was felt at the time that issues surrounding San Bernardino's market reputation were effecting economic development efforts. As a result of this analysis ERA has developed several broad themes on which the city can build on in projecting its positive vision for the future to broader audiences. Events and Ceremonies The remarkable success the City has enjoyed as host to the annual (every September) Route 66 Festival has steadily attracted positive attention to the City. It is visual (our town), recognizable (our downtown), recent, and captures generations. The consistency of the event, and the welcoming provided by the event operators and the City, has "captured the brand." Now it needs to continue forward. Also, the Route 66 weekend festival opens the public eye to the hosting capacities of the City. Prior to this present time, there have been (and continues to be) other annual events and activities which have "gotten lost" in the overall massive calendar of events and activities in Southern California. One such has been the National Orange Show, which also resonates with the citrus heritage of the entire Inland Empire. An entirely positive circumstance has been the opening of the new San Bernardino Baseball Stadium which is an effective draw and has refocused attention, particularly in its immediate center city market area. Taken together, San Bernardino has, in ERA's opinion, turned the corner on hosting reputation and attractions. Clustering of hosting capacities along Hospitality Lane, visible from the freeway, has been very positive. There are miles to go, but the momentum is solid at this time. The continuing policy of weaving together Economics Research Associates ERA Project No, 13718 City of San Bernardino Page IX-3 I I I I I .1 I I I I I I I I I I I I I history, the crossroads location, and connectivity with outdoor recreational destinations appears to be a solid policy group to pursue. Governments Center of the Inland Empire An enduring strength for the City of San Bernardino has been its collection of governments of every level. A simple tour of the telephone book well describes the amazing collection of agencies, deliberately public as well as quasi-public and of a special district nature. We are a city, a county seat, a state office cluster, and a federal agencies location group. The City, along with its partner - the County - has continually reinvested in public/governmental, health, and other facilities and, indeed, the most modern buildings in the downtown core area are the civic and governmental properties. Sustaining and further collecting governmental offices should continue to be a core economic development and diversification policy. The City and its political leadership and representation have consistently delivered results in this regard and must continue to do so as opportunities arise. Educational Cluster A total of more than 25,000 students attend California State University San Bernardino (CSUSB) and San Bernardino Valley College. The faculties also represent more than 1,000 persons. Additionally, the college and university staffs excluding the faculty are nearly the same number, another 900 persons. This clustering, which is sure to grow as the Inland Empire population grows, is a core strength and will continue to be highly positive for the City itself. As shown at other campuses and the nearby environs, it is entirely likely that a proactive policy which helps to welcome the incubator firms formed by faculties, research staffs, graduate students, and recent graduates will provide both additional jobs and additional wealth. It will also push forward technologies and competencies which are actually in place but have not yet expanded outside of the campuses to a significant degree. Enterprises, mostly very small starter firms, founded on and adjacent to campuses, should be encouraged by the City, its Redevelopment Agency, and in concert with the college and the university. Economics Research Associates ERA Project No, 13718 City of San Bernardino Page IX-4 I I I I I I I I I I I I I I I I I I I Initiation of a College of Engineering at CSUSB will be a highly positive economic development boost. Practical engineering training specialties can substantially enhance investment in the region. Geography/Topography Drives Locational History and Assets San Bernardino, as a city, performs incredibly important functions as a transcontinental hub and gateway. It is also, as importantly and probably growing In importance, a utility hub in terms of energy transmission, water transmission, telephone signal transmission, and additional communications technologies. Next policies for the City must be to transform the gateways and corridors into next generation hub functions (hubs for information and communication, energy, mass media). The City lies astride the transcontinental corridors and also the energy and communications corridors; it needs next to develop these locational strengths as potentials for growing businesses which utilize these locational assets. Although the I-15/Devore Cutoff literally "made" the opportunities for the City of Ontario, those have been 1970s technologies related to intercontinental trucking and warehousing, as well as Ontario airport expansion from a former military field which became a civilian asset in 1946. Those "victories" for Ontario will become long in the tooth and San Bernardino may have the opportunity to seize initiatives with next technologies and somewhat more intensive land uses than the warehousing fields of the California Commerce Center in Ontario. GA TEW A Y TO THE MOllNT AINS AND DESERTS San Bernardino has a unique opportunity to reinvent itself as the provisioning place and the recreational equipment stores cluster location. Millions of Californians and out-of- state visitors pass through the City on the way to the San Bernardino Mountains and also on the way to the deserts. An assessment of potential gaps in retail goods and services for all of these cadres of visitors can help define opportunities for furthering the clustering of these Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX-S I I I I I I I I I I I I I I I I I I