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ECONOMIC ANALYSIS DOWNCOAS
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SUMMARY ECONOMIC ANALYSIS OF
DOWNCOAST GROWTH AREA
NEWPORT BEACH GENERAL PLAN STUDY
Development Research Associates
July 28, 1972
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Introduction
This memorandum reviews, in summary fashion, the anticipated growth of the
"downcoast"area between Newport Beach and the approximate area of Wishbone
Hill, as analyzed by DRA from data provided by CD staff, and attempts to place .
it within the overall growth picture developed by DRA for the Newport Area in
its preliminary economic base and growth projections study.
This area, located within the Irvine Ranch, forms a part of the Newport Beach
Market Area as defined by DRA for the economic portions of the General Plan
Study (see preliminary economic base/projections report and summary), and
is currently slated for massive planned development of residential, retail and
specialty commercial, hotel/motel, commercial recreation, and related public
open space, and other supportive uses, over the next 23 years.
It should be noted that general magnitude of population and land use growth in
this portion of the NBMA and Orange County, as a whole, has been assumed by
Orange County planning, SCAG and others in developing population, employment
and general land use projections for the county and various statistical subareas
within it, based upon information from previous conceptual plans for the area.
Our review of these "general magnitude" figures with respect to current data
provided by CD staff indicates a high degree of correlation, with the result that
we have utilized our regional and market area projections developed in the
economic base study for this analysis as well.
Economic and Physical Context
The economic context of this development, as we understand it, is a "Coastal
Resort and Recreation area, in concert with diversified residential development, "
which will be developed on approximately 1, 400 acres of land, with large areas
left in their national state or developed with extensive landscaping.
It is apparently not intended to be a direct continuous extension to the south of
the single-family development pattern, currently found in Corona del Mar and,
with the exception of the convention/conference/tourism market for hotel/motel
uses, its nonresidential land uses are expected to serve only residents within
the scope of the project, with some possible local retail market from the
southern Corona del Mar area.
The residential uses contemplated will have, by nature of the strong amenity
features of location and view as well as the levels for selling price and rent, a
regional market appeal, as does in fact, any housing located in the Newport i�Tts
market area, either as primary residence or as a seasonal or second home.
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This latter fact is significant, since this proposed development is within what
DRA has chosen to characterize as the Newport Beach Market area or "sub-
region. " (See also Economic Base Report)) Most cities undertaking an
economic and planning analysis tend to characterize themselves as the focus of
various primary and secondary "market areas; " whether or not this is
actually the case, but it is DRA's contention that Newport Beach is, and will be
validly the primary focus in name, image, interest, and activity, of an
economic and physical growth concentration over the next two decades along
this portion of the Southern California coastline even if it restricts the extent of
this growth occurring within its current city boundaries to less than "trend"
growth levels.
This is particularly true with respect to coastal rather than inland growth,
which will favor Newport Beach, the downcoast area, and Laguna Beach, with
inland growth concentrating in Huntington Beach, Costa Mesa, and other portions
of the Irvine area.
DRA does not see under "trend growth" assumptions any slackening of residential
and commercial recreation/resort development in Southern California or
Orange County within the next two decades and in fact we see continuing
increasing pressure on specific areas such as Newport to accommodate an
even neater share of this total market potential than currently,as described in
our preliminary trend growth projections report.
Thus, demand for coastal residential uses, both first and "second, " or
seasonal homes, as well as for related commercial recreation/resort uses is
expected to exceed supply for the next 20 years within the NBMA Coastal portion,
causing both extensive recycling pressures on already built-up older coastal
areas (Newport Beach), as well as "first cycle" development pressures in as-yet-
undeveloped very high potential areas such as the downcoast area coastal
portions. The question, as we see it, is not whether or not the development
will occur, but more appropriately, how soon, how fast, and in what form, if
we assume that trend growth forces will prevail. 1
Initial findings of the DRA Housing Market element of the General Plan Study
tend to confirm this demand/supply imbalance.within the county at both ends of
the housing spectrum: amenity-oriented housing demand and demand for low and
moderate income housing will both continue to outstrip supply, while a relative
balance (over the long term) will be struck within the middle-through-upper-
middle and non-amenity-high-income housing ranges.
