Economic Development Committee

TOWN OF MOUNT PLEASANT, SOUTH CAROLINA ECONOMIC DEVELOPMENT COMMITTEE Monday, July 31, 2017 (August Committee Meeting) Municipal Complex, Committee Meeting Room, 3rd Floor 100 Ann Edwards Lane Mount Pleasant, SC 29464 MINUTES Members Present: Mark Smith, Chairman, and John Burn Excused Absence: Will Haynie Staff Present: Eric DeMoura, Town Administrator; Amy Livingston, Business and Tourism Manager Also Present: Aaron Arnett, Arnett Muldrow & Associates Mr. Smith called the meeting to order at 11:00 a.m. 1. Approval of Minutes from the June 29, 2017 meeting Mr. Burn moved for approval; seconded by Mr. Smith. All present voted in favor. 2. Public Comments [None] 3. Presentation on Retail Market Analysis and Leakage Study by Arnett Muldrow – Ms. Livingston stated that she was pleased to introduce Mr. Aaron Arnett from Arnett Muldrow & Associates. She stated that Arnett Muldrow & Associates is a leading firm that conducts retail studies across the nation. She stated that it is extremely important to have appropriate data when reviewing plans as a Town, and it is important to understand the current climate. She stated that this is a baseline study for the Town in order to understand the retail market, where we may be leaking, where we may  Economic Development Committee July 31, 2017 Page 2 of 23 be leading the way, and will allow the Town to gather data of what the Town should be doing. Mr. Arnett said that this is the perfect time to do this study and provide the data to help form the comprehensive planning process that the Town is about to begin. He said it will also help with the ongoing Economic Development Strategy, the Port study and to shape economic development policy moving forward. He added that the purpose of this study is to provide the baseline data for the Town. Mr. Arnett stated that this is a Retail Market Analysis, and they wanted to focus in on the Town’s localized market. He stated that this is where they look at opportunities to grow retail, and review some of the challenges and things that the Town may want to target moving forward. He stated that the Town exists in a much larger geography. He stated that in this study, they looked at a number of different geographies to see what the opportunities are with the larger region, whether it be the MSA, which is the Berkeley-Charleston-Dorchester tri-county area, or the competitive markets within the urban metro. He said they had to ensure that they did not just look at the Town of Mount Pleasant, but the whole area. He stated that Charleston Metro is a $13.6 billion dollar retail market which is the largest retail market in the State totaling one fifth of all retail  Economic Development Committee July 31, 2017 Page 3 of 23 sales in the entire State. He stated that all the numbers shown in the study are from the previous twelve months (2016). He state that if you look within the $13.6 billion dollar market, it will show the biggest retail magnets. He stated that West Ashley is the area that is potentially growing the most at this point. He stated that it is interesting when we look at the size of our markets versus the gravitational pull. He stated that this is referred to as the retail pull factor which compares at the per capita retail sales in that area to the State average. He stated that anything above 1 means you are doing well and are pulling people in. He stated that what is interesting is when you see that North Charleston is a $3.2 billion and the Peninsula is a $1.19 billion market, but when you look at the gravitational pull, you see that the Peninsula has the strongest pull overall. He stated that it makes sense because many of the destination businesses, such as tourism, are located downtown. He stated that Mount Pleasant is at 1.08 and has a healthy market.  Economic Development Committee July 31, 2017 Page 4 of 23 He stated that the main study that they do in this analysis is called a Retail Leakage Study, which is a supply and demand analysis. He stated that it basically looks at, within a geography or trade area, what consumers who live in that area are purchasing on an annual basis as compared to what stores within that area sell on an annual basis.  Economic Development Committee July 31, 2017 Page 5 of 23 He stated that if consumers who live in a particular market geography are purchasing a lot more than the stores in that area are selling, it means that dollars are leaking elsewhere, which translates directly to demand. He stated that this means that this area is not meeting the current market demands. He stated that this is the case here in Mount Pleasant; in the past twelve months, stores sold $1.36 billion dollars yet the residents of Mount Pleasant spent $1.7 billion. Therefore, the Town leaked $339 million dollars in 2016. He stated that you can look at this from two different sides in that we may not be meeting the needs of the consumer market here; however, by the same token, this is demand. He stated that this is true demand based off of true consumer buying power and the makeup of the Town’s market. He stated that when you look in the larger region, a 15-minute drive time, the area starts to gain. For example, while the localized market of Mount Pleasant shows a $339 million dollar unmet demand, and the immediate region, which includes downtown and most of the peninsula, gained $559 million overall. Therefore, some things that show demand in Mount Pleasant may be absorbed within a quick drive from where we are, and there are others that still show opportunity. He stated that this is when we need to look at the Town’s opportunity, demand within the context of the larger region.  