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Taking downtown SLO's temperature

Commercial players from mom-and-pop shops to Tom Copeland weigh in on the future of downtown

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Christmas is just around the corner, which means we're in the midst of the busiest shopping season of the year. The Dalidio Ranch shopping center proposal has passed. The Copelands' gentrification projects continue to bring national chain stores to downtown SLO. Seismic retrofitting is still creating worries for downtown's mom-and-pop establishments.

In the midst of so much retail change, one might be forgiven for

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# wondering what downtown San Luis Obispo will look like in the coming years. Will independent businesses find a way to thrive? Or is the future of downtown filled mainly with nationally recognized chains?

Those are fair questions. The city core has changed considerably in recent years, and in some people's opinions not always for the better. Still, a quick tally of independently owned retail and restaurant businesses downtown puts the total at around 230, while retail chain stores and restaurants number only about 25.

Despite that ratio and though an exact comparison of square footage devoted to each type of business isn't known some small-business owners feel that chains are destroying the boutique-style shopping that's made downtown SLO so unique and vital. Others admit that the corporate presence can be a draw for shoppers.

While small-business owners worry about potential challenges due to retrofitting and Copeland redevelopment projects, Copeland Properties worries about stores that could and should be located in the downtown moving to the city's periphery. Where the future will lead is open to speculation, but more than a few proprietors are nervous about what's to come.

Going, going, gone
Clearly, as chains move in and small businesses feel the squeeze of higher rents driven by the costs of retrofitting, more and more longtime local businesses have left or are leaving. Fifteen-year-old Edgeware is gone. Jo Anne's, which had been in business 28 years, just closed. Meridian, which survived 15 years, will relocate out of the downtown in about a week. Stigers Optical Images is going. This list goes on.

Edgeware owner Gary Wallace, who shut his doors in June, blames the closure on rising rents and an anti-small business attitude: "I was downtown for 15 years before I bailed. I exercised my option to re-up my lease, and then sold. If you want the truth and not stories to deceive the public, I am here to give it."

Wallace cited rents that rose from $2.65-a-foot to $4-a-foot in five years and a 25-percent drop in business after losing the Court Street parking lot as elements that led to his shop's demise.

David Katz owner of the now-closed Hudson's Grill and Wallace have since gone into business together to open Pacific Fish and Chippery on Higuera Street in a building owned by Wallace. Katz, like his partner, believes that the lack of a parking element in the Court Street Project spelled doom for his 21-year-old bar and grill.

"Business was down 57 percent after the parking lot closed," he lamented. "Business as well as the integrity and spirit of this town are down. Our easy-going attitude needs to stay intact."

Other small, locally owned businesses put blame on seismic retrofitting for forcing them out and with higher rents looming upon their return, many feel they won't be able to afford to move back in.

Larry Kowalski, owner for 29 years of Mo's Smokehouse BBQ (previously The Assembly Line), said that his restaurant is moving out because of the retrofit.

"We'll open back up if we can find a new location we had our best year ever this year but we will not be going back [to our Higuera Street location] because our rents will go up substantially after the retrofit is done."


Retrofit fever
Central Coast Surfboards, which occupies a Higuera Street building that needs retrofitting, has been in business 31 years. Is owner Mike Chaney worried about having to move?

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# "Worried? In a lot of ways we'd prefer it, but it's a great location and I certainly wouldn't mind waiting it out," he said.

Unlike some independent business owners, Chaney is a pragmatist about the future.

"Commerce is commerce, and I'm not one to bite any natural business commerce," he said. "The nature of the big brand stores that have gone in up the street from us will eventually drive family businesses like us out of downtown because those stores are willing to pay the rents."

So what would Chaney do if his rent climbed to $4-a-foot?

"I've been at it for 31 years, and if it got to that point, I may be inclined to say, 'It's been a nice run, but that's it.' I certainly wouldn't work and not make money," he said. "Eventually if it goes that way, people would stop paying even a national chain's not going to lose money forever."

Like many longtime business folks, Chaney thinks changes downtown have had a negative effect: "I think it's lost its charm. There was a feeling of cool when you used to go downtown.... If they move McCarthy's to a new location, is it going to be the same? No."

