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Downtown Retail Vacancy Rate Still High

By Riya Bhattacharjee
Wednesday April 08, 2009 - 06:34:00 PM
A street musician plays in front of the vacant site of the former Act I & II theater.
Riya Bhattacharjee
A street musician plays in front of the vacant site of the former Act I & II theater.
Downtown Berkeley’s retail vacancy rate has dropped slightly from last year, but is still higher than several of the city’s other shopping districts.
Riya Bhattacharjee
Downtown Berkeley’s retail vacancy rate has dropped slightly from last year, but is still higher than several of the city’s other shopping districts.

On a recent warm spring evening, the streets of downtown Berkeley were sparsely populated—unusual for a Friday night. 

A small but steady stream of people could be seen trickling in and out of Shattuck Avenue’s bars, restaurants and cafes—Angeline’s was packed, and so was Thalassa—but few window shoppers.  

For a long time now Berkeley’s downtown hasn’t been bringing in the kind of foot traffic usually generated by retail shops—a fact city officials acknowledge but counter with the claim that the downtown is fast emerging as an arts, entertainment and dining destination. 

However, Berkeley Economic Development Manager Michael Caplan is quick to point out that this doesn’t mean retail has taken a backseat. 

On the contrary, the city of Berkeley has embraced an aggressive campaign to make downtown retail space more attractive to merchants, expediting design review for minor zoning issues, approving building permit fee deferrals for development, and considering modification of the zoning ordinance to help restaurants, quick-service joints, department stores and grocery stores set up shop more quickly. 

“There’s not a whole lot of retail expanding in downtown Berkeley,” said City Councilmember Jesse Arreguin, whose district includes downtown. “There are very few businesses here that provide the goods and services we need to make the downtown a retail destination and neighborhood-oriented commercial district. That’s why it’s important to attract new businesses and create more foot traffic.” 

The city’s Office of Economic Development reports downtown vacancy rates for ground-floor retail space in the first quarter of 2009 to be at 15.11 percent, slightly lower than the 16.20 percent recorded a year ago, but higher than the Fourth Street, North Shattuck and Telegraph Avenue shopping districts. 

Caplan attributes the decrease to the few new stores opening over the last year, but admits that the city is having a problem finding retailers for some of the larger vacancies which make up a sizable chunk of Shattuck. 

“It’s not just Berkeley, there’s a broader change happening in the economy,” he said. “Not a whole lot of retail is interested in moving into large spaces right now. However, a lot of smaller spaces still have people looking at them. There’s always some discussion. It’s never quiet.” 

A quick survey of the number of vacant spaces on Shattuck carried out by the Planet and Arreguin April 3 revealed 15 vacant storefronts in the nine-block span between University Avenue and Dwight Way. 

This includes at least five retail spaces where a frozen yogurt shop, a bakery, a restaurant and other sundry businesses are slated to move in, vacancies the Office of Economic Development said they also considered during their own survey. 

Arreguin said vacancies on prominent corners and locations were making the problem more obvious. 

Ross clothing store, Cody’s Books, Cold Stone Creamery and Shoe Pavilion, all of which occupied large spaces in the downtown, have either left town or gone out of business, adding to the list of longstanding vacancies in the area. 

Caplan said that Ross’s departure alone had spiked the vacancy rate from 13 percent in the last quarter of 2007 to 16 percent in the beginning of 2008. 

“Not a whole lot of large stores are looking for 30,000 square feet of space spread across two stories,” he said, referring to the department store’s former quarters. “Am I surprised by it? No. Do I think it will eventually be leased? Yes.” 

Of the two vacancies on Shattuck Square, Caplan said 91 Shattuck Square had already been scooped up by a bakery. 

“That’s the kind of thing I am talking about,” he said. “There are a lot of small spaces that have been leased but just haven’t had people move in yet. So all we are seeing is cardboard and paper pastings on the windows.” 

Some vacant storefronts have art or pottery by local artists and Berkeley High School students displayed on them, an effort put together by the Berkeley Downtown Association and the city’s Civic Arts Commission to make empty store windows look “more friendly.” 

A 6,000-square-foot space in the former Act I & II Theater on Center Street, which the zoning board approved last year for restaurant use, and which local developer Patrick Kennedy is remodelling, is currently sitting empty. 

“That kind of a space can be hard to lease at a time like this,” said Caplan. “It’s very high quality and there’s not much money floating around right now. But it’s a major investment by Kennedy to make it more desirable, and when the market is right, it will lease easily.” 

Caplan attributed the vacancies to a tightening credit market, high rents and the overall economic downturn, adding that he was confident that eventually things would take a turn for the better at the end of the year. 

“Downturn is in a transition and has been for a while,” he said. “We are constantly thinking of how we can improve the tenant mix.” 

The Berkeley Planning Commission’s draft Downtown Plan—which seeks to revitalize the city’s downtown center and is pending approval from council—states that despite its traditional “main street character, with buildings built to the edge of the sidewalk, windowed storefronts... eclectic mix of buildings, variety of places to eat, shows to see, a great library, a widely used YMCA,” and an internationally renowned university right next door, “many people—including many Berkeley residents—are disappointed in today’s downtown.” 

The document describes how citizens reminisce about a vibrant, “family-friendly” downtown that had existed through the 1980s, which makes them nostalgic for Edy’s Ice Cream, the Hinks department store, JC Penney’s, the Blue and Gold Market, Morrison Jewelers and Tupper & Reed music, which were core to the community’s daily needs, and not simply places to grab a quick bite or a movie. 

It says that although creating the “old downtown” in present-day economic conditions will be virtually impossible, bringing back the old energy will not. 

Arreguin said that he hoped the city’s short-term efforts to help retailers would pave the way for a better downtown. 

“We are just making it simpler for retail to move in,” said Steve Ross, the city’s planning manager, of the accelerated design review process. “If someone wants to change their sign or make a minor alteration to their shop window, we don’t want to hold them up.” 

Mid-term goals to improve the flagging retail environment include revising the zoning code to reflect the yet-to be approved Downtown Area Plan and crafting a comprehensive parking strategy. 

Janet Winter, who has co-owned Games of Berkeley on Shattuck with her husband for the past eight years, blamed the vacancies primarily on high rent and shoplifting. 

“Merchants are just tired of dealing with that stuff,” she said. “We have people who come in on a semi-regular basis to steal certain things, like for instance a deck of cards. Then there’s the rent—it’s so high that most small businesses can’t afford to open up. When the economy was strong, rental prices were high. Now that the economy is weak, rental prices are still high. The landlords think they can sit on it and that the market will come back. They don’t understand our problem.” 

Ito Ripsteen, a partner with Gordon Commercial, which owns much of the retail space downtown, said that for the right kind of tenant, “rent would not a problem.” 

The average cost of leasing space downtown ranges between $3 to $4 per square foot, he said. 

Ripsteen said that his company was breaking down larger floor spaces into smaller portions in an effort to make leasing more flexible. 

“There’s not a lot of large soft goods stores that want to move downtown,” he said. “Clothing stores want to move to Telegraph, because they want to have that synergy with students. We have more offices downtown though because it’s cheaper than Oakland.” 

Caplan said that he was hopeful that with new developments such as the Shattuck Hotel, the Arpeggio condos, Freight and Salvage and Trader Joe’s coming to Berkeley in the next year, there would be more activity in the downtown. 

However, Arreguin said that he was not sure whether development alone would help create more retail. 

“Yes, it’s true, there are a lot of projects slated to be completed, but we don’t know if that’s going to improve the retail environment,” he said. “I don’t think anyone knows for sure at this point.”