Economic Development Committee July 31, 2017 Page 6 of 23 Mr. Arnett stated that these are the leakage numbers which are calculated by every retail category. He stated that it is 65 or 70 different categories that they determine what that demand happens to be.  Economic Development Committee July 31, 2017 Page 7 of 23 He stated that these are the categories that show the most demand here in the Town of Mount Pleasant. He stated that the largest demand is automobile dealers of $213 million. He asked if this is what the Town would like to focus their recruitment efforts on or is it really a true indicator of what the Town’s market opportunity is. He stated that he does not believe it is, as there is an automobile dealership cluster that has developed and grown in West Ashley. He stated that when you look at the numbers over in the West Ashley area, they are bringing in dollars, because that it where everything is located in regards to automobile sales, by and large. He stated that if new dealerships wanted to come in this area, they will likely select West Ashley, not Mount Pleasant. He said others that are more relevant to the Town are building materials and supplies, which are several types of businesses, but includes home improvement centers. He said that the Town leaked last year about a store and a half worth of home improvement centers, and now there is a Lowe’s coming online; therefore, this data confirms this. He said that when the new businesses open, the numbers will be backed out of the demand numbers, but again, this indicates that the market is responding to the demand. He stated that this is also true with general merchandising, which are the Target’s, Walmart’s, but also the Costco’s. He said that this again shows that there is demand that the market is responding to. He stated that most of the others are more specialty type retail, which are very important, particularly when you are attempting to create a community where people want to be. He stated that these are what falls into quality of life categories that people want and expect when moving into an area. He stated that there are various levels of demand in all of those categories. He stated that leakage is not the only way to determine opportunities. Mr. Arnett mentioned that another is a supply side analysis called retail shares, and it looks at the shares of the Town’s sales in the community as a percentage of the larger trade area, in this case, the entire BCD metro area. He stated that it is a good indicator relative to performance by individual categories, but it may also show opportunities. However, the Town may be doing something extremely well and want to cultivate and  Economic Development Committee July 31, 2017 Page 8 of 23 grow that cluster, even if there isn’t localized demand, but there may be regional demand. He stated that some of the areas the Town is doing very well in, in terms of the benchmark share, is grocery, food and beverage stores. He stated that this has been discussed at length in the past. He stated that the Town had approximately 18% of the entire region’s grocery store sales, which is double what the benchmark share of 10% is.  Economic Development Committee July 31, 2017 Page 9 of 23 He stated that this indicates that the Town is doing very well with grocery store sales. He stated that this data does not necessarily describe the type of grocery sales that the Town has. He stated that it may be a little different than the rest of the larger market, which may be why the Town is pulling in more dollars. He stated that the Town has higher-end grocery stores that are not found everywhere else, such as Whole Foods, Trader Joe’s and Harris Teeter. He said that health and personal care includes drug stores and all other wellness types of businesses and personal care categories. He said that the Town had a 16% share of the entire region and likely attributes to yoga, spinning studios, fitness centers, barre studios, which is a cluster that has grown in the Town and may be something to promote or cultivate. He believes that one of the reasons this has happened is because the Town has a great quality of life and health living, but there is also an affluent market in the Town compared to the larger region. He stated that restaurants are also doing very well in the Town with 17% of the entire market of restaurant sales. He said this is an indication that the restaurants in the Town are doing really well and something the Town may want to continue to grow and cultivate.  