A population spurt and an increasingly attractive business climate in the Tri-Valley sub-market of the East Bay are drawing big retail projects to the area.
“Tri-Valley has been one of the more explosive corridors in the Bay Area in the last 30 years,” said Ed Del Beccaro, East Bay and Silicon Valley senior managing director for Houston-based real estate services firm Transwestern. “It will continue to be one of the high-growth corridors in the next 20 years.”
Among the projects looking to take advantage of that growth is The Crosswinds at Livermore, a 250,000-square-foot development proposed by San Jose-based developer Republic Family of Cos. The Crosswinds would feature at least one big-box retailer, smaller stores, restaurant spaces, auto dealerships and a hotel with up to 175 rooms.
At Interstate 580 and El Charro Road, The Crosswinds would be near the San Francisco Premium Outlets, owned and operated by Indianapolis-based retail real estate investment trust Simon Property Group.
“Being at the epicenter of the Tri-Valley region, Livermore is a city that is quickly becoming one of the economic and innovation hubs of the Bay Area,” Republic President and CEO Michael Van Every said. “Republic is a Bay Area company that understands long-term growth patterns in cities like Livermore and looks for value-add opportunity for both economic and community benefit.”
Van Every believes The Crosswinds’ proximity to the outlets will prove beneficial for both retail centers. “Simon Property has created a landmark retail development with the San Francisco Premium Outlets, and the Republic project will enhance the neighboring commercial by adding land-use opportunities that provide food, lodging and entertainment,” he said.
A strong demand in the area for retail space and hotel rooms also bodes well for The Crosswinds. Retail vacancy in Livermore is 3 percent – down from the five-year average of 6.4 percent – while hotel occupancy ranges from 85 percent to 90 percent on the prime Monday through Thursday nights in the Tri-Valley corridor, according to Transwestern.
Republic declined to give the purchase price for the 22-acre project site and name retailers or hotel chains interested in occupying the development. But construction, which could start later this year and finish in 2017, would cost about $25 million.
The Crosswinds would arrive in a region experiencing a population and development surge. The Tri-Valley is home to about 302,000 people currently – up 42 percent from the 213,000 residents in 2000, according to Brian Landes, Walnut Creek-based research analyst for Transwestern. The population is expected to reach nearly 366,000 within a decade.
Other key retail projects in the region include a 339,000-square-foot IKEA store eyed in Dublin and New Jersey-based developer RedMill Capital’s 120,000-square-foot Shoppes at Livermore, which is expected to begin construction in September near both The Crosswinds site and the outlets.
Van Every believes the various retail centers will provide different consumer needs and not cancel each other out. “Rather than seeing each other as competitors, each development will only go toward creating more energy and vibrancy for the area,” he said.
A dynamic retail scene in Tri-Valley, however, comes in contrast with a national picture that shows a weakened industry overall. Many indoor malls across the country are struggling or have shuttered, and major retailers such as Macy’s have planned store closures while Sports Authority and others have filed for bankruptcy.
Consequently, publicly traded REITs with heavy exposure to outdated malls are seeing their shares go down considerably although those linked to upscale retail such as Simon are faring better.
“Regional malls are feeling pain, but not all are created equal,” Landes said. “Class B and C malls are the malls having problems. These are the malls where department-store anchors are going dark and apparel tenants are vacating. These malls are being hit by the pullback in middle-market apparel and retail.”
But Class A malls such as Broadway Plaza in Walnut Creek and Stanford Shopping Center in Palo Alto are enjoying low vacancy and looking to expand, he said. “Centers with higher-end/luxury tenants in good locations with affluent demographics are thriving.”
The Crosswinds would fit that description and likely not be hurt by a slumping national retail market, he said.
The project “reflects the emergence of Tri-Valley as a major job, housing and retail center,” Del Beccaro added. “Tri-Valley will also be the catcher’s mitt for a lot of the growth coming from San Francisco and Silicon Valley.”