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Special Report: Retail in Downtown San JoseBy Broderick Perkins DeadlineNews.Com
Ace Hardware IT'S NOT certain if any of those merchants will actually open shop downtown, but that's a list of retailers obtained from a survey in anticipation of San Jose's latest redevelopment push downtown -- retail. During a period of several days, in an unscientific survey, DeadlineNews.Com asked business leaders, downtown neighborhood residents, activists and real estate sales people a simple question "What retail outlets would you like to see downtown?" The resultant list also includes recommendations found in "Retail in the Downtown: A View From The Downtown Residents and Neighbors," a report prepared for the Urban Land Institute (ULI) by Christi Welter, co-founder and co-chair of San Jose's Downtown Neighborhood Leadership Forum, a group of active downtown residents. The list also includes outlets mentioned in the ULI report, "Downtown San Jose, CA: Enriching the Quality of Retail Revitalization" Luring the right retail mix downtown won't be easy, but a good mix is a key component in the critical mass San Jose seeks for the historic urban renewal planned for downtown, experts say. Good retail can bolster more participation in existing and future social, civic and cultural activities by stimulating after-hours foot traffic from transient day workers and from the growing number of residents moving into the area. With more foot traffic, perhaps downtown San Jose won't go to sleep every night after the sun goes down. "It's an issue of livability. People aren't interested in the huge box stores. They are interested in creating a destination where people come and shop. It's all designed with unique places that provide various services people need as residents. Look at what Willow Glen has done," said Welter. A year after the ULI study said San Jose suffered from a "disconnected" downtown with "no sense of place", the San Jose Redevelopment Agency is still a season away from signing the first of what could be dozens of new retailers to fill 300,000 square feet in the proposed five-block, 1.6 million-square-foot redevelopment project on the drawing boards. The agency is still grappling with the proposed plan presented by the approved New York-based master developer Palladium Co. The proposal, downtown San Jose's largest ever urban mixed-use project, includes commercial, residential and entertainment projects, as well as retail outlets in an area that spans most of five city blocks. Planned retail mix includes "anchors," services, dry goods, entertainment "We are now in active discussions with them to have a development agreement by the fall signed and ready to go so they can then start doing their project," said Harry Mavrogenes, deputy executive director of San Jose's redevelopment agency. Not yet naming names, the agency says it is considering a certain retail type and mix. "It will be a mix of retail that serves the office market, people who live downtown and new residents coming downtown," said Harry Mavrogenes, deputy executive director of the San Jose Redevelopment Agency. Mavrogenes said redevelopment is seeking so-called retail "anchors," typically large department stores designed to maintain foot traffic in shopping districts. The agency is considering anchors for the north and south ends of the downtown redevelopment project. The project stretches from the closed United Arts cinema complex near San Carlos Street between First and Second streets at the south end, to the "Mitchell Block" bounded by St. John, Santa Clara, First and Market streets at the north end. "We hope to have two major anchors, one at the Mitchell end and at the other end at 'Block Three'," next door to the San Jose Rep, Mavrogenes said. Don't expect Macy's or Nordstrom's or a return of JC Penney's to downtown. "They could be a small department type stores, nothing to make it into a Valley Fair. Maybe home goods stores of the 40,000 to 50,000 square foot size range," Mavrogenes said. He also says to expect theaters, entertainment venues, more restaurants, cafes, perhaps another hotel, apparel stores and the other "usual suspects" found in shopping centers and malls. San Jose wants to spend $5.1 million to renovote the Jose Theater at 62 S. Second St to lure the Improv comedy club. With city council's approval on June 26, more laughs will be heard downtown by years end. The redevelopment agency is also spending $5.7 million to renovate the former Woolworth Building on South First Street to house a House of Blues 24,000-square-foot night club and restaurant which should open a few months later. Palladium also recently pitched San Jose's redevelopment plans to retailers at the International Council of Shopping Centers' conference in Las Vegas in May. The redevelopment agency is confident the Westfield Valley Fair expansion and the high-end Santana Row mixed-use, boutique village under construction across Stevens Creek Boulevard won't pose a threat to retail plans downtown. "There's still a good market for downtown. A lot of standards have changed over the years. The use of radius restrictions have shrunk in denser metro areas like ours because there is serious retail interest in downtown," Mavrogenes said. Lease, competitive, demographic obstacles Radius restrictions or radius clauses in retail leases are designed to help a retailer avoid cannibalizing it's own receipts by placing more than one of the same outlet brand within a certain radius, say five or 10 miles or more. Some clauses also prevent competing retailers from operating within the same radius. Landlords like the clauses because they help the landlord stabilize income. "The landlord doesn't want a tenant opening a competing store that could create a vacancy. They want to maximize sales in the one store. They are very typical in a shopping mall," said Mark Ritchie, president of Ritchie Commercial, Inc. Ritchie and other commercial real estate experts generally agree the retail build up on Stevens Creek Boulevard and radius clauses won't be a factor affecting downtown's chances of luring sufficient retailers. "There will be a different mix of tenants. Entertainment, food and drink, limited kind of service retail. After all is said and done, I don't think we are going to see the dry goods retail merchant in the downtown core. Even if we didn't have the Valley Fair-Santana Row duet, we don't have the demographic and density needed to support that," said Ritchie. Downtown is a tough draw for the demographic crowd with a penchant for shopping. Young families with kids want to be near retail centers, but schools with competitive test scores are often more important. Years ago, the Pavilion, an outdoor mall across First Street from the Fairmont Hotel, offered limited, boutique-style shopping without a major retail anchor at a time when residents in adjacent neighborhoods were largely blue collar workers. Eventually, the shopping center was gutted to make way for Above.net operations. The latest redevelopment strategy for the downtown core includes a massive housing component and plans for more parking, both to create a captive shopping audience. More housing is designed to broaden downtown's demographic mix and, contrary to Ritchie's comments, broaden the mix of retailers. "We are going to create a downtown you can't replicate in a mall," said Scott Knies, executive director of the San Jose Downtown Association. "There will be a number of restaurants as part of the initial wave, but more services as we produce the housing units. I can see us getting more of the type of home goods, nursery, hardware type of stuff that would be great after the Walgreens and Zanattos, which we didn't have five years ago," Knies said. The ULI report also recommended San Jose go after a broad group of retailers. "National fashion chains, including the Gap, Old Navy, and Banana Republic, are leading the charge back to downtown retailing. Other retailers, such as Urban Outfitters, Talbots, and Star-bucks, actually prefer urban and main street locations to shopping malls. Home Depot (with its Expo and Villager's Hardware stores), Bed Bath and Beyond, and Restoration Hardware exemplify national retailers that are experimenting with small-store home improvement and design concepts that would appeal to downtown San Jose shoppers," the report says. ULI also recommends San Jose not let existing retailers slip away to cities that already have vibrant shopping districts. "Likewise, local retailers that can round out the downtown retail mix should be incubated downtown rather than encouraged to relocate to Willow Glen, Los Gatos, Palo Alto, or Santa Cruz," the report said.
Copyright © June 29, 2001 for Broderick Perkins, executive editor of DeadlineNews.Com, has been a consumer and real estate journalist for 25 years. His award-winning work has appeared in major-market newspapers and leading realty Web sites. |
