Loading...
HomeMy WebLinkAboutA045 - Staff Report, Proposal to Perform Market Position Analysis A� a. . STAFF REPORT Proposal from ZimmermanNolk Associates, Inc. To Perform a Market Position Analysis and Implementation Strategy For Somerset Background: At the City Council meeting of December 19, 2000, the City Council tabled action on the issue of creating an Urban Revitalization Area for Somerset. The City Council also directed that the City Manager determine the availability of the firm of ZimmermanNolk and determine their timeframe needed for the completion of a marketing analysis for Somerset. ZimmermanNolk was initially hired by the City to perform a preliminary analysis of the sales pace of homes in Somerset and a report was submitted to the City dated October 23, 2000. This report revealed several aspects of the Somerset project that may be contributing to the slower pace of home sales. ZimmermanNolk also recommended that a Market Position Analysis be completed. This analysis should provide answers to the following aspects of the Somerset project: What changes if any to the proposed plan would improve salability; What changes to the mix of housing types might be needed; What are the proper mix of proportions of various housing types needed; • What modifications and/or additions to specific housing models is needed if any; • Establishing an effective phasing plan; • Provided advice on sales marketing. Approach and Availability: Staff contacted the firm of ZimmermanNolk shortly after the meeting of December 19, 2000. The result of this contact was a request for a proposal to be submitted to the City that would outline the approach that would be taken in the preparation of the recommended Market Position Analysis. Staff received a FAXED copy of the proposal for the Market Position Analysis on January 2, 2001. A summary description of the work that would be performed by ZimmermanNolk follows: 1. Location/Site Evaluation- An evaluation of the location, accessibility, visibility and overall suitability of the Somerset site for a mixed use Traditional Neighborhood. 2. Draw Area Delineation- Identification of the "draw" areas from Story County for new residential units. 3. Market Overview- Evaluation of the potential for residential development on the site, based on an analysis of the supply of existing residential units. 4. Determination of Market Potential- Use of a "target market analysis" to determine the potential market within Somerset. 5. Determination of Optimum and Target Mix- An analysis of the optimum residential mix in Somerset will be developed along with an analysis of the target residential mix based on the draw area and current conditions in Somerset. 6. Establishment of Optimum Market Position- Identifying the best achievable mix of housing types in Somerset in terms of such characteristics as building configuration, density, size entry price/rent range, and absorption forecasts. 7. Implementation Strategy- Development of a phasing program to realize the market potential based on the existing physical condition of the site (completed infrastructure and buildings). Establishment of a framework for an effective sales and marketing program to be executed by local sale agents. Time Schedule and Cost: The work that has been generally outlined above can commence shortly after the City would approve the proposal with an actual site visit to Ames occurring in mid-February and the completion of the Market Position Analysis in the form of a written report by late March. The total cost for this consultant service is $23,200. Staff Comments: Representatives from ZimmermanNolk have suggested that before they can offer any meaningful recommendations on how to improve the sales pace in Somerset, a Market Position Analysis should be performed. It was pointed out that the value of performing the proposed Market Position Analysis is that the results of the analysis will be applicable to Somerset specifically and to the entire City of Ames generally. The information that will be received will include: • The optimum residential mix for well developed Traditional Neighborhoods • The achievable target residential mix for Somerset • Obtaining information on the optimum market position in term of unit sizes and pricing structure for Somerset specifically and the City in general • Obtaining information of potential absorption rates Staff understands that the creation of the Market Position Analysis is an appropriate step in the analysis, but the proposed time frame for the completion of the work (late March 2001) might be seen as being problematic for the continued success of the Somerset project. Alternative Interim Approach: Staff also discussed the possibility of Zimmerman/Volk providing an interim service that might assist in providing insight into Somerset in a more near term timeframe. It should be emphasized that this feedback will be based on the consultants unsubstantiated conclusion derived during this brief visit. It needs to be emphasized that Zimmerman/Volk truly believes ideally that the next effort should be devoted to performing the Market