CC 04-16-19 Study Session #1 Economic Development Strategic Plan Presentation
Economic Development Strategic Plan Overview and Initiatives
Cupertino City Council Study Session April 16, 2019
1
Economic Development Strategic Plan: A blueprint
for the City’s future economic development activities
Regional and local economic trends: employment, industries, businesses
Retail trends and implications for Cupertino businesses
Impact of the business community on the City’s fiscal health
Opportunities for maximizing the value of what is already here
Implementation strategies for the City and its partners
An EDSP is a multi-year plan to strategically position the City and its business environment. Things that are taken into account when developing a plan are…
2
The first deliverable work product was a Background Report using economic data and analysis, and stakeholder feedback, upon which to build Cupertino’s EDSP.
3
What We Heard: Community Comments
Economic Assets and Opportunities
Location at the heart of Silicon Valley
Excellent freeway access
Highly competitive tech sector
Highly educated and politically
active residents
Excellent school district and
quality of life
August 2015
The feedback and comments we heard from residents included…
4
What We Heard: Community Comments
Issues for Economic Development
Limited opportunities for clothing and other specialty goods shopping and entertainment
Independent retailers and other small
businesses struggle with high costs
Predominance of a single employer
Protecting quality of life
is critical
August 2015
We used other sources of resident feedback, including results from the 2014 Godbe community survey. We heard the most important issues facing Cupertino were affordable housing (33 percent),
traffic (21 percent), and controlling growth (17 percent).
Many residents are also concerned about preserving the quality of the public school system as the community continues to grow and change.
5
Background Report: Competitive Position
Employment & Industry Trends
Growing job base
Major technology employers
Concentration of small and midsize professional and technology firms
Attractive business climate for small entrepreneurs and startups
Few small and midsize manufacturing businesses
Challenging environment for midsize firms
Opportunities:
Challenges:
The background report describes employment and market trends, identifies local assets, and presents the opportunities and challenges for attracting and retaining businesses in Cupertino.
You can see the list of opportunities and challenges we face…
6
Source: US Census ZIP Code and County Business Patterns, 2012
Percent of Total Firms by Firm Size,
Firms with Fewer than 250 Employees
Background Report: Competitive Position
Small and Midsize Businesses: Many Local Firms are
Very Small (1-4 Workers)
This chart reflects the large majority of small businesses and affirms the attractiveness of Cupertino for entrepreneurs and start-ups.
Relatively few midsize businesses – challenges with finding space for expanding companies.
7
Background Report: Competitive Position
Office Sector
Opportunities:
Challenges:
Premier office location
High-quality office stock
Access to skilled labor
Access to venture capital
Predominance of a single tenant
Limited availability of office space and lack of turnover of midsize spaces
Cupertino traditionally has very low office vacancy rates (hovering around 2%), which means when office space becomes available it is quickly leased or subleased, however, at a premium.
8
Source: Silicon Valley 1Q15 Office Market, Newmark Cornish & Carey, 2015.
Number of Deals by
Building Size in 2014
Background Report: Office Sector
Low Vacancy Rates and Limited Turnover Limit Opportunities
for Businesses to Expand in Cupertino
Brokers indicate that larger spaces, particularly in the range of 20,000 to 100,000 square feet, are in high demand for expanding companies seeking space in Silicon Valley. However,
space of this size is extremely limited in Cupertino, and companies often compete with Apple – which typically offers to pay for significant tenant improvements – for available vacancies
9
Major Employment Locations
Currently, the premier location for office space in Cupertino is at the intersection of Stevens Creek and North De Anza Boulevards, and north along North De Anza.
As a result of the Main Street and Apple Campus II projects, the most desirable location for office space is shifting eastward.
10
Background Report: Competitive Position
Retail Sector
Opportunities:
Challenges:
Strong local buying power
Many neighborhood- and business-serving retailers
New investment underway
Declining sales and stagnating sales tax revenues
Highly competitive retail trade area
Inventory of older strip retail centers
Because retail was a topic of interest we went into great detail researching and sharing information with the community. At the community workshop Christine Firstenberg of Metrovation
spoke on factors that impact retail location decisions and she shared her experience locating Stein Mart at Homestead Square.
