St. Johns Market Analysis April 2015
Table of Contents
SECTION I: INTRODUCTION .................................................................................................................................................................. 3 PURPOSE OF STUDY: .............................................................................................................................................................................. 3 METHODOLOGY AND RESOURCES ............................................................................................................................................................. 3 SECTION II: STUDY AREA ...................................................................................................................................................................... 4 WHAT ARE THE GEOGRAPHICAL BOUNDARIES OF ST. JOHN’S?.......................................................................................................................... 4 SECTION III: ST. JOHNS DEMOGRAPHICS ............................................................................................................................................. 6 WHAT ARE THE COMMUNITY CHARACTERISTICS OF ST. JOHNS TODAY? .............................................................................................................. 6 POPULATION........................................................................................................................................................................................ 6 RACE ................................................................................................................................................................................................. 6 SEX.................................................................................................................................................................................................... 7 AGE ................................................................................................................................................................................................... 7 INCOME .............................................................................................................................................................................................. 8 EDUCATIONAL ATTAINMENT .................................................................................................................................................................... 9 THE TAKEAWAY .................................................................................................................................................................................... 9 SECTION IV: ST JOHNS ECONOMIC CHARACTERISTICS ....................................................................................................................... 11 BUSINESS AND EMPLOYMENT ................................................................................................................................................................ 11 REAL ESTATE...................................................................................................................................................................................... 12 TRANSPORTATION ............................................................................................................................................................................... 13 PARKING ........................................................................................................................................................................................... 15 RECREATION AND ATTRACTIONS ............................................................................................................................................................. 15 SECTION V: CONSUMER SURVEY ....................................................................................................................................................... 16 SECTION VI: SUPPLY AND DEMAND STUDY ....................................................................................................................................... 17 AREAS OF BIGGEST BUSINESS OPPORTUNITY IN ST. JOHNS............................................................................................................................ 18 SECTION VII: ST. JOHNS TOMORROW ................................................................................................................................................ 21 APPENDIX .......................................................................................................................................................................................... 22 HOW TO USE THIS REPORT..................................................................................................................................................................... 22 AREA RESOURCES FOR BUSINESSES .......................................................................................................................................................... 22
SECTION I: INTRODUCTION Purpose of Study: The St. Johns Market Analysis answers three questions:
What is the current local business market and are there market gaps? What is the current demographic makeup of St. Johns? What are the future economic and community trends for the area?
We anticipate it will be most useful to entrepreneurs who are already operate businesses in St. Johns as well as those who are seeking to “set up shop” in the area. By understanding economic and community dynamics, local businesses will be better equipped to respond to present and projected community needs and market demands.
Study Organization St. Johns Main Street (SJMS) is a 501(c)(3) non-profit located in the heart of St. Johns. The organization was formed in 2010 by a group of passionate St. Johns residents and business owners who were committed to making the community more vibrant, stable, and sustainable. SJMS falls under the umbrella of the National Main Street program. Conducting a market analysis fits is an important resource to help achieve SJMS’ mission. Mission St. Johns Main Street (SJMS) is working to create a thriving and sustainable local economy for the St. Johns Neighborhood. As part of the national Main Street movement, we promote local prosperity and livability by serving as a resource hub for community and local business. This analysis was produced by SJMS staff with input from Blake Goud of Marquam Capital and Seile Tekle of Micro Enterprise Services of Oregon, Portland.
Methodology and Resources The analysis provided in this market study was assembled using publically available data and data available in private databases. The demographic information was primarily based on data from the US Census and the ESRI demographic databases for the St. Johns neighborhood. Some of the US Census data was pulled from resources compiled by the Portland State University Population Research Center. The methods used for analyzing the supply and demand information is detailed in that section.
SECTION II: STUDY AREA What are the geographical boundaries of St. John’s? This study uses data, where available, for the area defined by the City of Portland as St. Johns (See figure 1). This includes parts of North Portland within the zip codes 97203 and 97217 and which is bounded by the Willamette River, Columbia River, a section of North Ivanhoe Street and “the cut” (the local name given to the set of rail road tracks that separates the Portsmouth, Kenton, and University Park neighborhoods from the St. Johns neighborhood). In many cases, some data may only be available for the ‘core’ St. Johns area where most of the population lives in the bottom portion of the area as illustrated in Figure 2.