Position Analysis. Based on the urging of staff they are willing to provide a greatly reduced "Consultation Service" that would involve a two-day visit to the City of Ames. This Consultation Service that would involve: • One day being devoted to gathering general information on the market characteristics in Ames and obtaining general observations about the potential for the development of Traditional Neighborhoods in the City. • One day devoted to discussing with the developers of Somerset the following issues: • Understanding their approach to developing the Somerset project, • Attempting to ascertain what might be some of the reasons for the slow pace of sales, • Discussing the importance of maintaining consistency with the established development principles of creating a Traditional Neighborhood, and • Providing general observations that might improve the pace of sales. This "Consultation Service" could occur as soon as January 30/31, 2001. The cost for this service would be a day rate charge of $1,500 per day, or $3,000 total, plus air fare, lodging, and meal expenses. Staff Comments: Staff realizes the value of preparing the Market Position Analysis, especially since the results would be applicable to Somerset specifically and to the entire City of Ames generally. This analysis would serve to either reinforce the policies that exist in the Land Use Policy Plan or bring into serious question the feasibility of implementing the preferred land use alternative of Village Residential. In actuality, it could be argued that this type of analysis should have been done as part of the overall planning process. Clearly staff believes that the two-(2) day "Consultation Service" from Zimmerman/Volk should be undertaken, since it is relatively near term and less costly. The results of this "Consultation Service" might also serve to determine the advantages of performing the more extensive Market Position Analysis. JAN-02-01 02 :05 PM ZIMMERMANzVOLK ASSOC INC 908 735 4751 P. 02 ZIMMERMANNOLK ASSOCIATES, INC, 17 East Main Street taiirtun. New Jersey O8809 (908) 735-6336 • (1408) 735-4751 fificsimile Research & Strategic Analysis PROPOSAL For A Market Position Analysis And Implementation Strategy For Somerset A New Neighborhood In the City of Ames Story County, Iowa To be conducted for the City of Ames January 2, 2001 O1/02/01 TUE 13:02 [T%/R% NO 63251 JAN-02-01 02 :05 PM ZIMMERMAN-VOLK ASSOC INC 908 735 4751 P. 03 Ames, Iowa Page 2 January 2, 2001 STUDY OB JECTI V ES This proposal describes the scope of work for a Market Position Analysis and Implementation Strategy, to be undertaken on behalf of the City of Ames, hereinafter also referred to as the client. The program is designed to establish the optimum market position for residential development within Somerset, a 195- acre, mixed-use master-planned development in the City of Ames, Story County, Iowa. The development was originally planned according to the principles of Traditional Neighborhood Development, but has been modified such that it has neither the market advantages nor the development advantages of a well-designed and well-executed traditional neighborhood. Therefore, once the optimum residential market position has been determined, a phasing strategy will be established with the objective of recovering as many of these advantages as possible. Zimmerman/Volk Associates will research and evaluate household and economic data and market activity relating to residential development in Somerset. The determination of the optimum market position will be based on this analysis, as well as specifics relating to the existing conditions, location and visibility of the property, infrastructure currently completed, as well as the development's sales history, In brief, the research and analysis program will provide: Optimum residential mix for Somerset; • An achievable target residential mix for Somerset, • Optimum market position including unit sizes and prices/rents; • Phasing strategy; and • Absorption forecasts. SCOPE OF SERVICES To achieve the study objectives and establish the framework for analysis, Zimmerman/Volk Associates will employ its target market methodology, an analytical technique, using the PRIZM geo-demographic system, that establishes the optimum market position for residential development of any property—from a specific site to an entire political jurisdiction—through cluster analysis of households living within designated draw areas. In contrast to classical supply/demand analysis—which is based on supply-side dynamics and baseline demographic projections—target market analysis establishes the optimum market position derived from the housing and lifestyle preferences of households in the draw area and within the framework of the local housing market context, even in locations where no close comparables exist. ZIMMERMANNOLK ASSOCIATES,INC. JAN-02-01 02 :06 PM ZIMMERMANiVOLK ASSOC INC 908 735 4751 P. 04 Ames, Iowa Page 3 January 2, 2001 In geo-demographic segmentation, clusters of households (usually between 10 and 1 b) are grouped according to a variety of significant factors, ranging