The Maturation of Santa Clarita's Retail Market

With an unemployment rate far lower than Los Angeles County and the state of California, Santa Clarita shoppers offer savvy retailers the perfect demographics — a high medium-income, young population base, growing families, and a well-educated workforce that enjoys larger disposable incomes for shopping.

And along with the favorable demographics are consumers with an increasingly mature appetite for upscale retail shopping options.

“Not only are we a community of some 250,000 people with pretty high average medium income, many of the restaurants that also open here report having their best opening day of any restaurant in their chain,” said Jason Crawford, marketing and economic development manager with the city of Santa Clarita.

Formation of the City

Typical of many start-up bedroom communities, Santa Clarita was home first to a group of long-time residents whose family roots can be traced back to part of the history of the valley.

When residents needed to buy something they headed into downtown Newhall. As urban sprawl began to take hold downtown Newhall gradually began to fade as commercial districts along Lyons Avenue and later Soledad Canyon Road sprung up to meet the growing number of residents’ shopping needs.

Shoppers at one time relied on the now-closed Newberry five and dime store and the still in operation K-Mart store for an assortment of general merchandise; Newhall Hardware and Do It Center, which closed in 2008 and 2010, respectively, Caston’s appliance and television store ,which opened in 1972 and is now closing, or Consumers Furniture, which opened in 1978.

But the burgeoning population in Santa Clarita and its incorporation as a city in 1987 lacked retail diversity for local shoppers until Newhall Land & Farming Company planned and built the Valencia Town Center mall, which opened in 1992.

Initially small in comparison to many urban malls, Valencia Town Center houses JC Penny’s, Sears and Macy’s at the centralized shopping hub.

As the population in both the city and valley itself exploded from those early shopping days, residents with a higher level of disposable income and growing families also clamored for retail stores that met their growing upscale tastes.

The Nordstroms Campaign

Retail sales generated sales tax is the largest contributor to the city’s general fund, Crawford said. It’s how the city pays for all the services residents enjoy.

“We identify what retailers and restaurants go after when the surveying the community,” Crawford said. “And look at ‘retail leakage’ reports.”

The retail leakage reports identify what stores or restaurants residents are leaving Santa Clarita to spend money at, losing that money that could be spent locally.

“Revenue leakage in Santa Clarita runs as high as 42 percent,” said Howard Durchslag, senior vice president of leasing with Westfield. “Our goal is to cut that in half.”

Westfield is paying attention to what the community wants, agreed Stacie House, marketing director with Westfield. The company owns and operates the Westfield Valencia Town Center.

“We’re looking for and actively pursuing retailers that fit the mold of Santa Clarita shoppers,” House said. “We want to be the hub and pulse of the community, by delivering a lifestyle-destination for the community, including the right merchandise lineup consumers are looking for without travelling great distances to seek it out.”

As the city of Santa Clarita polls residents periodically to see what services, amenities, restaurants and retailers locals wanted to see come into the valley, Nordstrom continuously tops the list of favorite retailers.

In 1998, nearly 40 percent of the residents surveyed named Nordstrom as one of the number one reasons they leave to shop outside of the Santa Clarita Valley.

“Santa Clarita finally reached a population and income level where Nordstrom was interested in locating here,” said Marlee Lauffer, senior vice president of marketing and communications with Newhall Land.

Nordstrom approached Newhall Land and the developer in turn contacted the city.

Retailers often get concessions from cities to open a store and other cities at the time were stepping up to pay Nordstrom to come into their own municipalitie’s knowing they would get a return on their investment through sales tax revenues generated.

Department stores currently located at the mall received the land for free when Newhall Land developed the mall for local residents.

Nordstrom offered to locate a store at the mall in exchange for a $20 million advance payment and additional concessions for amenities such as parking, building use and money toward operating costs.

Newhall Land was willing to cover many of the costs associated with bringing the retailer to Santa Clarita, Lauffer said.

“We were trying to accommodate Nordstrom, and protect the city and Newhall Land.”

Despite the demand for an upscale retailer, however, city officials in place at the time and residents deemed the concessions asked by the retailer to be too steep a price to pay a retailer residents’ would be spending their money to shop at.

With roads, parks and schools yet to build for the rapidly growing city, the city and many residents scoffed at the request. Negotiations fell apart.

“The deal probably was never presented in a full manner, and with opinions on both sides it made it more difficult for public to understand,” Lauffer said.