Figure 1: Map of the Greater St. Johns Area
Figure 2: Map of Core St. Johns Area
There are several reasons for defining the study area in this manner: Data on the St. Johns area has historically been collected from within these boundaries, making it more feasible to obtain accurate, area-specific information. However, a key source of data for the demographic information in this report is ESRI and shows only a more limited geographic area (where much of the residences and main business district are located) including everything within a one radius from N Lombard St and N Burlington Avenue (shown in figure 2 above as the green circle). St. Johns is primarily a “convenience trade area”, meaning the majority of businesses in the area are accessed on a regular basis (gas stations, banks, and grocery stores for example). Consumers tend not to travel far from home or work to purchase such goods and services. Because neighboring areas such as Portsmouth and Kenton have their own “convenience” businesses, it logically follows that the majority of consumers who shop at St. Johns businesses are based in the St. Johns neighborhood. Some businesses are considered “destination” businesses, meaning they are distinct enough that consumers are willing to travel longer distances to access them. An example of these types of businesses would be movie theatres or specialty stores. Although this study does not include data on consumers outside of St. Johns, future studies may want to incorporate a more rigorous assessment of how these consumers can contribute to future economic and business development in St. Johns.
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The geographical barriers and therefore commuting obstacles posed by the Willamette and Columbia Rivers and to a lesser degree by the cut mean the area is more isolated than it would be in the absence of these geographical features.
SECTION III: ST. JOHNS DEMOGRAPHICS What are the community characteristics of St. Johns today? Why do demographics matter in a market analysis? The demographic data presented in this report: population, race, sex, age, household income, housing, and educational attainment, are all indicators that have an impact on product preferences and spending potential.
Population St. John’s is one of Portland’s largest neighborhood (second largest by land area and 11 th largest by population out of 95), representing between 2 and 3 percent of the population of Portland. According to ESRI (2013), the annual growth rate from 2010 to 2012 is 1.5% and based on projected population estimates for 2017, it is anticipated to remain at this level. The rate of growth is comparable with the city of Portland but higher than Multnomah where the annual growth rates for comparable periods are 0.8% and 0.9%, respectively.
Population Growth (Annual % Change)
Population
2010 2012 2017
St. Johns 13,936 14,346 15,445
Multnomah County 736,785 748,445 784,058
Portland 583,786 600,899
St. Johns 2010-2012 1.5% 2012-2017 1.5%
Multnomah County 0.8% 0.9%
Portland 1.5% na
Note: Data for St. John's show the population within a 1 mile
Note: Data for St. John's show the population within a 1 mile radius of N Lombard St and N Burlington Ave. Source: ESRI, US Census Bureau
Source: ESRI, US Census Bureau and SJMS analysis
Race Population by Hispanic Origin 2000
2010
2014
Hispanic
15.4%
21.8%
19.9%
Not Hispanic
86.1%
78.2%
80.1%
Source: Portland State University Population Research Center, ESRI
A striking difference between St. Johns and the rest of Portland is in its diversity in racial identification and the share of the population of Hispanic origin. The precise level is quite dependent on geographical bounds used but a half-mile radius around St. Johns downtown corridor had a 13.8% Hispanic population share in 2012 while a bigger geographical area using the same methodology but including an area within 1 mile of the St. Johns downtown corridor shows a higher Hispanic population share of 18.0%. The decline between 2010 and 2014 is not large enough to conclusively identify a trend change because there are different methodologies between the PSU estimates based on US Census data and the ESRI data, as well as different specific geographic boundaries which, as we can see, may lead to different estimations.
Population by Race 2000
2010
2014
77.2%
79.2%
67.3%
Black or African American alone 9.4%
9.2%
8.2%
American Indian
1.7%
1.5%
2.1%
Asian
5.6%
4.0%
4.0%
Two or More Races
5.9%
4.8%
6.7%
Other
0.2%
1.3%
11.7%
White
Source: Portland State University Population Research Center, ESRI
The data on population broken down by race (rather than Hispanic origin) shows relative stability in the population share of different racial groups. The sharp jump in ‘other’ and decline in ‘white’ is due to the categorization of the Hispanic population. Many Hispanics are white but the precise share is not broken down and there is no reliable way to estimate the proportion of Hispanics who would identify as white versus other racial groups.1 The sharp rise in the population who identify as Hispanic as well as those of racial minorities means that St. Johns is significantly more diverse than the city of Portland as a whole. The proportion identifying as black or African American is close to or slightly higher than the city’s overall population share while the share of people who identify as Asian is lower than the city as a whole. Finally, there is a large share of the population who identify as other (including those who identify as Native Americans, Pacific Islanders or people of more than one race) is slightly higher than the population of Portland. The share of people living in St. Johns who identify as other or multiple races accounts for 6.7% of the population compared to 4.7% for the city as a whole.