In some cases, it's market economy not retrofitting that's driving businesses from the downtown core.

According to Meridian owner Eva Young, "Our move had nothing to do with retrofitting that building doesn't need it. Our rents were going up because the market will bear it. They're now asking $4.25-a-foot, and my former rent was 40 percent less than that. My options were up, and I want it well-known that I had a wonderful relationship with my landlord and a very fair lease: five years with two five-year options, and now it goes to market, and the chains are going in because they can afford the rent."

Though no deal has been inked, a Coffee Bean & Tea Leaf representative was recently in Meridian measuring the building. There's speculation that the national chain will become the new tenant. Does Young think chains such as Coffee Bean will make the downtown better?

"I don't," she said. "I've lived here since 1975, and even as a young girl, a teenager, I'd come over to the little boutiques. San Luis has always been known for its independent boutique specialty shops, and it's too bad it's turned into Anytown, USA. It's getting to be where it's like any other town. You can go to a Gap or Pottery Barn in any city, and I think people usually come here for smaller stores. I understand to keep things vital you need an influx of dollars, it's just unfortunate that we're moving in favor of chains rather than independents."

What does she say to those independent business owners who think everything is going fine downtown?

"Those who aren't concerned obviously haven't been affected," Young said. "Their lease hasn't matured and gone to market, and some are sitting on really old leases on really cheap rates, some paying less than $2 a foot. Eventually it will come with a bang."


And what about the Dalidio project?
"Obviously it's going to take dollars away from downtown, but I don't think that's as evil of an issue as what has happened to downtown itself: congestion and parking issues, problems of infrastructure never designed for the population growth we've seen, and added retail space on too-skinny streets," she said.

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# "It's definitely sad that the character has changed from what it once was and sad that smaller retailers are going to have an increasingly harder time making a living, but I do appreciate the more urban feel it has a little more vitality," she continued. "When I went into downtown in 1991, it was almost a ghost town. I understand the influx of national chains, but I'm very against the high-rise buildings that are planned. Three stories is okay, but beyond that and I've been in towns like this it gets to be two o'clock in the afternoon and you can't see the sky. That said, I'm not one of these diehard negatives."

San Luis Obispo City Economic Development Manager Claire Clark who started with the city as seismic coordinator said that she's heard over the years from downtown tenants concerned about how the retrofitting efforts will impact their businesses.

"People have become uncomfortable, and with good cause," she said. "It's hard to know what to do."

She's also heard from people worried that their independent businesses will be negatively affected by chain stores moving in. On the other hand, she's heard from people who realize that chains bring foot traffic to all of downtown.

"Anecdotally, there have been chain stores that have come in and gone out," she explained. "National stores have failed alongside local businesses and for, many times, a lot of the same reasons: an inability to innovate and also just the vagaries of life."

Clark also pointed to cyberspace as a "catalyst for businesses not being able to make it in a place like San Luis Obispo." Calling the Internet a "wildcard," she explained that a shopper's ability to point and click instead of walking downtown can be hard on locally owned shops that rely solely on foot traffic.

Ultimately, however, the biggest thing she hears from downtown shop owners is that they love being downtown.

"Everybody is concerned that our downtown remains vital, and that is a high priority for the city," she said.


Feeling the pinch from national chains
Novel Experience owner Jim Hill knows better than anyone the effect national chains can have on local businesses. He's the last independent new bookseller in the downtown core, which used to boast several: Norwood's, Gabby's, Paper Reeds, and Earthling.

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# "Most of those book stores failed in the first six months of Barnes & Noble opening," recalled Hill, who was forced to reinvent his business to survive.

He moved a couple of doors down to a smaller location, one of his three employees voluntarily quit, the remaining two agreed to cut back on their hours, and his wife and business co-owner Christine Hill took another job.

"These were all money-saving moves," he said. "I couldn't afford the rent, and the move cut my overhead in half. I had to have my wife Christine find outside work because a single income from the bookstore couldn't support our family. [All these measures] may be postponing the inevitable, but I hope I can continue to operate until I reach retirement age."

His building is also scheduled for retrofitting, which he said may "be the end of us."