from basic demographic characteristics, such as income qualification and age, to less- frequently considered attributes such as mobility rates, lifestyle patterns and compatibility issues. Zimmerman/Volk Associates has refined the analysis of these household clusters through the correlation of more than 500 data points related to housing preferences and consumer and lifestyle characteristics, As a result of this process, Zimmerman/Volk Associates has identified 41 target market groups with median incomes that enable most of the households within each group to qualify for market-rate housing, and an additional 20 groups with median incomes in which a more limited number of households is able to qualify for market-rate housing. The most affluent of the 61 groups can afford the most expensive new ownership units; the least prosperous are candidates for the least expensive existing rental apartments. The MARKET POSITION ANALYSIS includes the following: Task L—Location and Site Evaluation Zimmerman/Volk Associates will evaluate the location, accessibility, visibility, infrastructure completion and condition of the 195-acre Somerset site to determined how its characteristics, constraints and opportunities influence its suitability for a mixed-use Traditional Neighborhood Development designed according to the principles of the New Urbanism. Task 2.—Draw Area Delineation Zimmerman/Volk Associates will identify the appropriate draw area(s) for new residential units in Story County and for the site, based on the housing market context, historic settlement patterns, migration trends, and other market dynamics. Task 3.—Market Overview Zimmerman/Volk Associates will evaluate the residential context in relation to potential residential development on the site, based on available supply-side data and field investigation by Zimmerman/Volk Associates' personnel. Task 4.—Determination of Market Potential Zimmerman/Volk Associates will determine the market potential for new housing units within a Traditional Neighborhood Development of the 195- acre Somerset site through target market analysis of households in the draw area(s). This includes: • Current household classification by market group within the draw area(s) for the site. ZIMAIE•RMAN/voLK ASSOCIATES, INC. 01/02/01 TUE 13:02 [T%/R% NO 63251 JAN-05-01 12 : 19 PM ZIMMERMAN.'VOLK ASSOC INC 908 735 4751 P_ 02 Ames, Iowa Page 4 January 2, 2001 • Qualification and filtering of the current draw area households by relevant criteria including, among others, mobility and migration factors, and propensity to purchase/rent new housing units. • Identification of those households within the draw area(s) with the potential to move to the Somerset site. Task b.—Determination of the Optimum and Target Residential Mixes Zimmerman/Volk Associates will determine both the optimum and target residential mixes for the 196-acre Somerset site. The optimum residential mix is directly based on the housing propensities of those households in the draw area(s) most likely to move to the site The target residential mix is based on the housing propensities of those households in the draw area(s) most likely to move to the site as modified by the site's current conditions—completed infrastructure and buildings. The optimum and target residential mixes will be correlated by household group (younger singles/couples, traditional and non-traditional families, empty-nesters/retirees); by tenure (rental and ownership); and by housing type (apartments, townhouses, detached houses). Task 6.—Establishment of the Optimum Market Position Given the existing site conditions, the optimum market position for the Somerset site will include the best achievable mix of housing types, configurations, lot sizes/densities and sizes, prices and rents. The optimum market position will include a development program for each housing type, as follows: • Building configuration; • Density or lot size; • Size range; • Market-entry base price/rent range; • Number of units; and • Absorption forecasts. Forecasts of attainable average monthly absorption will be based on Zimmerman/Volk Associates' understanding of the market dynamics of master-planned communities and properties planned using the principles of Traditional Neighborhood Development and will be derived through an assessment of the optimum sizes, prices and rents within the context of the market performance of any relevant existing properties in the market area. ZIMM[RMANNOLK ASSOCIATES,INC. 01/05/01 FRI 11:14 [T%/R% No 63411 JOIN-02-01 02 :07 PM ZIMMERMAN-YOLK ASSOC INC 908 735 4751 P . 06 Ames, Iowa Page 5 January 2, 2001 The optimum market position will also include appropriate neighborhood amenities and descriptions of target market buyers and renters. Task 8.