Sex The gender balance of the population in St. Johns is close to roughly split between men and women and representative of the average across the city of Portland with 51.1% men (Portland: 50.5%) as of 2010.
Sex (%, 2010) St. Johns
Portland
Male
48.9%
49.5%
Female
51.1%
50.5%
Source: US Census Bureau
Age Of particular interest to businesses is the share of the population that is in the primary earning demographic. According to analysis conducted by the Portland Business Journal, the median age of the population of the Portland metro area is 36.4 years. Data for St. Johns finds a younger population with an estimated median age of 32.8 years.2 A line from TV
1
The 2010 US Census found that 76.1% of Portlanders were white and 72.2% identified as non-Hispanic. Stevens, Suzanne. 2012. “Portland metro average age: 36,” Portland Business Journal blog, February 22 (accessed March 28, 2015) http://www.bizjournals.com/portland/blog/2012/02/portland-metro-average-age-36.html?s=print 2
show Portlandia describes Portland as the city “where young people go to retire” which in large part reflects the inflow of young, white, college-educated people from other parts of the United States.
While this explains part of the population dynamics of St. Johns, it does not capture it entirely because the population is much more racially diverse than the city as a whole and a portion of the younger age demographic is due to the higher share of people identifying as Hispanic. According to the Pew Research Center, the Hispanic population nationally is much younger (median age: 27 years) than the remainder of the population (median age: 37 years). 3
Income One of the most important factors in determining household spending (and by extension sales at local businesses) is the median household income. This is a measure that shows the level of income going to the household located in the middle of the income spectrum. Half of all households earn higher incomes and half earn lower incomes. For St. Johns, the median household income in 2012 was $36,283 compared to the median income for all of Portland of $52,158. The median household income in St. Johns is expected to rise to $42,157 by 2017 which works out to an average annual growth rate of 3.0%. This compares to the recent rise in median household income for the Portland metro area as a whole between 2010 and 2013 at 3.3% per year. Projections through 2020 estimated by IHS Global Insight show the gross metropolitan product (GMP) rising by 4.0% per year for the Portland metro area. 4 Some of this growth will not directly translate into median household income growth because the number of households will rise, but it is still expected to lead to significant growth through 2020. The Portland metro area is expected to be the 21st fastest growing metro economies (out of 363) through 2020. A couple of factors could explain the lower median income in St. Johns compared to the entire Portland metro area. One reason is that the lower average income of residents in St. Johns relative to the city as a whole usually means lower average household income as the median resident is just entering his or her prime working years. An aging of the
3
Motel, Seth and Eileen Patten. 2012. “The 10 Largest Hispanic Origin Groups: Characteristics, Rankings, Top Counties”. Pew Research Center (accessed March 28, 2015) http://www.pewhispanic.org/2012/06/27/the-10-largest-hispanic-origin-groups-characteristics-rankings-top-counties/ 4
IHS Global Insight. 2014. U.S. Metro Economies: GMP and Employment 2013-2015. Report prepared for the U.S. Conference of Mayors and The Council on Metro Economies and The New American City.
population which, though not dramatic in the next 5 years, will have the effect of (all else equal) raising median household income. Another trend which is discussed later in the report in more detail in the context of gentrification is the diverse racial mix within the St. Johns neighborhood relative to the city. Across the city as a whole, people of color—specifically African Americans and Hispanics—have significantly lower median household incomes than the city as a whole which is itself significantly lower than the median income for non-Hispanic whites.5
Educational Attainment The biggest difference between St. Johns and the rest of Portland, even more strikingly so, is the difference in educational attainment of residents in St. Johns. These stem primarily from the history of St. Johns as a blue collar neighborhood due to its proximity to the port facilities on the Columbia and Willamette Rivers as well as to the manufacturing and logistics facilities on Swan Island. This has provided significant job opportunities for people who do not have a high school degree and those who did not finish high school. By contrast, the demographic changes in the rest of Portland that planted the seeds for the satirical show Portlandia are based on its desirability for people with college degrees (whether associates, bachelors, masters or professional degrees). The only advanced degree category in which St. Johns has a notably higher rate than the city as a whole is in doctoral degrees which may be a result of the nearby University of Portland.
