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El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Contents Purpose Methodology Findings ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Contents Purpose Methodology Findings ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Purpose of Study • Revitalization of San Pablo Corridor is a top priority • Prior to soliciting development partners, complete analyses of: – market demand – parking demand • In order to: – identify appropriate parking management strategies and policies – formulate realistic goals for development, based on market conditions and development. ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Key Findings • Current real estate market near feasible but below prevailing profit expectations • Some sites along San Pablo are on the brink of market-driven development – Projects experience a positive return on cost, but not enough to incentivize development • Sites with highest development potential are around BART stations – Can charge higher rents – Developers more likely to build at lower parking ratios • Creativity on the part of developers and the City of El Cerrito can nudge some sites over the brink, making projects feasible ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Key Findings Avenues of Creative Thinking – Establish entitlement certainty • Reduces risk – Demonstrate potential feasibility to land owners – Land prices (on Agency owned parcels) – Consider non-retail uses on ground floor • Allows developers greater flexibility – Specific plan intended to transition the Corridor from “Suburban” to “Urban” – Improve urban design along Corridor • Increases desirability of area and ability to generate rents – Implement parking strategies • Reduces the amount of parking developers need / choose to build ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Contents Purpose Methodology Findings ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested 1 2 5 4 3 6 7 8 9 10 Del Norte Node Plaza North Node Plaza Node Prototypes Tested 4 nodes 10 sites 22 scenarios Midtown Node ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Heights 45 feet 65 feet 80 feet ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Program – Multifamily residential – Office –Class A Build-to-Suit –Professional offices – Retail –Big box –Neighborhood ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Parking Ratios Prototypes Tested Del Norte Node 1.04 per unit 1.81-2.70 per 1,000 Midtown Node 1.40 per unit 3.3 per 1,000 Plaza North Node 1.20 per unit 3.3 per 1,000 Plaza Node 1.04 per unit 1.81 per 1,000 Prototypes Tested Varying Parking Ratios 1 2 5 4 3 6 7 8 9 10 ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Densities As Other Assumptions Change Prototypes Tested – Less ground floor retail –Less parking required to meet demand –More parking demand for commercial space compared to residential space –More buildable area for residential space –On the ground floor –Buildable area occupies more of site – Heights at 65’ –Past 65’, apply setback Higher residential densities Heights at 65’ Lower parking demand Less ground floor retail ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Flexible Assumptions Varying Costs – Base residential construction cost: $200 per square foot – More than 65’ –Construction cost increases 25% – Sites with less than 60 units –Construction cost increases 10% – Sites with more than 500 units –Construction cost decreases 7% – Structured vs. unstructured parking –Surface parking: $4,000 per space –Tuck under parking: $15,000 per space –Podium parking: $22,500 per space ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Parking Ratios Prototypes Tested Del Norte Node 7% Bart-adjacent Del Norte neighborhood $2.27/sq. ft Midtown Node No premium $2.16/sq. ft Plaza North Node No premium $2.16/sq ft Plaza Node 7% Bart-adjacent 3% Plaza neighborhood $2.37/sq. ft Flexible Assumptions Varying Residential Revenues 1 2 5 4 3 6 7 8 9 10 ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Stable Assumptions • Costs – Land costs ($40/ft) – Site prep costs ($20/ft) – Stabilized vacancies Residential –10% Commercial – Residential Construction Costs ($180-$250/ft) • Commercial revenues – $1.70 sq. ft / month / NNN Convenience Retail – $1.30 sq. ft / month / NNN Big Box Retail – $3.25 sq. ft. / month / Full service Class A Office – $2.25 sq. ft. / month / Full service Professional Office ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Stable Assumptions • Residential Unit Size – Studio: 450 sq. ft. – 1 bedroom: 700 sq. ft. – 2 bedroom: 900 sq. ft. • Residential Unit Mix – Studio: 15% – 1 bedroom: 45% – 2 bedroom: 40% • Residential Base Rents – Studio: $1,200 – 1 bedroom: $1,525 – 2 bedroom: $1,750 – Rent per square foot: $2.16 4th and U - Berkeley Avenue 64 - Emeryville ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Static Pro-Forma Analysis • Feasibility analysis performed using static pro-formas • A static pro-forma analysis estimates