11
Background Report: Competitive Position
Retail Sector
Trade area demographics
Competitors in trade area
Location and design of shopping center
Storefront width and depth
Accessibility and visibility
Construction costs
Anchors and other tenants
Rent costs and deal structure
Retailers consider trade areas and drive times, not city boundaries. They also look for synergies with existing retailers.
12
Trade Area and Hotspot Overview Map
Red is highest
concentration of sales
As you can see from this map Cupertino residents are within driving distance to surrounding hotspots.
13
Background Report: Competitive Position
Retail Sector
Source: MuniServices, 2015; Strategic Economics, 2015.
Estimated Retail Sales
in Cupertino
(Millions of 2014 Dollars)
Sales in Cupertino have fallen 17% since 2005
14
Key Issues for EDSP to Address
15
Key Issues to Address and Strategies for Economic Development
16
Key Issues to Address and Strategies for Economic Development
17
Key Issues to Address and Strategies for Economic Development
18
Key Issues to Address and Strategies for Economic Development
19
Key Issues to Address and Strategies for Economic Development
20
Three Initiatives Moving Forward
Mobile Vendor Regulations
Incubator and Co-Working
Space Use
Innovation District Vision Plan
21
EDSP Strategy 9
Mobile Vendor Regulations
Develop policies for regulating food trucks and other mobile services.
22
Project Goals
RESPOND to the evolving nature of the retail sector
FACILITATE delivery of goods and services to Cupertino community
ENSURE public safety and enhanced design at mobile services sites
Mobile Vendor Regulations
23
SB 946 Sidewalk Vendors
Sidewalk vending (non-motorized)
Place of operation
Hours of operation
Fines and penalties
Mobile Vendor Regulations
Issues
24
Status
Mobile Vendor Regulations
Draft ordinance being developed in coordination with City staff for Council Review Summer 2019.
25
EDSP Strategy 3
Incubator and Co-working Space Use
Action 3.3. Create a new development allocation for innovation space.
Facilitate the development of new office and industrial/flex space for small and midsize companies to expand.
26
Project Goals
Incubator and Co-working Space Use
FACILITATE Tenant Space for Creative Industries
ENABLE Smaller Start-up Companies in Cupertino
EXAMINE Potential at Underutilized Retail Sites
27
Land Use Typology
Incubator and Co-working Space Use
28
Status
Incubator and Co-working Space Use
Draft ordinance in coordination with City staff for Council Review Summer 2019.
29
EDSP Key Issues and Strategies
Connectivity and Placemaking
Support Growth of Small and Midsize Businesses
Innovation District Vision Plan
Brookings Institute
30
Bubb Road Special Area
Innovation District Vision Plan
31
Project Goals
Innovation District Vision Plan
PLACE-MAKING for “Maker Economy” Businesses
CATALYST for Economic Growth
DISTRICT IDENTITY via Infrastructure and Design Improvements
32
Types of Tenants
Innovation District Vision Plan
Bubb Road Tenant Type
33
Market Summary
Innovation District Vision Plan
The Bubb Road area contains 936,000 sf rentable building area
Flex properties represent 85% of total
35% of City’s flex properties located in Bubb Road area
Properties in Bubb Road area slightly more affordable compared to other places in Cupertino
34
Key Considerations
Innovation District Vision Plan
Innovation businesses require below market rents
Cities can incentivize higher value uses to subsidize innovation businesses
Industrial buildings can be inexpensively repurposed
Successful innovation districts require public/private partnerships
Innovation businesses (makers, small manufacturers, and other entrepreneurs) require below market rents. PlaceMade contended that most industrial tenants cannot afford to pay more than
$2 per sq. ft.
Cities can incentivize higher value office uses in order to help to subsidize lower rents required by innovation businesses (e.g. San Francisco PDR).
Some existing industrial buildings (e.g., Gate510) can be inexpensively repurposed to serve small scale manufacturers, makers, and other innovation entrepreneurs.
The creation of successful innovation districts often require active marketing and business attraction efforts, often done in partnerships with city agencies, non-profits, academic institutions,
property owners, and the real estate community.
35
Status
Innovation District Vision Plan
Community workshop – Spring 2019
Vision Plan development – Summer 2019
Council review – Fall 2019
Vision Plan refinement – Fall 2019
Review economic analysis and planning strategies with City staff in advance of:
36