1For a definition of the assumptions and nature of trend growth, the Economic
Base Study for the General Plan should be consulted. It should be noted that
this growth is expected to occur, even with coastline growth controls and local
growth controls, since the development is imminent and the controls are. not�?�rc\sry'n
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Thus the implications of the growth of the downcoast area can be characterized
as:
o An extension of the market forces and development patterns
(with some exceptions due to topograhy and development
objectives) currently found on the most recent urbanized
residential portions of Newport Beach.
o An extension of the physical perception of the "Newport
area" which now already encompasses portions of the Irvine
Ranch, Costa Mesa, and Huntington Beach, as well as New-
port Beach itself, and which will act as a self-perpetuating
image and market factor, whether or not the downcoast area
is actually within the actual city boundary of Newport Beach.
This is particularly likely due to the fact that most recent and
current urbanization on the edges of Newport Beach has
occurred to the south and southeast on Irvine Company land
in the direction of the downcoast area,
o A pattern and magnitude of growth already generally antici-
pated by County, Newport Beach and other entities, since
planning of the entire Irvine Ranch, on an "order of magni-
tude" level, has been underway since the early 19601s, and
general figures of anticipated growth of this area have been
incorporated in most regional planning efforts by SCAG
and Orange County. It should be noted, however, that
current figures represent a reduction of approximately
15% over the plans of the mid-601s, and that the development
timetable has been extended into the mid-1990's, from
earlier schedules which indicated much of the development
occuring by the mid-80's. (Assumed result of delay from
original starting date estimates)
o Following from the first two items above, the development will
operate essentially as an economic and physical "extension"
of the existing Newport-Corona del Mar area, rather than as
a self-contained economic and physical entity such as a "new
town" or a separate small city. There is an exception to this,
to the extent that the resort-related specialty commercial and
recreation uses will tend to form a "sub-community" of
activity and intensity of use within the overall development
much the same as Balboa Island on a much smaller scale now
forms within the overall Newport Beach community.
o A possible relieving of various growth pressures on the existing
Newport Beach area, including: the potential diversion of a +^�
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portion of the leisure/recreational market which would, as
the region's population increases and intra-regional mobility
remains high (freeways, etc. ) put increasing seasonal loads
on Newport Beach recreational, circulation; and public safety
• elements; lowering of recycling pressure on some older
portions of Newport through provision of additional middle
price range single and multiple family units in NBMA and
broader range of living area locations within NBMA for some
socioeconomic groups as are currently,attracted tothe New-
port Area; clearer definition of market potential for various
types of hotels in NBMA, since currently planned new con-
struction appears to be based on a "fuzzy" mixture of business
visitor (existing), convention development (hoped for), and
tourism (loped for) markets.
o The creation of an annexation -- no annexation issue for the
City of Newport Beach -- revolving primarily around cost-
revenue questions, but also related to major growth policy
questions in which the downcoast area would appear to provide .
a number of benefits to the existing and potential "future"
Newport Beach, but also represent an actual increase in the size
of the city (if the downcoast were annexed) which may not be
a desirable objective, no matter what the offsetting benefits.
These questions can only be answered by a thorough cost-
revenue analysis and a clear expression of issues, benefits,
problems and other aspects of the growth policy question.
o It is assumed that, to protect its own economic interests, the
Irvine Company will not project or permit development types,
magnitudes, or timing to occur in one or more portions of its
holdings which are in conflict with those in other portions of
its holdings. It is further assumed that, since Irvine can,
through its single ownership of considerable current potential
development areas, control a number of market forces in the
Newport Market Area, it will not "dump" land onto the develop
ment market to realize a quick return (without regard for
market saturation), thus creating conditions which might
begin to reflect negatively on the market success of the Irvine
properties and the Newport Market Area.
o It is also assumed that most developers of downcoast and -other
Irvine properties will attempt to market "products" as early
as possible in the total development period for the downcoast
area, so that some type of master marketing schedule and
controls system will have to be utilized by both Irvine and
County (or, if annexed, by Newport Beach) to insure that
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overbuilding or, excess of service and circulation capabilities
does not occur at any stage of the project.