—Implementation Strategy Zimmerman/Volk Associates will establish a development phasing program designed to realize those market and development advantages that are achievable given the physical condition of the site, i.e. completed infrastructure and buildings. In addition, marketing objectives will be established for Somerset; these objectives will provide framework for an effective sales and marketing program to be developed and executed by a local real estate marketing firm. CLIENT OBLIGATIONS The City of Ames will has provided information on Somerset's subdivisions, sales and conditions germane to the assignment as of October, 2000. The client will provide, as available and germane to the assignment, an outline of development constraints, physical, regulatory, and practical, as well as any other existing data to which it has access that it deems to be relevant. Acceptance of this contract by the City of Ames will guarantee payment of fees and reimbursement of expenses, as outlined below, in a timely fashion. SCHCDULING AND COSTS Zimmerman/Volk Associates will begin compiling and analyzing relevant data upon acceptance of this proposal. The completion (late of the study is predicated on timely acceptance of this proposal. As a general guide, the optimum market position is completed within two months of the delineation of the draw area(s). Assuming expeditious acceptance of this proposal, a timeline follows: Mid-February 2001 On-site field evaluation Draw area delineation February/March 2001 Target market analysis Determination of optimum market position Late March, 2001 Delivery of study The estimated total cost for this program is estimated at $23,200, calculated as follows: Market Position Analysis fee: $19,500 Estimated expenses: $3,700 Estimated Total Cost: $23,200 ZIMMC.RMAN/VOLT:ASSOCIATES. [NC. 01/02/01 TLTE 13:02 [TX/RX NO 63251 JAN-02-01 02 :07 PM ZIMMERMAN/YOLK ASSOC INC 908 735 4751 P_ 07 Ames, Iowa Page B January 2, 2001 Reimbursable expenses are based on one, two-person research visit, including a Zimmerman/Volk Associates principal. Travel expenses associated with additional trips—including meetings, presentations or workshop/charrette participation—have not been included in the calculation and will not be incurred without prior authorization by the client. Reimbursable expenses are charged as follows, with estimates based on recent comparable assignments: • Census, demographic, and consumer data, At cost— Estimated at $300 • Air transportation (one and one-half round-trip fares, Continental/Northwest mid-week coach, airport transit), At cost— Estimated at$2,200 • Auto rental, At cost— Estimated at $300 • Tolls, gasoline, and parking, At cost— Estimated at g50 • Lodging and meals, At cost— Estimated at $800 • Telephone calls and facsimile transmissions outside the 908 area code, At cost— Estimated at $25 • Delivery charges (air express, messenger service, postage, etc.), At cost— Estimated at 25 Total estimated expenses— $3,700 Expenses for the Market Position Analysis shall not exceed $3,700 without prior client authorization. BILLING, PAYMENT AND TERMINATION The total professional fee for this program is $19,500 and is due as follows: $9,750 upon acceptance of this proposal as an initial retainer. $9,750 upon receipt of the completed, bound study. Expenses will be billed periodically, or at the completion of the assignment at the discretion of Zimmerman/Volk Associates. Additional meeting and/or charrette fees will be billed as incurred, All payments are within 30 days of the billing date. Payments received after 30 days may be assessed a one-and-a-half percent (1.5%) per month late payment charge at the discretion of Zimmerman/Volk Associates. ZIMMERMAN/YOLK ASSOCIATES, INC. 01/02/01 TUE 13:02 [TX/R% NO 63251 JAN-02-01 02 :08 PM ZIMMERMAN-VOLK ASSOC INC 908 735 4751 P. 08 Ames, Iowa Page 7 January 2, 2001 The client acknowledges that if Zimmerman/Volk Associates must resort to legal action to obtain payment, then the costs of such action will be borne by the client and not by Zimmerman/Volk Associates should Zimmerman/Volk Associates prevail in such action. This contract can be terminated by either party with written notice. In the event the contract is terminated by the client, Zimmerman/Volk Associates will cease all work upon receipt of written notice. The amount due Zimmerman/Volk Associates shall be calculated according to the actual work completed as a percentage of the total project. ACCEPTANCE This agreement will become effective with the appropriate signatures below. One signed copy should be returned to Zimmerman/Volk Associates, together with the initial payment of$9,750, Upon acceptance with authorized signatures below, this document constitutes the entire contract between the City of Ames and Zimmerman/Volk Associates, Inc. Any modification to this agreement must be made in writing, signed by both parties, and attached to this document. The authorized signatures below show acceptance of the terms and obligations of this proposal by Zimmerman/Volk Associates, Inc. and the City of Ames. ��Irndd man orLIt N/Vc LK ASSOCIATES, INC. JanuaryI O1 The methodology, schedule, client obligations, fees, and payment method outlined above, as well as any signed attachments, are accepted for the client with the following signature(s) of responsible and authorized individual(s): For the client: Name Firm Date ZIMMERMANNOLK ASSt)CIATES, INC. 01/02/01 TUE 13:02 [TX/RX NO 63251