future cash flows based on stabilized point in time • A snapshot of the development potential ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Contents Purpose Methodology Assumptions Findings ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Feasible Projects are Possible • The first successful development project will: – Demonstrate the market for TOD in El Cerrito – Minimize the perception of risk – Potentially increase future project feasibility and reduce future financing costs • No developer wants to be a test case • Any of the sites can be developed if the developer has opportunities to be creative. What will take a project over the line? – Reduce land or construction costs – Reduce interior circulation – Remove ground floor retail requirement – Utilize lift parking ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Return on Cost For each site, the most feasible alternative 2.2% 2.2% -5.5% 6.3% 2.6% -3.8% -14.4% -3.6% 6.0% 6.8% -20% -15% -10% 0% 5% 10% 1 2 3 4 5 6 7 8 9 10 Del Norte Node Mid Plaza North Plaza ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Parking Ratios Prototypes Tested Del Norte Node Midtown Node Plaza North Node Plaza Node Flexible Assumptions Varying Residential Revenues 2.2% -3.8% -14.4% -3.6% 6.0% 6.8% 2.2%* -5.5% 6.3% 2.6% * No replacement parking assumed ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Return on Cost For each site, the most feasible alternative 2.2% 2.2% -5.5% 6.3% 2.6% -3.8% -14.4% -3.6% 6.0% 6.8% -20% -15% -10% 0% 5% 10% 1 2 3 4 5 6 7 8 9 10 Del Norte Node Mid Plaza North Plaza 45’ 65’ 65’ 65’ 65’ 45’ 65’ 65’ 65’ 65’ ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Return on Cost For each site, the most feasible alternative 2.2% 2.2% -5.5% 6.3% 2.6% -3.8% -14.4% -3.6% 6.0% 6.8% -20% -15% -10% 0% 5% 10% 1 2 3 4 5 6 7 8 9 10 Del Norte Node Mid Plaza North Plaza 45’ 65’ 65’ 65’ 65’ 45’ 65’ 65’ 65’ 65’ All multifamily residential, 0-30% ground floor retail ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Del Norte Site Height Retail Units Units Per Acre Parking Spaces Res. Parking Ratio Comm. Parking Ratio ROC 1 45’ 0 137 87 143 1.04/unit 1.8/1,000 2.2% 2 65’ 16,000 325 71 368 1.04/unit 1.8/1,000 2.2% 3 65’ 6,000 38 48 50 1.04/unit 1.8/1,000 -5.5% 4 65’ 42,000 853 71 1,005 1.04/unit 2.7/1,000 6.3% 5 65’ 19,100 384 75 436 1.04/unit 1.8/1,000 2.6% 1 2 5 4 3 El Cerrito-owned property Bart parking requirement Small constrained site Potential regulatory issues Potential regulatory issues ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Del Norte Site Height Retail Units Units Per Acre Parking Spaces Res. Parking Ratio Comm. Parking Ratio ROC 1 45’ 0 137 87 143 1.04/unit 1.8/1,000 2.2% 2 65’ 16,000 325 71 368 1.04/unit 1.8/1,000 2.2% 3 65’ 6,000 38 48 50 1.04/unit 1.8/1,000 -5.5% 4 65’ 42,000 853 71 1,005 1.04/unit 2.7/1,000 6.3% 5 65’ 19,100 384 75 436 1.04/unit 1.8/1,000 2.6% 1 2 5 4 3 2 4 4 4 5 5 5 ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Midtown Site Height Retail Units Units Per Acre Parking Spaces Res. Parking Comm. Parking ROC 6 45’ 20,000 708 59 1,057 1.40/unit 3.3/1,000 -3.8% 6 6 6 6 6 6 ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Plaza North Site Height Retail Units Units Per Acre Parking Spaces Res. Parking Comm. Parking ROC 7 65’ 1,800 36 52 49 1.20/unit 3.3/1,000 -14.4% 8 65’ 0 105 71 126 1.20/unit 3.3/1,000 -3.6% 7 8 7 8 ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Plaza Site Height Retail Units Units Per Acre Parking Spaces Res. Parking Ratio Comm. Parking Ratio ROC 9 65’ 3,000 59 71 67 1.04/unit 1.8/1,000 6.0% 10 65’ 9,000 195 71 222 1.04/unit 1.8/1,000 6.8% 10 9 10 10 ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Return on Cost at Baseline Developable Sites Six sites with positive ROC 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 0% 2% 4% 6% 8% 10% 1 2 4 5 9 10 Del Norte Node Mid Plaza North Plaza 45’ 45’ 65’ 65’ 65’ 45’ 65’ 65’ 65’ 65’ All multifamily residential, 0-30% ground floor retail ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Parking Ratios Prototypes Tested Del Norte Node Plaza Node Development potential highest around BART stations ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Parking Ratios Prototypes Tested Del Norte Node Plaza Node Development potential highest around BART stations • Where there are potential economies of scale (outlined in blue) ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Parking Ratios Prototypes Tested Del Norte Node Plaza Node Development potential highest around BART stations • Where there are potential economies of scale (outlined in blue) • At sites that are rectilinear (shape is square) ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested Varying Parking Ratios Prototypes Tested X Del Norte Node Plaza Node Development potential highest around BART stations • Where there are potential economies of scale (outlined in blue) • At sites that are rectilinear (shape is square) • Where there aren’t excessive parking replacement policies (X’d out) • Where the City of El Cerrito can directly impact land costs (color is green) ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Return on Cost at Baseline Developable Sites 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 0% 2% 4% 6% 8% 10% 12% 14% 16% 1 2 4 5 9 10 Del Norte Node Plaza ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Return on Cost at Developable Sites 10% Market-Driven Parking Demand Reduction 10% fewer parking spaces are constructed Developers recognize change, build less parking Customers reduce driving Residents reduce car ownership ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 4.0% 4.0% 8.5% 4.5% 8.1% 8.