Downcoast Development Statistics
CD Staff has furnished DRA with figures concerning the anticipated development
of the approximately 1, 400-acre downcoast area between the Corona del Mar
areas of Newport Beach and the approximate area of Wishbone Hill. These
figures have been compared with total area growth estimates by SCAG, Orange
County Planning, DRA and others, and have been utilized as the basis of this
analysis. They are grouped by land use category:
o Residential (Dwelling Units)
Single Family Detached (start 1974)
1980-1200 units
1990-1904 units
Single Family Attached (start 1974)
1980- 920 units
1990-1634 units
Multi-Family (start 1977-78)
1980-2810 units
1990-6793 units
(An alternate boundary for this portion of the downcoast area
would include development extending to the east side of Wish-
bone Hill -- above figures only include development to west
side -- the revised multi family totals resulting from this
boundary extension are shown below. )
Wishbone Hill East .Extension Multi-Family (start 1977-78)
1980-3270 units
1990-8153 units
The above figures indicate that some 4930 to 5390 new dwelling
units would be located in the area by 1980, and that by 1990
total dwelling units could range from 10, 331 to 11, 691, for
possible 1980 and 1990 populations of 16, 200 and 35, 100
respectively.
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o Local Shopping-Retail Commercial
Small center containing 70, 000 sq. ft. of gross leasable area
Small center containing 60, 000 sq. ft. of gross leasable area
Small center containing 7d, 000 sq. ft. of gross leasable area
Small center containing 100, 000 sq. ft. of gross leasable area
Small center containing 90, 000 sq. ft. of gross leasable area
TOTAL 390, 000
Staging of the above, in coordination with residential development
and other uses, is expected to be:
3 centers developed by 1980 totaling 230, 000 sq. feet
1 center developed by 1981-1990 totaling 90, 000 sq. feet
1 center developed by 1991-1995 totaling 70, 000 sq. feet
(If the development area is extended to include Wishbone Hill
and the area between it and the ocean, and additional retail
commercial increment is added -- 40, 000 sq. feet by 1980
and an additional 40, 000 sq. feet by 1990. )
These commercial uses could be expected to generate approxi-
mately 1, 000-1, 100 primary jobs by 1990.
0 Hotel/Motel
One complex containing 75 rooms
One complex containing 300 rooms
One complex containing 300 rooms
One complex containing 300 rooms
One complex containing 150 rooms
One complex containing 150 rooms
One complex containing 75 rooms
TOTAL 1, 350 rooms
Staging of the above hotel/motel growth is expected to be:
4 complexes by 1980 totaling 1, 050 rooms
2 complexes by 1990 totaling 225 rooms
1 complex by 1995 totaling 75 rooms
(If the extension of development areas described under retail
commercial and residential uses above takes place, an additional
two complexes totaling 375 rooms are contemplated for develop-
ment by 1980. ) (Total 1980 rooms would then be 1, 425. )
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o Other Uses
5 Service Stations
4 Elementary Schools
1 Junior High School
1 High School
250, 000 sq. ft. of specialty commercial
(150, 000 by 1980)
(100, 000 by 1990)
22 acres of commercial recreational uses (by 1980)
24 acres of "convention center" use (by 1980)
155 acres of gold course (18 holes) (by 1980)
22 acres of ".parking grove" (remote clustered parking)
(by 1980)
The above statistics generate the following DRA-estimated
population and employment levels for the downcoast area:
1980 resident population 15, 000-16, 200 persons
1980 full-time employment 1, 900- 2, 000 persons
1990 resident population 32, 500-35, 100 persons
1990 full-time employment 2, 700- 2, 800 persons
Summary Conclusions
An analysis of the preceding implications and statistics in the light of the
preliminary findings and projections for the trend growth economic base
component of the Newport Beach General Plan, developed by DRA, indicates
that:
o The projected general extent, type and timing of residential
development is consonant with DRA's preliminary estimates
of housing demand for the Newport Beach Market Area and
Orange County, and appears to offer no significant negative
economic or physical impact upon the existing and projected
Newport Beach community, under trend growth assumptions
currently utilized. In fact, depending upon the eventual pre-
cise market structure(s) of the downcoast housing supply, it
could, alternatively: provide some relief for excessive re-
cycling pressure on older Newport Areas; re-orient the future
focus of NBMA higher value housing away from Newport Beach,
causing a potential "plateau" effect or •gradual decline in de-
sirability, condition, and value of Newport Beach units; pro-
vide a reinforcing extension, in numbers and choices of '
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location, of housing, life styles, and economic elements which
currently make the Newport Beach area popular.