Economic Development Committee July 31, 2017 Page 10 of 23 He stated that there is significant demand and while the entire market is gaining overall, there are a number of categories that show real demand that may help formulate some of the economic development strategies moving forward, specifically for retail. He added that future retail growth in the Town is likely going to be tied to localized demand created by new residential growth. He stated that the Town is growing and is projected to continue to grow at a faster rate than the rest of the entire region. He stated that Shem Creek is a cluster and Mount Pleasant Towne Centre is also a major regional retail center that is pulling people from all over and has been for two decades. He stated that the continued growth in the tourism market is going to drive some of the retail opportunity. He stated that in regard to growth and enhancement of competitive retail centers, there is a new masterplan in West Ashley for the Citadel Mall/Sam Rittenberg corridor. This will be a new and fresh place for people to go and invest. He said this will be a competitor for the Town in the future. He said one of the big items is the availability of space in the Town. He added that the Town only has approximately 700 acres of available vacant land that is zoned for commercial.  Economic Development Committee July 31, 2017 Page 11 of 23 He stated that the last series of slides show the current market trends, which was a high-level look at what the market opportunity happens to be, what this means within our current market. He stated that they looked at regional real estate numbers, and Mount Pleasant has a very healthy and competitive market within the region. He said that Mount Pleasant’s submarket is receiving the highest rents within the entire metro, with the exception of King Street and downtown Charleston. He stated some of the newer developments are getting just over $40 per square foot which is quite a bit for retail. He stated that the Town has low vacancy which is a good indicator. He said Mount Pleasant proper has an approximate 5% vacancy rate. He said that the Town has a little higher-end retail product coming in, and many of the real estate professionals said that many of the new products that come into this region are coming into the Town of Mount Pleasant as the first time they are in this market. Mr. Arnett stated that the Town has approximately five to six million square feet of retail space that is developed currently. He added that in terms of significant space, there are only three anchor spaces that are vacant here, which are the former Southern Season on Coleman, old Bi- Lo on Ben Sawyer and the Ross Dress for Less in Belle Hall.  Economic Development Committee July 31, 2017 Page 12 of 23 He mentioned that they did an inventory of the entire area, which is included in the report. He said there are high-end stores such as Whole Foods, Nordstrom, regional traffic generators such as Town Centre, Trader Joe’s and are beginning to have mixed-use development, which is something very important. He said as we move forward in the long term, the Town is going to have to look for opportunities for in-fill development, whether commercial or other types of uses. He stated that for market trends, they looked first at commercial and residential building permits to see what the market has done over the  Economic Development Committee July 31, 2017 Page 13 of 23 last decade since the recession. He stated that there are several interesting points. He said that one is commercial investment, which are renovations, repair and new construction for commercial development. He mentioned that during the recession, commercial development took a significant hit. He said that we are right at the pre-recession levels at this time in terms of total investment. He said with residential, this is not the case at all. He said there was a small dip in terms of investment which immediately recovered within two years, now investment is much past the pre- recession levels and upwards of over $500 million dollars that is being invested in residential building permits. He said this is important because retail demand is going to be driven by the Town’s population growth, which has continued to grow.  Economic Development Committee July 31, 2017 Page 14 of 23 He said that business licensing is based on annual retail sales or gross receipts, and 50% came in three categories: food and beverage, restaurants and general merchandising. He stated that when we look at business license trends, or sales trends, over the last decade (below), grocery was not affected by the recession at all, and in 2015, there were approximately $341 million of sales that year in that category. Between 2007 and 2015, this sector had 51% growth and it was approximately $257 million in 2015.  Economic Development Committee July 31, 2017 Page 15 of 23 He said that Health and Personal Care has seen a 52% growth over the same period. He stated that several new lodging businesses have come online, and this sector has seen a 68% growth. He added that sporting goods grew by 114% and was the highest amount of growth in sales over this time. He stated that not only does the Town have a demand, but a growing healthy market. Mr. Arnett asked how we qualify all this data with a better understanding of what the Town has here in the community. He stated that they did engage a number of stakeholders in this process. He said that they spoke with Town staff, real estate professionals, developers and property managers. He said that this is their opinions as expressed in these discussions. He stated that the future opportunity is going to be driven by the people that live in Mount Pleasant, and it is even