The Takeaway St. Johns is a unique neighborhood within Portland characterized by a growing and diverse population, with educational attainment consistent with the working class history of the neighborhood and dominant source of employment in the surrounding areas. Because of the lower average household income and its geographical isolation relative to other parts of Portland, St. Johns is only in the early stages of attracting a changing mix of people moving in. As these changes occur which are likely to make St. Johns more like the rest of Portland demographically, there will be both challenges and opportunities to allow the neighborhood to keep its distinctive character. 5
The comparison was made using American Community Survey data on median household income for 2013 between African Americans in the city of Portland and the population as a whole and between Hispanics and the population as a whole. Significance was measured at the 90% confidence level by whether the range for one income estimate plus/minus the margin of error was within the range of the other income estimate plus/minus its margin of error. The difference between Asians and the population as a whole was not significant different while the difference between Asians and non-Hispanic whites was marginally significant.
SECTION IV: ST JOHNS ECONOMIC CHARACTERISTICS What is the economic environment of St. Johns today? Why does economic information matter in a market analysis? Like demographic data, information on the economic environment can indicate spending trends and market demands.
Business and Employment
Cost of living $47,500/year Percentage of population below poverty level 24.3 percent Unemployment 5.9 percent
There are a relatively limited number of economic sectors in St. Johns that account for the bulk of the economic activity covered by the data sources used in this report which exclude the large scale manufacturing industries that dominate the northeast section of St. Johns along Columbia Boulevard.6 The top four sectors in terms of sales are retail trade, other services, construction and real estate rental and leasing. The top four sectors in terms of employment are retail trade, other services, accommodation and food services and administrative support and waste management and remediation services.
Top Male Occupations: Service Sales and Office Production Management Top Female Occupations: Sales and Office Service Management Business and Financial Operations
Combining these two types of data into a measure of sales per employee can provide information on where the potentially Source: Realtor.com (2015), City-data.com (2011) higher value added sectors are that will provide Revenue per Employee (by Sector) higher wage jobs to support the local community as well as provide a market for the other businesses in the St. Johns area. Employees Retail Trade 691 However, simply looking at sales per employee Finance and Insurance 30 will not always provide a useful measure of the Manufacturing 22 value added per employee because of different Construction 81 ways in which businesses are organized. These Real Estate Rental and Leasing 70 Other Services 383 caveats will be noted below. Professional, Scientific, and Technical Services Health Care and Social Assistance Administrative and Support and Waste Management Transportation and Warehousing Arts, Entertainment, and Recreation Accommodation and Food Services
24 96 166 90 42 310
Revenue per Employee $ 470,556 $ 385,500 $ 310,833 $ 239,383 $ 236,229 $ 157,548 $ 130,958 $ 103,458 $ 64,554 $ 61,778 $ 51,714 $ 51,126
The largest sectors for revenue per employee are retail trade, finance and insurance, manufacturing, construction and real estate. These sectors will not all create as high wage jobs as might be assumed based on Source: SJMS analysis based on a sample of 251 employers in St. Johns the revenue per employee. For example, retail Note: Sectors with fewer than 10 employees were excluded. trade companies rely on high volumes of sales to offset generally low margins. Finance and insurance do provide higher wages, but the number of employees is 6
Large-scale manufacturing operations have an important role in the local economy but the data sources employed for this study does not include data needed to include these businesses in the present study.
relatively low, as is manufacturing for the data sampled in this analysis. If the geographic reach were extended further, this sector employment totals would be higher due to the proximity to Swan Island and other industrial areas in North Portland near the Port of Portland. 7 Another sector with a large employment footprint is other services which has a high average revenue per employee although the types of businesses included in this range are diverse so it is important to realize that this is a top-line number that does not account for diversity in the other operational expenses required to run these businesses. The rest of the sectors have lower revenue per employee and are not necessarily going to create high wage jobs but will nonetheless provide services needed by the community.