As of the city of Santa Clarita’s 2010 survey, Nordstrom still tops of the wish list of residents desiring more upscale shopping venues. And at the same time, other retailers are showing up on the wish list.

“There will always be a desire to have many of those fashion-forward and higher-end stores here,” Lauffer said.

The Apple store opened in July after nearly two years of work by the Westfield Valencia Town Center’s Senior Vice President of Project Leasing, Howard Durchslag, after the retailer appeared on the wish list in the city’s latest poll of residents.

As the local tech-savvy population grows, a maturing consumer base is increasingly seeking retailers that can fulfill both their tastes and needs.

And with the opening of the Shops at The Patios, Westfield continues to deliver those merchandise offerings sought by residents with both independent and chain-operated boutiques, as well as upscale retailers

Retailers are scrutinizing everything in this economy, making new store expansion a difficult proposition.

But Westfield still has more plans to enhance the offerings at the mall and is working with many more merchants to accomplish this goal.

“We’ve made a long term commitment to Valencia,” Durchslag said.

Strategic Retail Growth

There was a period when the city also pursued big box chains to locate within the city limits, much to the chagrin of small mom and pop business owners.

But just as the population was asking for more upscale retailers to patronize, residents also wanted the options offered by retailers such as Home Depot, Lowes, Costco, Sam’s Club, Target, Kohl’s and even Walmart.

The city wanted the retailers as well for two other reasons: sales tax revenues and ease of access to residents.

With nearly 177,000 residents in the city of Santa Clarita, the fourth largest city in Los Angeles County and the 24th largest city in the state of California, residents were leaving the city to purchase items at retailers not located within the city limits, causing “revenue leakage” for the city’s tax base.

The city of Santa Clarita generated $21.8 million from retail sales, Crawford said.

Located just 35 miles northwest of downtown Los Angeles, the city’s population has grown 16.7 percent in just the past decade alone. Deemed the sixth safest city in the United States with at least 100,000 residents, the city and surrounding valley now count a population of 275,000 — more than a quarter-million residents.

All these people need places to shop. They wanted variety and they also wanted options to be price-conscious consumers when necessary.

The other deciding factor in where to locate retailers coming into the area was geography. Locating retailers on the east side of the city gave consumers access to the same stores without traveling through the city and congesting the few main thoroughfares and intersections in town.

The Future

The city was really happy and proud that Westfield continued moving along with expansion by building the Shops at The Patios despite the recession, said Crawford.

“Westfield didn’t stop construction or signing leases,” he said. “The company was betting on the future of Santa Clarita in the long term.”

The city of Santa Clarita wants to bring in all the retail shops and restaurants that the community wants, and that residents will area to patronize, Crawford said.

“We would love to see a Nordstrom here,” he said. “We want Santa Clarita to be a destination that other communities come into to shop.”

As retailers often rely on incentives from cities and developers such as free land, tax incentives, loans and other enticements before opening a store, a deal would be necessary to bring the upscale retailer into town.

In Santa Clarita, the city tends to focus more on attracting businesses that will produce hundreds of jobs, Crawford said.

“However, we would love to see a Nordstrom here and if necessary we’ll go talk to them and let them know how much our community wants them.”

Westfield has a good relationship with the community and city, both Durchslag and House said.

“We want to enhance our offerings at the mall and grow it,” Durchslag said.

As for older retail areas of the city, the city has been involved with redeveloping Old Town Newhall, hosting events regularly to bring shoppers back into the area where two local theaters, restaurants and newer retail boutique stores are now located.

It is currently working on a plan for the commercial corridor along Lyons Avenue as well to help energize the retail centers by changing codes and zoning to encourage landlords and landowners to change the face of the wide boulevard.

The way the retail centers were built originally left a sea of parking next to the street with the stores sitting far back on the lots, Crawford said.

We’d also like to see more buildings set up closer to the street, or perhaps second stories adding to existing structures.

On the east side, the city recognizes the retail business along Soledad Canyon needs to be revitalized as well, Crawford said.

“We’d like to see more cosmetic improvements like the ones that were made at the intersection of Whites Canyons and Soledad Canyons Road,” he said.

And the city has been looking at different mechanisms to energize the area as it did by locating the Edwards Theater up by Sierra Highway and putting a new library in place in a newer retail center.

Also, Westfield has plans to do more expansion in the future, allowing the city to continue attracting higher end retailers.

“We work closely with Westfield and share the results of the surveys with them. We are here to meet with potential retailers and help them lock in those deals for the local marketplace,” Crawford said. “With the demographics, there are benefits to doing business here.”