o The projected development of "local shopping" commercial
uses, as well as schools, service uses, and other population-
related land use elements appear to be in agreement with
recognized standards, DRA estimates of total commercial use
for the NBMA and Orange County, and the apparent timing of
the growth of the downcoast area, which foresees a major com-
ponent of growth occurring by 1980, thus requiring supporting
commercial, etc. No general economic conflicts seen with
projected Newport Beach commercial development since the
new commercial would be serving new local populations only
and not competing with regional or sub-regional markets.
o The projected development of commercial recreation, golf
course, and other leisure activities is seen as a further ex-
tension of a recognized-market in the NBMA in which demand
already generally exceeds supply, and which is oriented both
to the potential resident of the downcoast area, as well as
users in the NBMA and Orange County. Tourism demand for
such facilities in concert with the other resort elements of
the downcoast area will reinforce this regional visitor demand.
DRA therefore finds no conflict between these elements and
the trend growth projections for the City of Newport Beach.
o The projected development of a resort/convention/recreation
complex including a large number of hotel rooms oriented pri-
marily to tourism and conference use; a sizable amount of
related specialty retail; related, undefined "convention facilities"
and supportive parking and services development (along with
the recreation uses previously described) appears to DRA to
be an ambitious undertaking with a number of "pros" and
"cons":
Pro: ° It provides a unique "image" development in keeping
with the scenic and climatic potentials of the area;
° It provides employment;
It generates economic potential in the market areas.
Con: ° It creates potential conflicts with announced plans of
developers already in the development process else-
where on Irvine land, within the City of Newport Beach.
° It may create traffic problems along the few arterials
which can feasibly serve the downcoast area, parti-
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cularly as loadings increase due to buildout of the
entire Newport Beach and downcoast areas in the
late 1980's and early 1990's•
° It appears to be heavily seasonal in nature and de-
pendent upon strong'promotional techniques for
other aspects of its market (convention), possibly
exacerbating seasonal economic swings already
characterizing the economy of the NBMA.
Without more detailed information on the actual nature of the
proposed development and more detailed market information,
it is difficult for DRA to render a conclusion on the economic
"appropriateness" of this aspect of the downcoast development.
However, the following questions appear to require further
investigation:
° In view of the massive overbuild potential of NBMA hotel
rooms projected by the DRA preliminary economic base
report, based upon current development plans in the
region (1980 supply expected to exceed demand by 200%),
we question the total number of hotel rooms projected
for the resort development by 1980. This magnitude of
resort/tourism-oriented hotel development would severely
diminish this aspect of total market potential for other
existing and proposed hotels in the NBMA, including
several which are currently or would be located on other
Irvine properties,
° Similarly, many existing and proposed hotels, some
also on the Irvine properties, are basing a major portion
of their demand assumptions on the conference-small
convention market which is strongly interlinked with both
business visitor and tourism markets in the NBMA. Our
interpretation of the 24 acres of "convention facilities"
contemplated for the downcoast area is that they will be
oriented toward conference types of convention, rather
than massive national or regional efforts, and that the
resort/recreation nature of the area will reinforce this
orientation. This aspect of the development's market
orientation should be more closely examined to determine
if it and developments planned elsewhere in the immediate
Newport Beach area are working at cross purposes,
possibly resulting in eventual lowered occupancy rates
and general oversupply in the area.
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° Can even a resort project of this massive scale support
a quarter of a million square feet of specialty commercial,
as currently projected? .Admittedly, a considerable
amount will be in restaurants, resort apparel, sporting
goods, and other resort-supportive uses, but in the ab-
sence of more definitive information concerning the pro-
posed development of this use, we would question the
development of greater than 150, 000 square feet, based
on total resort size, past experience and recognized mar-
ket standards, (The Cannery, Ghiradelli Square, and the
remaining specialty uses within the entire Fishermen's
Wharf area of San Francisco together total only 180, 000
net square feet, for a considerably greater market area.
than could be expected for the downcoast development. )
Taken in balance, DRA, feels that the downcoast development appears both
sound and exciting in concept, but we believe that major questions concerning
the detailed market aspects of various proposed land uses for the concept
must be answered more definitively before the timing and magnitude of these
portions of the development could be considered as commensurate with New-
port Beach (and NBMA) public sector growth objectives, or as sound from a
private marketing and eventual development economics standpoint.
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