Real Estate Residential The St. Johns neighborhood has home prices lower than the average level of Portland with the median sales price in 2014 at $227,000 and is considered to be an affordable neighborhood relative to many others where prices have increased to higher levels.8 Some of the lower prices may be due to smaller home sizes represented in sale price data because the average price per square foot of $213 per square foot is only 7% lower than the average in Portland while sale prices are 27% lower. Sale prices have risen modestly recently—8.1% during the past 5 years or 1.6% per year—which has been below the inflation rate which has remained depressed following the Great Recession. This modest rate of increase is not rapid enough to constrain potential new buyers. The below-average median sale price and slower growth in prices could attract buyers who have found other areas of Portland increasingly unaffordable. The increase in prices is forecasted by Zillow to increase 5.7% during 2015 which would represent a notable increase compared the recent trend. An acceleration in home price increases would benefit home owners but could represent a challenge on lower income residents in St. Johns. As a result of the income disparity between white Portlanders and people of color, a significant acceleration of home prices and rental rates could negatively affect the diversity of the St. Johns neighborhood which has remained even as other areas of North and Northeast Portland have become less diverse. As mentioned above the low price levels relative to other parts of Portland and the recent slow increase led Realtor.com’s model to classify St. Johns as a “Strong Buyer’s Market” although within the past 6 months as the market has tightened, it has shifted towards being a “Soft Seller’s Market. This represents a change in the direction of a tighter market and likely indicates a faster rate of price appreciation in the next few years.9 The rental market, like many other parts of Portland, is more competitive with high demand and low availability making it a “Competitive Renter’s Market”.10 According to the PSU Research Center and the 2010 US Census, the St. Johns neighborhood remains relatively evenly split (something which has not changed significantly since 2000) between owner-occupied and renter-occupied units with a vacancy rate of 6.7%.11
7
The Swan Island Business Association (http://www.swanislandba.org/) claims 11,000 people commute to jobs on Swan Island daily. Trulia, Saint Johns Local Page, Accessed April 28, 2015 http://www.trulia.com/real_estate/St_Johns-Portland/5733/market-trends/ 9 Realtor.com, St. Johns Local Page, Accessed April 28, 2015 http://www.realtor.com/local/St-Johns_Portland_OR 10 Realtor.com, St. Johns Local Page, Accessed April 28, 2015 http://www.realtor.com/local/St-Johns_Portland_OR 11 PSU Research Center, US Census 2010 8
Based on the additional upfront cost of buying a home versus renting, it is cheaper to rent than to buy. However, the anticipated savings from buying versus renting (in part affected by historically low interest rates) makes buying cheaper beginning 12 years after buying. The price increases are likely to increase if the overall vacancy rate declines (for example, rental vacancy rates in the Portland metro area fell to 2.3% in the 4 th quarter of 2014, this breakeven period would become shorter. 12 St. Johns Commercial Real Estate Fast Facts
Commercial Real Estate According to Colliers International, there is currently sufficient supply and sales of commercial real estate peaked in 2012 and have declined sequentially. The average time for commercial property to lease has fallen from 29 months at the beginning of 2014 to 8 months by the end of 2014 but this measure is highly volatile because it covers a relatively small number of units, only a fraction of which will be on the market at any given time. However, until recently there was a big gap in new buildings being brought onto the market (from 2011 to late 2014) until about 6,000 sq. ft. came online year-to-date in 2015. This led Mark Porter at Colliers International to conclude that “As long as no new inventory is delivered and absorption trends continue, the vacancy rate will continue to fall incrementally”. Thus even the recent new inventory deliveries and a few more coming online in 2015, there is likely to be a tightening in the commercial real estate market in St. Johns which would lead to upward pressures on rental rates.
Average price/sq. ft.: Avg. Rent: $4.44/SF Avg. Sales Price: $62/SF Total commercial property units: 467 properties, 414 buildings, 16.6m sq. ft. Occupancy rate: 91.1% Vacancy rate: 8.9% Turnover rate: Sales peaked in 2012, but have trended down annually to-date. Months to lease dropped from 29 months at the beginning of 2014 down to 8 months for the current quarter, but this is volatile measure that could easily jump back up. Owner occupied: 20 buildings of 2,299,689 SF or 13.8% of total square foot Renter occupied: 394 buildings of 14,317,278 or 86.2% of total square foot Source: Mark Porter, Colliers International, December 2014
Transportation Residents and visitors can get to and around St. Johns by car, bus, bike, and foot. Car There are five arterial roads in St. Johns and around 100 collector roads North Lombard Street North Columbia Boulevard North St. Louis Avenue North Fessenden Street North Smith Street The above arterial roads receive the heaviest traffic loads, along with the collector roads near the St. Johns Bridge. Access to St. Johns is limited by natural features including the Columbia and Willamette Rivers and the Union Pacific Railroad ‘cut’ which separates St. Johns from the rest of North Portland. 12
According to US Census Data, the overall rental vacancy rate hit a low of 2.1% in Q2 and Q3 of 2013 before rebounding to close to 5% through the first three quarters of 2014, in part because of new construction although the drop back to 2.3% in Q4 suggests there is still significant demand for units.