more so here than in other places because of the natural borders the Town has (i.e. national forest, rivers, etc.) He stated that long-term, this is going to drive the market  Economic Development Committee July 31, 2017 Page 16 of 23 because as this area grows, the space available for development is going to be taken up. He asked when we get to that point, where do we go. He said that much of that demand now and in the future, based on the developers, is going to be north of Highway 41. He said that this is where the new retail demand is going to happen, with the future Carolina Park development area and other large tracks of land that are undeveloped, this could be the receiving area for new retail, but is also following the residential growth that is heading that way. He stated that some were of the opinion that when Nexton is fully developed from a commercial standpoint, it may affect the Town and others felt it would not affect the Town at all. He said that another discussion was the Mount Pleasant Market compared to the downtown Charleston market; they are starting to notice some of the businesses leaving King Street because of the high rent and lack of parking and moving to Mount Pleasant. He said that some of the challenges are permitting, and many are excited about the changes that have taken place and looking forward to the positive impact of the 3rd party permitting. He stated that most of the stakeholders felt the changes in impact fees were part of the cost of doing business in the Town, but also looked ahead and worried that they may create a challenge for the smaller and independent businesses who may be affected by the variation in impact fees. He added that another challenge is retail space versus office space due to the cost of space. He said that this may result in not having as much office space, as retail commands higher rent. He said this all goes back to the constraints of space. He said another thing of interest to the stakeholders was when looking at the numbers, data and demand; what are the other things that exist that affect our market that we need to be thinking about now, in the comprehensive planning process as we are developing these economic development policies moving forward. He said service-level workforce, housing for service employees, and transportation. He said that he knows these are things the Town has discussed and is working on, but the stakeholders saw this as something that the Town needs to think about moving forward. He said the things that the Town is doing collectively to improve the quality of life, whether encouraging pedestrian access,  Economic Development Committee July 31, 2017 Page 17 of 23 encouraging mixed uses, etc., this is a good thing and helps the Town have a stronger competitive market. He stated that the discussions with the stakeholders were very productive conversations, and they were very thankful to the Town for inviting them to come and provide their input on this. He said that lastly are the general conclusions. He stated that the purpose of this presentation is to provide data for the various planning stages that the Town is doing moving forward. However, there are a number of things the Town may be contemplating as it begins the comprehensive plan and the economic development strategies. He suggested using the data and findings to inform those planning processes. He also suggested working with the private sector to figure out the best uses for the three big anchors that are vacant and how best to work with the private sector to ensure the right type of development is put in those three anchors. He said for the long-term, the Town needs to be thinking about development policies for infill. He mentioned earlier that the Town is constrained by rivers and bridges, and in the long-term,  Economic Development Committee July 31, 2017 Page 18 of 23 will have less and less space; however, the Town also has wonderful new and redeveloped retail centers. He said there are some that are aged and tired, and the Town should contemplate some policies for those moving forward. He said that some of the things the Town may also wish to think about are the great incentives that have been put in place that have helped bring in private investment and perhaps there are things that can be done on the retail side and small business side to help with that as well. He added that there are a number of different ways communities have done this and various ways the Town has accomplished this, whether it be rebates, permitting and impact fees to mixed-use bonuses. He said that the Town is doing this and doing it well, but should think about this from the small business standpoint. He stated that the Town does a great job presenting the Mount Pleasant brand and said that the new Town website is beautiful. He said that people know the Town when they see the marketing and identity in this region; however, the Town may want to think about doing an economic development specific brand, economic development market position and then expand those marketing tools to focus on economic development. He said for example, the Town has the recent Port District Study, which has great vision, but how can the Town communicate this. He suggested building some tools to help communicate that vision, either to the decision-makers