I types of services. As a true gateway to the mountains and deserts, the City will also generate an effective additional reputational quality which it well deserves. GOALS, 08 IECTIVES AND POLICIES In view of the above challenges and opportunities, along with the information presented in the preceding chapters, ERA's Commercial and Industrial land use strategy for the City of San Bernardino is put forth in the form of a distinct set of economic development goals, which are complemented by corresponding objectives and policy statements. It should be kept in mind that the purpose of these goals, objectives and policies are focused to set a planning framework for Commercial and Industrial land uses in the City. With the understanding that a long term economic development plan needs to be dynamic, one must ensure that the Goals and Objectives of this framework allows San Bernardino to continuously reposition itself as multiple economic activities evolve. As a result, "Goals" are a declarative statement of City qualities and intentions (related to the City's overall vision) that tend to be both now and in distant focus. "Objectives" by definition are statements towards which efforts can be directed to achieve the "Goals". Most often the end of an "Objective" action can be quantified or measured. "Policies" set the parameters for actual implementation steps to be taken by the City to realize the Objectives and achieve its Goals. Goal] : Encourage economic activity expanding upon the existing and oncoming locational strengths of San Bernardino Objective 1.1: Expand on the concept of a "Transcontinental Hub" Policy 1.1.1: Retain and expand trucking, warehousing and distribution opportunities. Policy 1.1.2: Attract warehousing/distribution centers with "Just in Time"! inventory storage needs. 1 lust.in.time inventory storage is an inventory management technique where inventory carrying costs/responsibilities are moved to tbe supplier, and sellers demand delivery on an 'as required' basis. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX-6 ~ I I I I I I I I I I I I I I I I II II II Policy 1.1.3: Incentivize industrial users with "multi-modal" needs. Objective 1.2: Capitalize on the frontages and properties visibility along the 1-215, 1-10 and SR-30 to attract larger high value employers Policy 1.2.1: Discourage subdivision of larger industrial land parcels with freeway frontage. Policy 1.2.2: Protect some large parcels with frontage along the 1-10 and 1-215 for high value manufacturing/R&D establishments. Policy 1.2.3: Pre-plan the opportunities which are coming for properties which will be adjacent to the I-2101I-215 interchange expected to be completed in 2005-2006. Objective 1.3 Optimize existing redevelopment project areas to identify and prioritize development opportunities. Policy1.3.1: Concentrate on the Southeast Industrial Park in the near term to attract high value employers. Policy 1.3.2: Develop the Northwest and the State College (west of 1-215) redevelopment areas as high value industrial!R&D uses. Policy 1.3.3: and enhance Downtown as a Public/Government sector core. Policy 1.3.4: Seek development opportunities to the west of 1-215 In the vicinity of the Santa Fe rail depot. Objective 1.4: Consistently market industrial vacancies and new opportunity sites in the City in order to maintain occupancies at higher than the regional average Policy 1.4.1: Diversify industrial use mix with a balance of warehousing! distribution, manufacturing and R&D uses. Policy 1.4.2: Attract non-polluting light manufacturing and assembly uses to industrial infill and buffer sites. Examples include high value printing and publishing, light packaging etc. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX- 7 1 I fi I I I I I I I I I I I I I I I I I Policy 1.4.3: ExpandlInvest in high-speed communications infrastructure to attract technology oriented users. San Bernardino could launch an "electronic streets" partnership initiative with communications utilities. Objective 1.5: Retain and expand the Government/Public Office cluster Policy 1.5.1: Maintain strong intergovernmental relations with public sector agencies to be up to date with their needs. Policy 1.5.2: Attract public sector tenants to occupy historic/adaptive reuse projects. Policy 1.5.3: Continue to specialize in regional/district offices focused on very large Federal/State assets and environmental protection (e.g. USFS; BLH; NPS; USFWS; CDF; CALTRANS; etc.). Objective 1.6: Positively define and capitalize on available workforce skill capabilities to attract new employers. Policy 1.6.1: Define and market the regional labor force, within commuting distance from San Bernardino. (30 minutes, or 30 miles radius.) Policy: 1.6.2: Attract large employers with bilingual labor force needs and modest skills. Examples include Call Centers and Billing Centers. Policy 1.6.3: Provide tax incentives and technical assistance to encourage home based businesses/offices. Target the achievement of 15+ percent of actual jobs/incomes being located in residences, similar to the evolving national norm. Policy 1.6.4: Promote bilingual capacities of the resident labor force as an asset. I- Objective 1.7: Partner with the existing educational training programs to residents institutions to effectively deliver job Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX-8 ~ I I I I I I I I I I I I I I I I I I I Policy 1.7.1: Identify training and labor force needs of oncoming employment sectors to successfully forge partnerships with both employers and educational institutions and produce results. Policy 1.7.2: Provide vocational training opportunities to the younger resident labor force in conjunction with the Cornmunity College and the University. Policy 1.7.3: Pursue development of joint incubator projects sponsored/ fostered by CSUSB and SBUC and private entities. Policy 1.7.4: Partner with CSUSB to create an endowment and attract funds towards the formation of an engineering school. Objective 1.8: Expand on historic and the natural (Gateway to the mountains and deserts) assets to attract recreational visitors. Stimulate hotel occupancies to achieve performance consistent with the regional market. Policy 1.8.1: Continue to promote 'identity-building' events. Examples include 'Route 66', 'Citrus' etc. Policy 1.8.2: Promote 'Railways' as a part of history/identity. Market the Santa Fe Depot as a destination with easy connections via the Metrolink. Policy 1.8.3: Build on the 'Gateway to the Mountains' theme to attract overnight visitors. Policy 1.8.5: Seek collection of unique differentiated retailersl"outfitters" and related services providers as a cluster of specialties which can maintain market draw and sustain regional reputation (e.g. "mountain stores"; trucking training; information centers; etc.). Goal 2: Identify and attract new employment types/land uses that complement the existing employment clusters and foster long-term economic growth Objective 2.1: Build on the Government/Public sector cluster to attract and retain dependent employment sectors. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX-9 <:1 I I I I I I I I I I I I I I I I I I I Policy 2.1.1: Identify specific clusters of economic actIvity to target for recruitment (e.g. seek additional public and proprietary educational institutions and technology education). Policy 2.1.2: Explore potential for attracting next generation of public and private land resorts technologies and information center functions. Policy 2.1.3: Attract Federal and private training center functions for SBIA, including aerial forest fire suppression, regional air marshalls training; airlines flight crew training; law enforcement aircraft operations training; etc. Policy 2.1.4: Define the evolution of upcoming services clusters which interact with governments, and their continuing likelihood of locating adjacent to governments in the San Bernardino Central City (e.g. legal offices; accounting/auditing firms; design and engineering firms; finance-insurance- real estate services firms; etc.). Develop a program to retain and attract such firms and employment. Policy 2.1.5: Market hosting capacities for business/public events. (Develop hotel/motor inn capacities - thematically different from Ontario cluster.) Objective 2.2: Build on the Health Care clusters to attract and retain related employment sectors. Policy 2.2.1: Work with area educational institutions to expand medical technology education and training programs. Identify programs and facilities funding sources to commit to such training. Policy 2.2.2: Explore medical specialties (biomed; biotech; medical devices; etc.) as part of any Cal State research park proposal. This venture should also include needs being identified adjacent to the Lorna Linda Hospital complex. Policy 2.2.3: Consider medical office opportunities as compatible land uses adjacent to existing heath and educational institutions Policy 2.2.4: Examine opportunities for concentrating regional forensics laboratories. Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX-IO I I I I I I I I I I I I I I I I I I I Objective 2.3: Build on the Transportation/Communication clusters to attract and retain dependent employment sectors. Policy 2.3.1: Trucking and warehousing opportunities should be allowed by defining potentially compatible land uses adjacent to prime industrial sites, especially those with freeway frontages. Policy 2.3.2: Advocate speed up of funding for completion of the Foothill Freeway extension to connection with the 215 prior to 2005-2006. Policy 2.3.3: Fund key surface transportation improvements including new interchanges along 1-215 in the northwest. Policy 2.3.4: Improve access from the 1-10 to the Airport Industrial complex along Waterman, Tippecanoe and Mill Goal 3: Prevent retail sales leakage and recapture regional retail expenditure through key sectors Objective 3.1: Capture an increasing percentage of the day-to-day shopping needs of the resident population Policy 3.1.1: Allow for mixed-use retail residential projects where appropriate, with a focus on providing community oriented retail on site. Explore co-development (with lands, advocacy, or marketing efforts) with Cal State, perhaps using the UC Riverside model which resulted in the University Village Center. Objective 3.2: Increase regional retail capture levels commensurate with market area disposable income Policy 3.2.1: Look favorably upon, and incentivize developers and tenants which will draw retail sales from the broader region (without the liability of state imposed sales tax sharing). Policy 3.2.2: Place major retail 'name' stores along visible transportation routes to expand retail sales capture from the larger market area. Objective 3.3: Identify and expand on recreational/retail opportunities Economics Research Associates ERA Project No. 13718 City of San Bernardino Page 1X-1I I I I I I I I I I I I I I I I I I I I Policy 3.3.1: Incorporate the Vision 2020: Lakes and Streams to complement the City's existing strengths. Goal 4: Prepare for oncoming economic activities through adequate infrastructure improvements, sensible planning and a business friendly environment Objective 4.1: Identify and prioritize infrastructure investments Policy 4.1.1: Undertake strategic capital improvements planning and prioritize investments. This will allow development to anticipate the location and timing of infrastructure improvements. Policy 4.1.2: Identify and mitigate flood and groundwater up-swell risks to maximize development opportunities. Goal 5: Clearly signal the multiple opportunity locations in San Bernardino for retail, office, and industrial development Objective 5.1: Strongly identify the corridors and nodes as development (not "redevelopment") locations. Policy 5.1.1: Designate "Prime Properties Clusters and Corridors" (e.g. SBIA, Southeast Industrial Park, Hospitality Lane, "College Park," "Downtown," "Foothill/Northwest," etc.). Policy 5.1.2: Define the property and entitlement opportunities for each Prime Property Cluster and Corridor via Internet web page marketing (with private property owner/developer partners). Economics Research Associates ERA Project No. 13718 City of San Bernardino Page IX.12 po 1:1 .. "" I.. r .. .. .. ... ~ c ~ .. ,. .. ... .. r '" ~ ~ .. r .. ... .. ... .. ... III ... .. .. .. ... III