Bus There are five bus lines that run through St. Johns. Bus routes and schedules vary and connect transit users to destinations such as Sauvie Island and downtown Portland, or the MAX. However, the geographic features described above limit the number of destinations where there is easy access without requiring transfer to other buses or use of other modes of transportation. Transit Score: 44/100 which puts St. Johns in the middle with “some transit [and a] few nearby public transportation options”13 4 – Division/Fessenden 11 – Rivergate/Marine Drive 16 – Front Avenue/St. Helens Road 44 – Capitol Highway/Mocks Crest 75 – Cesar Chavez/Lombard Bike Portland consistently is ranked one of the most bike friendly cities in the United States with the highest mode share for bike commuting at around 6%. St. Johns is not unlike the larger metro area in having good access for people on bikes although for trips outside of St. Johns there are more limited options particularly traveling West (connections East are served by the bike path along Columbia Boulevard and the bike lane on North Willamette Boulevard). The St. Johns Bridge has ‘sharrows’ for bikes to share the lane with motor vehicle traffic although the limited separated infrastructure may reduce the number of people who feel comfortable riding across it. Highway 30 provides a direct connection to downtown Portland, but the bicycle facilities available on it further reduce its usefulness for people riding to downtown Portland. Bike Score: 75/100 “Very Bikeable; Biking is convenient for most trips”14 Foot Walking around St. Johns is somewhat feasible. The sidewalk network is extensive on some streets but lacking in others, and the proximity of residential housing units to schools, restaurants, bars, stores, and other destinations decreases as foot travelers move away from the Lombard Street corridor. Walk Score: 59/100 “Somewhat Walkable; some errands can be accomplished on foot”15 Other modes ZipCar, Car2Go, RelayRides, GetAround, Taxi, Uber, Lyft
13
walkscore.com (2014) walkscore.com (2014) 15 walkscore.com (2014) 14
How workers commute to and from St. Johns The average time to get to work for people across the United States is 25.4 minutes. For people working in St. Johns and surrounding areas, the average is 24 for the census tract on the north side of the peninsula while the three census tracts that make up the core of St. Johns had average commute times of 27, 29 and 31 minutes. 16 The chart to the right shows the mode share split which has a significantly higher share of people driving alone (Portland average was 57.4% in 2013), a slightly lower share of people using public transportation and carpooling, and a lot lower rate of people walking or biking to work.17
Parking Portland Bureau of Transportation is in process of conducting parking analysis of North Portland, including St. Johns. The report will not be released until 2016 and it is suggested that this topic is revisited at that time.
Recreation and attractions
16
St. Johns Bridge Cathedral Park Smith and Bybee Wetlands Natural Area Kelley Point Park Columbia Slough Trail Pier Park Pier Pool George Park Chimney Park St. Johns City Park Nearby: Forest Park, Sauvie Island
US Census Explorer: Commuting Edition, available at http://www.census.gov/censusexplorer/censusexplorer-commuting.html Portland data used for comparison is from the same source as compiled by BikePortland: http://bikeportland.org/2014/09/18/census-shows-bigleaps-biking-cities-portland-inches-backward-111088 17
SECTION V: CONSUMER SURVEY Please look for Consumer Survey which will be released separately in 2015.
SECTION VI: SUPPLY AND DEMAND STUDY This section illustrates the current demand for select business industries in St. Johns, as well as the current amount of businesses in those industries, i.e., supply. This information can be used to identify gap markets as well areas that need to be diversified, expanded, or removed. In remaining consistent with other downtown, business district, and Main Street market analyses, the supply and demand assessment encapsulates industries whose goods and services are accessed by the average consumer at street level (men’s clothing, barber shops, grocery stores, etc.). It excludes the large scale manufacturing industries that dominate the northeast section of St. Johns along Columbia Blvd. 18 Data was pulled from ReferenceUSA, which continually updates as businesses register across the United States. In this database, the North American Industry Classification System (NAICS) is used to categorize businesses by industry, e.g., grocery stores, jewelry stores, book stores, etc. There are currently over 1000 NAICS codes that fall under 20 larger categories. For the sake of concision, 49 NAICS codes were selected for this report, representing roughly half of the businesses in St. Johns. Supply is based on the amount of businesses categorized by NAICS code, and was obtained by sorting businesses in St. Johns by NAICS code, then totaling the amount under each code. Demand is based on the potential revenue that can be generated by residents living within a given trade area was obtained using the following calculation (Waterford Study, 2012). A x (B/C) x D = E E/F = G A = U.S. sales per capita by business category obtained from the 2012 U.S. Economic Census B = Median per capita income in the local trade area C = Median per capita income in the United States. D = Trade area population (12,207) E = Potential sales in local trade area F = Average sales per U.S. Store G= Number of businesses needed to fill demand The supply and demand analysis is based on the available data and should be interpreted with an understanding that it will only provide part of the answer of what is in demand and what is being supplied as far as business needs. For example, it may classify several types of businesses together which are actually providing different services. In addition, the estimates are based on St. Johns as its own isolated city and the demand for its businesses coming solely from its local population. SJMS will use the planned Consumer Survey (see preceding section) to test whether the consumer demands meet our conclusions from this analysis which will provide additional outputs for the St. Johns business community. In reality, while St. Johns’ businesses may get a large portion of their demand from the local community, it is also located within a much larger metropolitan area that can act as a force multiplier on the demand which is
18
Large scale manufacturing operations indeed have an important role in the local economy and particularly to provide family-wage employment opportunities, but as the data does not lend itself beneficial to this report, it is suggested that further studies be conducted as seen necessary.