or in the future for future investors. He said when looking at workforce and transportation, the real estate professionals are excited to be included and suggested annual roundtables with them. He said that it was interesting to see the sharing of information between the private sector and the Town throughout this process, and it was very positive. He stated that we now have a baseline set of data and can use it to inform the Town’s policies, but the Town can also use it to track new things. He stated that it is not a direct one-to-one cause and effect, but it is a data point that may be used for impact fees or any policies that Town may be engaged in. Mr. Smith thanked Mr. Arnett and stated that this information is very useful to help the Town navigate the challenging times of high growth. He stated that the leakage discussed earlier was most sobering, and it is  Economic Development Committee July 31, 2017 Page 19 of 23 no surprise that Home Depot did do their homework and recognized opportunity here in the Town as they are submitting plans having seen this sector at the top of the leakage needs for the Town. He said it should send a strong message to the Town’s elected officials of this need. He said in reference to the trends, the building permits speaking on only the commercial side, the decline over the last year in new construction, we are down to the 2009, 2010, 2011 levels, but are seeing an uptake in the redevelopment, renovations and repairs. He said with the commercial building permits down, what is the direct correlation to that of the downward trend that the Town is seeing in new business licenses. He asked if there was anything that the Town needed to pay particular attention to or do they follow each other. Mr. Arnett stated that typically they will follow each other; however, he said he could not answer if there is anything specifically that needs attention, other than the data. He said there may be a dip this year and thinks that this particular number may not have included the last month of the fiscal year. He said to review the general trend overall. He said that the Town has so many external items other than what the market demands that effect this such as quality of life, workforce, and the simple availability of space. He said there is currently space and even some vacancies, although limited; however, moving forward, the availability of space is going to affect the market overall and potentially the number of new business licenses. Mr. Burn thanked Mr. Arnett and staff for providing this presentation. He said that this is one of the most interesting studies he has seen. He said the retail spending, he is assuming does not include insurance, medical, etc. Mr. Arnett stated that it does not. He said that all of the retail numbers, when reviewing leakage, was retail and did not include things such as banking, insurance, or general offices on an annual basis. He said that the commercial building permits, did include this, as it is a trend of commercial investment and all investment, not just retail.  Economic Development Committee July 31, 2017 Page 20 of 23 Mr. Burn stated that there are 700 acres remaining that is zoned commercial and asked Mr. Arnett if he believes the Town needs more moving forward or with what the Town has now residentially, is sufficient. Mr. Arnett said that he believes this is a great discussion for the comprehensive planning process moving forward. He said that the Town needs to be cognizant of the available space the Town does have. He said the private sector feels that the Town needs to ensure that space is reserved moving forward, for retail and office development. He said this is very important because the more people the Town has and continues to have, will bring demands for new schools and other things, but they will also be driving in their vehicles going places and will need specific types of businesses for them to go about their day-to-day. He said that it is a very important thing to think of moving forward that if we solely have all the development in residential, then the Town may be contributing to some challenges moving forward with employment losses to those having to leave the town, causing traffic, in order to find employment or things they are not able to find within the Town of Mount Pleasant. He said this is something we all need to think about in all of our economic development policies. Mr. Burn stated that Mr. Arnett mentioned Nexton; however, there was no mention of Cainhoy Plantation, which is a development on Cainhoy Road and asked if this was considered, because this is a concern to him. Mr. Arnett stated that this was not really discussed, but he would be happy to look into and add into the overall findings. He said another thing that was discussed, but not mentioned in this presentation, was the development near the Citadel. He said it is much smaller than Nexton’s. Mr. DeMoura stated that this information will be shared with the planning forum that is working on the comprehensive plan. Thomasena Stokes-Marshall, 481 Lilly and Rebecca Lane, said that there was discussion regarding the need for infill. She said that there were certain areas that were not identified in the report. She said in reference  Economic Development Committee July 31, 2017 Page 21 of 23 to