WESTERN SNAPSHOT, OCTOBER 2005

Coachella Valley, California Retail Market

Battaglia

Heading east along Highway 111, the main retail corridor, there's John Wessman's crack at downtown retail gentrification in Palm Springs with The Promenade. To the southeast in Cathedral City, prime redevelopment projects are just starting to show promise as developers such as CK Development and Tri Millennium post solid results. The Cove project on the south side of Highway 111 will be stapled with a Sheraton, Holiday Inn and an In-N-Out Burger/Starbucks Coffee corner.

Passing through Palm Desert, where corridor infill space is at a premium $50 per square foot, one will encounter the dust coming from La Quinta's retail windstorm. Further to the east along the Coachella corridor, there's Indio's rapidly disappearing frontage. Plans for Polo Square would bring 10-story condo high rises over 135,000 square feet of retail to the city's gateway area. Located at the intersection of Highway 111 and Arabia Street, the proposed Indio Court Gateway project is a fantastic mixed-use offering very similar to what is seen today in Palm Springs' core.

Thanks to a burgeoning residential sector, Indio and La Quinta will vie in a couple of years for a majority share of the $1.06 billion in retail revenue now enjoyed almost exclusively by the west Valley cities. With Riverside County's $30 million investment in Mecca's infrastructure, that city is sure to contribute to the valley's strong retail development by 2007.

The Coachella Valley economy is affected greatly by unique demographic and development trends: a seasonal population swell, a wide range of consumer buying power, Native American gaming and entertainment, and substantial golf course community development (120 courses and growing). There are now nearly 350,000 permanent residents with a reported 53 new residents arriving each day. The addition of both a Cal State San Bernardino campus and the UC Riverside-sponsored graduate school in Palm Desert will add a combined total of 20,000 potential students to the area over time. The valley's retail sales increased by 11 percent in 2003 and 13.7 percent in 2004, according to Wheeler's Publishing.

This year has seen many big retail headlines in the area. In March, Kohl's opened its first valley store in La Quinta, filling an old Wal-Mart location after the retail giant left to open the first California Supercenter nearby. Both developments are helping to shift the retail center of the valley farther to the east. A second Circuit City opened this year in La Quinta. Just across Highway 111, Henry's Market will make its area debut in The Pavilions while Best Buy and Bed Bath & Beyond are slated to operate their second stores there. In Palm Desert, The Desert Gateway, a 70-acre, 644,000-square-foot Wal-Mart Supercenter/Sam's Club-anchored development, is breaking ground. The Home Depot is adding another store in Palm Springs with another location proposed for north Indio. Lowe's Home Improvement Warehouse is moving into Palm Desert while the valley's third Trader Joe's will open for business shortly in La Quinta.

The El Paseo shopping district in Palm Desert is the valley's first successful, long-term promenade to introduce high-end outdoor mall shopping with such staples as J. Jill, Cole Haan, Chico's, BCBG Max Azaria, White House/Black Market, St. John's and Lenox. Average annual sales volumes per square foot in these stores rival indoor mall averages of $250 to $300 per square foot. On this “Rodeo Drive of the Desert,” the sale of the 35,000-square-foot El Paseo Village for approximately $15 million may pave the way for a much-anticipated Neiman Marcus, which, coupled with the well-managed Saks at The Gardens, could mean tenants might see sales in the $500 per square foot range.

Farther north in Rancho Mirage, the Bob Hope interchange slated to be completed in 2007 will enhance possibilities for fantastic retail success at the two large projects proposed for that intersection: a 632,000-square-foot neighborhood/lifestyle center called The Retreat and, across the road, connected by footbridge, an expanded Aqua Caliente Indian Casino Hotel with retail.

Vincent Battaglia is a commercial real estate broker and owner of Palm Desert, California-based Battaglia & Associates.

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