particularly important for retailers, restaurants and bars where the estimates from the methodology above will, more often than not, underestimate potential demand rather than overestimate it. To illustrate the likelihood of the estimates produced from this analysis being underestimates of potential demand consider that the market survey found a significant oversupply of restaurants in the St. Johns area. Walking down Lombard Street, there are a lot of restaurants, but many offer similar types of food and not the diversity that is available in other parts of Portland. The raw numbers present an underestimate of the potential demand for, say, Korean BBQ which is not available in St. Johns. This restaurant serves a different market than a generic ‘full service restaurants’.
Areas of Biggest Business Opportunity in St. Johns
Many of the businesses where there is insufficient current supply are ideal areas for new small business ownership by local entrepreneurs as well as expansion in the size of the existing businesses into multiple locations. Another avenue where there is potential for growth is for existing businesses to branch out into related business types. For example, there is some excess demand potential in nail salons but significantly more excess demand in beauty parlors where an existing nail salon could hire a cosmetologist or provide some space in their existing business for an independently run cosmetology service to test the market. If there is sufficient demand evidenced, then the
business or the independent beautician could set up a separate location nearby but have the ability for each shop to remain connected for purposes of marketing and cross-selling opportunities. Some of the areas where excess demand is indicated may not in fact be viable business opportunities or areas where existing businesses are not serving. For example, there are no pharmacies indicated in the chart but there are pharmacy services offered within both Fred Meyer and Safeway which probably fills most of the need identified in the analysis. However, the close proximity of Safeway, Fred Meyer and Grocery Outlet to the Lombard Street corridor between the St. Johns Bridge and the UPRR cut provides one example where the raw data needs to be analyzed in the context of the community and its geography and where a seemingly over served segment (grocery stores and by extension pharmacies) can possibly be underserving a significant segment of the community. A large portion of the community lives to the north of Lombard and the area further north than Smith Street or Fessenden Street have few options for groceries besides a few corner markets or 7-Eleven stores. The distance from the neighborhood near Pier Park to either Safeway or Grocery Outlet is 1.5 miles, which contributes to why the northern most census tract in St. Johns is categorized as a ‘food desert’ by the US Department of Agriculture. This ‘food desert’ designation comes with opportunities for grants from the USDA, US Department of Health & Human Services and the US Treasury under the First Lady’s “Let’s Move” campaign to increase the accessibility of nutritious food. The program is designed to target areas with significant low income populations who have limited access to a large grocery store which “contributes to a poor diet and can lead to higher levels of obesity and other dietrelated diseases, such as diabetes and heart disease”.19 Moving to the “over served” parts of the analysis, the biggest question mark falls on the bars and restaurants segment which, based solely on the methodology employed would seem to be significantly over served. However, the methodology has some limitation in not considering the potential demand from non-residents, and not taking into account sub-categories like, for example, the type of food or drink served or hours of operation beyond the split between full service restaurant, limited service restaurant and bars. 20 In addition, the analysis bases the potential demand on the per capita averages across the United States, adjusted for income, but without considering regional differences. Portland and Seattle are both known as ‘foodie heaven’ and have developed national recognition as the place to visit for food, beer and wine.21 In addition, Portland has developed a vibrant food cart scene which will inflate the number of establishments (because it measures ‘businesses’ without regard to size). The dramatic expansion of food carts provides a unique opportunity for lower-cost experiments in gauging and meeting demand for particular niche food areas where Portland has been recognized as a leader even beyond the United States. This boosts the potential market beyond what would be expected if St. Johns were a standalone town
19
USDA. “Food Deserts” http://apps.ams.usda.gov/fooddeserts/fooddeserts.aspx. Accessed April 25, 2015. Limited service restaurants are generally those defined as establishments where you order and pay for your food/drink when you arrive before you sit down and it is not limited to those restaurants being ‘limited’ in their food selection, hours or types of food and drink served. 21 Finding Houston. 2013. “America’s North-West Foodie Heaven – Portland & Seattle,” Accessed April 25, 2015, http://findinghouston.com/2013/06/17/americas-north-west-foodie-heaven-portland-seattle/ 20