workforce housing, there was no mention of affordable housing. She said that there is a need for affordable housing here in the Town, and as we look at putting together the economic development plan for the Town, consideration needs to be given to those and did not see where this was included at all. She said that another is the senior population, which is the largest and fastest growing population, not just here in the Town, but throughout the country. She said when the Town looks at putting together an economic development plan for any municipality, they need to look at incorporating those elements in our community that will ultimately impact and affect the quality of life for everyone. Mr. Arnett stated that Ms. Stokes-Marshall is correct and the private sector real estate retail development community felt the exact same way. He said that this was not a report on workforce housing, transportation and affordable housing, but they realized that this was something important for the Town moving forward. He said it is mentioned in his report, because it is an important discussion for the comprehensive plan moving forward. Pat Sullivan, 1002 Plantation Court, said that she thought in the presentation that it indicated that retail brings in more money than commercial, which really surprises her. Mr. Arnett said in terms of rental rates and space, retail may command higher dollars. He said that this is certainly what the development community felt as well. Ms. Sullivan said that if the Town obtains more retail and more commercial, those individuals will not be able to afford to live in the Town. She said that we look at the dollars it will bring to the Town, but it is also going to create havoc on transportation, which it does already. Mr. Arnett stated that he believes it is important for the Town to look at the retail market in context with everything; commercial development, affordable housing, office development, as well as residential, because you want to ensure there is a balanced mix of uses. He said if you do not have a balanced mix of uses, it will create more challenge and issues.  Economic Development Committee July 31, 2017 Page 22 of 23 Ms. Sullivan stated that a gold star is being put on retail; however, she has read that retail is having a difficult time financially. She asked if the Town is an exception. Mr. Arnett said that he would encourage Ms. Sullivan to read the entire report now that it has been made available; however, this is a retail study and not a study about other things. He said that it did come into the discussions, but this was a retail study, which is why all the attention was paid to retail. He said that Ms. Sullivan makes a good point that is referred to in the study, which is that there is this local market, but there is also a national market trend that may affect the Town and there are challenges to the retail market from a national standpoint. He said that if you look at grocery stores and home centers, one trend that exists nationwide, is that they are going to smaller products overall which does affect the market. He said that there are national trends in terms of retail that we need to keep in mind as we develop the economic development policies. 4. Consideration of an economic development incentive grant 5. Executive session – Committee may decide to convene executive session for the purpose of hearing proprietary business information Mr. Smith stated that the Committee has reason to adjourn into executive session, simply due to detailed discussions regarding one of the private sector business numbers which would not be appropriate to discuss in open session; therefore, the Committee will be in executive session to discuss the economic development incentive grant. Mr. Burn moved to adjourn into executive session; seconded by Mr. Smith. All present voted in favor. Committee adjourned into executive session at 11:49 a.m. and reconvened at 11:57 a.m. Mr. Smith declared the Committee out of executive session and stated that no action or votes were taken in executive session.  Economic Development Committee July 31, 2017 Page 23 of 23 Mr. Burn made a motion to send the economic development incentive grant application to full Council with a positive recommendation that staff recommended for their funding level; seconded by Mr. Smith. Ms. Livingston stated that in accordance with the Economic Development Incentive Grant program, staff received an application from a company that is both a retention opportunity and an expansion opportunity. She stated that this is a company that has been in Mount Pleasant for over a decade and is currently in an expansion mode. She said that they are also a regional headquarters, which is also in line with the Town’s economic development strategy, and their wages are just over double what the State and regional wages are and would be making a significant capital investment. Mr. Smith stated that the Town’s Economic Development Incentive Grant program, in detail, is downloadable on the Town’s website if anyone would like additional information. All present voted in favor. 6. Post executive session Committee may take action upon reconvening from executive session 7. Adjourn There being no further business, meeting adjourned at 11:58 a.m. Respectfully submitted, Barbara Ashe July 31, 2017