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 1 2 4 5 9 10 Baseline Return on Cost + 10% Parking Demand Reduction Return on Cost at Developable Sites 10% Market-Driven Parking Demand Reduction Del Norte Node Plaza ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Site Height Retail Units Density ROC 1 45’ 0 137 87 2.2% 10% less parking demand 0 154 98 4.0% 2 65’ 16,000 325 71 2.2% 10% less parking demand 18,000 361 79 4.0% 4 65’ 42,000 853 71 6.3% 10% less parking demand 47,200 950 76 8.5% 5 65’ 19,100 384 75 2.6% 10% less parking demand 21,000 428 79 4.5% 9 65’ 3,000 59 71 6.0% 10% less parking demand 3,200 65 78 8.1% 10 65’ 9,000 195 71 6.8% 10% less parking demand 11,000 217 79 8.8% Return on Cost at Developable Sites 10% Market-Driven Parking Demand Reduction ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 4.0% 4.0% 8.5% 4.5% 8.1% 8.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 1 2 4 5 9 10 Baseline Return on Cost + 10% Parking Demand Reduction Return on Cost at Developable Sites 10% Market-Driven Parking Demand Reduction Del Norte Node Plaza ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 4.0% 4.0% 8.5% 4.5% 8.1% 8.8% 9.2% 9.0% 13.8% 9.4% 13.2% 14.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 1 2 4 5 9 10 Baseline Return on Cost +10% Parking Demand Reduction Rent Increase Return on Cost at Developable Sites 10% Market-Driven Parking Demand Reduction + 5% Rent Increase Del Norte Node Plaza ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Site Height Retail Units Density ROC 1 45’ 0 137 87 2.2% 10% less parking demand 0 154 98 4.0% 5% increase in rents 9.2% 2 65’ 16,000 325 71 2.2% 10% less parking demand 18,000 361 79 4.0% 5% increase in rents 9.0% 4 65’ 42,000 853 71 6.3% 10% less parking demand 47,200 950 76 8.5% 5% increase in rents 13.8% 5 65’ 19,100 384 75 2.6% 10% less parking demand 21,000 428 79 4.5% 5% increase in rents 9.4% Return on Cost at Developable Sites 10% Market-Driven Parking Demand Reduction + 5% Rent Increase ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Site Height Retail Units Density ROC 9 65’ 3,000 59 71 6.0% 10% less parking demand 3,200 65 78 8.1% 5% increase in rents 13.2% 10 65’ 9,000 195 71 6.8% 10% less parking demand 11,000 217 79 8.8% 5% increase in rents 14.0% Return on Cost at Developable Sites 10% Market-Driven Parking Demand Reduction + 5% Rent Increase ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Conclusions • Development standards should allow flexible and creative development solutions – A height maximum of 70’ – Typical 6 story building is 65’ – Allow for interesting roof articulation – Allow for higher top floor ceilings – Leave open possibilities in the long-term – Low parking ratio minimums – Allow for greater buildable area and densities – Allow new development to respond to changes in parking demand by residents and customers – Let design and market factors drive project densities – Setbacks, parking ratios, and ground floor uses result in project densities – These factors have a greater impact on residents and community than densities ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Thank you! Q + A / Discussion ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 7.3% 7.0% 11.5% 7.5% 11.2% 11.9% 9.2% 9.0% 13.8% 9.4% 13.2% 14.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 1 2 4 5 9 10 Baseline Return on Cost Rent Increase Rent Increase + 10% Parking Demand Reduction Del Norte Node Plaza Return on Cost at Developable Sites + 5% Rent Increase ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 4.5% 4.9% 9.5% 5.3% 8.9% 9.7% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 1 2 4 5 9 10 Baseline Return on Cost 25% Reduction in Land Price Del Norte Node Plaza Return on Cost at Developable Sites 25% Reduction in Land Price ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting 2.2% 2.2% 6.3% 2.6% 6.0% 6.8% 2.2% 1.6% 5.9% 2.1% 5.5% 6.3% 2.2% 2.8% 6.8% 3.2% 6.7% 7.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 1 2 4 5 9 10 Baseline Return on Cost +10% Reduction +10% Increase Del Norte Node Plaza Return on Cost at Developable Sites Impact of Change in Retail Rents ---PAGE BREAK--- El Cerrito Development Feasibility Analysis City of El Cerrito City Council Meeting Prototypes Tested 1 2 5 4 3 6 7 8 9 10 Del Norte Node Plaza North Node Plaza Node Midtown Node