rather than being able to leverage off of the appeal for travelers from outside of Portland. 22 The added appeal of the local craft beer industry boosts the potential demand for bars and the local coffee roasting businesses (and our love for amazing coffee) raises demand for establishments serving it beyond what would be expected based on population and the size of the local economy. The ‘full service’ restaurant mix in St. Johns is not entirely complete because the bars also serve food (some are listed on here depending on whether they offer food as a primary offering or not). The analysis, however, remains whether or not the bars are included because they generally fall into the category of pub food/American traditional which is overrepresented among the food available. Of the 17 restaurants included in this survey, 7 (41%) offer pub food/American traditional, 3 (18%) offer American New and 2 (12%) offer BBQ. Combined, this more traditional restaurant fare accounts for over 70% of the total full service restaurant offerings in St. Johns. The limited service restaurants are also relatively concentrated in a few basic offerings with 23 restaurants of which 5 (22%) sell coffee, 4 (17%) are classified as fast food, 3 (13%) are Mexican and 3 (13%) serve pizza. Like the full service offering, the few most common types of food account for the majority (65%) of the food sold in St. Johns. This analysis is not meant to suggest that these forms of food are not valuable parts of the food market in St. Johns. Everyone likes their coffee, burritos and burgers but not everyone wants them every time they go out to dinner. The ability of Portland to gain the recognition it has is largely based on many different forms of food being sold. For St. Johns, this means that in order to attract more visitors from within Portland (and their spending power to be spent at local businesses), it will help if there are more unique food offerings to attract attention to St. Johns in the print media, in peer-to-peer recommendations and through other channels like social media. It is also not within the scope of this survey to suggest the specific types of foods although a few notes may guide business decision-making. First, the St. Johns area has a large Hispanic population and while there are three limited service Mexican restaurants, there are no full service Mexican restaurants or restaurants serving food from other parts of Latin America. Apart from the larger Hispanic demographic that would indicate more potential demand for additional Latin American restaurants (which of course does not discount that non-Hispanics will also patronize these same restaurants offering Latin American food), there are other food types not being offered in St. Johns. A review by The Guardian showing Portland’s Top 10 restaurants included some of what is currently being offered (coffee, cafes, New American, Japanese, Thai) but does not include others (principally European restaurants and a seafood restaurant). 23 An area for possible expansion is Asian food; while there is Chinese, Thai, Indian and Japanese on offer, there are limited selections relative to other neighborhoods.
22
Colin Marshall. 2015. “Foodie heaven in a parking lot - what's the secret of Portland's success?,” The Guardian, Accessed April 25, 2015, http://www.theguardian.com/cities/2015/feb/26/foodie-heaven-parking-lot-secret-portland-success 23 http://www.theguardian.com/travel/2013/may/25/top-10-restaurants-portland-oregon
Section VII: ST. JOHNS TOMORROW The market study shows that St. Johns is a vibrant and diverse community although there are definitive gaps remaining for businesses to provide services to both satisfy local demand (such as full service restaurants to cater to the demand from the local Hispanic population) and attract people from other parts of Portland. St. Johns’ geographical location within Portland means it is relatively undiscovered compared to other neighborhoods on the East Side of the Willamette River (consider, for example, the limited rise in home prices in St. Johns compared to, for example, the area along the Vancouver Avenue/Williams Ave couplet, the Alberta neighborhood or inner Southeast Portland around Division Street. The experience in these neighborhoods has been mixed for the residents and businesses who called them home prior to their redevelopment. The new multifamily construction and new businesses which moved in have brought gentrification to these neighborhoods but at the same time the forces that brought that revitalization led to the displacement of many residents and businesses who could not afford rising property prices (involuntary displacement) or in response to changing demographics within the area (voluntary displacement). With rising awareness that St. Johns is a relatively close-in neighborhood with more affordable home prices than more redeveloped neighborhoods, the community will have to be aware of the changes to come. It will also have to consider the impacts of the ongoing and future economic revitalization to make sure it can be done in a way that provides a positive future for the community and minimizes, mitigates or avoids the negative impacts particularly on low income residents and people of color. This market study hopefully has provided an overview of the current status of St. Johns and highlighted some of the things that make St. Johns a unique neighborhood.
APPENDIX To be completed during the summer of 2015.