"It will certainly be an interruption, and as understanding and flexible as our landlord has been, there's no way to tell if we'll be able to reopen. We have first option of reoccupation, and our landlord has said there'd be no change in rent through the end of our lease, but when [retrofitting] comes and what our options are temporary relocation, permanent relocation, throwing in the towel I can't say what we'll do."

Hill hopes he can maintain the business until retirement and then find someone to sell it to.

"I'd like to find someone who will carry on, someone with new ideas," he said. "There have been three owners in 50 years in this business, so I feel as if I've inherited a trust more than a business. I'd like to see it carried on."

Perhaps more than his personal business woes, Hill worries about the character of the downtown.

"This is my 17th year as a downtown businessman, and I've seen constant and in my mind irreversible changes toward high-end businesses and an increased presence of national chains," he said. "This seems to be what landlords prefer large budgets and deep pockets and more reliable and more profitable national chains. It all seems a bit inevitable.

"I think the character of the downtown will be gradually diluted at some point, hopefully in the distant future, until we become like any mid-sized city in the country," Hill predicted. "Independents are the primary component in the uniqueness of a town center, and when those are gone, there will be nothing to distinguish us from anywhere else."


The Copeland connection
New Times posed a set of questions to Tom Copeland, regarding complaints and concerns by independent businesses, and though specific questions went largely unanswered, Copeland explained at length his take on the downtown situation via e-mail:

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# "The downtown over the last 15 years has established itself as the specialty, lifestyle retail center for the Central Coast," he wrote. "The downtown's niche is unique because of its mix of quality independent retailers and popular lifestyle national retailers. The success of downtown SLO, like the success of any retail shopping area, is based on the synergy of its businesses. The public sees only what the downtown looks like today it's easy to forget the past and how fragile a downtown can be.

"In the '50s and '60s, downtowns flourished all across America. Downtown SLO was a typical downtown commercial center back then. Chain stores were abundant and existed next door to independent business. Downtown had every major chain retailer in the country located there. Remember Sears, Wards, Penney's, Gallenkamps, Reeves, Woolworth, Western Auto, to name a few these were the popular chain stores of that era.

"When Madonna Plaza was built in the late '60s, it took practically all the national tenants from downtown, leaving it struggling for an identity. Downtown suffered another major setback when Central Coast Mall was approved and built in the '80s. During these two decades, the downtown barely survived, culminating in the late '80s with empty stores and few patrons."

Copeland went on to note how problems with Madonna Plaza and Central Coast Mall in the early '90s led to the climate of today.


"Because of the failure of these shopping centers, downtown was once again able to attract tenants that typically would have located in an enclosed mall. Getting The Gap, Limited, Barnes & Noble, and others to locate downtown gave it substance and creditability as a retail shopping destination. Since then, the downtown has continued to attract new, exciting tenants both local and national capturing consumers who in the past would bypass San Luis Obispo and travel to Santa Barbara to shop.

"The downtown remains successful due to the synergy of the businesses located there. In this context, synergy means the mutually advantageous conjunction or compatibility of distinct business participants. It is immaterial whether businesses are small, large, local, national, or chains as long as they are located within the downtown core so that it retains its status as the regional specialty center of the Central Coast.

"Together, both independent and national stores complement one another to draw the consumer to shop downtown and allow the downtown to compete with other shopping centers and other cities.

"What would have a dire effect on downtown's desirability and be disastrous for independent businesses located there would be if the specialty chain stores moved out of the downtown to a specialty center on the periphery of town," Copeland concluded. "This is the scenario in most other cities and towns. This is why very few cities and towns have vibrant downtowns like San Luis Obispo."


Defending the Copelands
Boo Boo Records co-owner Mike White understands the frustration of some small businesses owners, but when he sees how the downtown has changed, he thinks the Copelands are saviors.

"We opened in 1974, but moved to the downtown in 1978," White said. "We've seen a lot of changes over that time, but in the last few years, they've been more profound in that we've had some real large-scale projects starting with Downtown Centre and then Court Street big national account-drawing type projects, which have definitely upped the ante for the downtown and property values. I think the more significant paradigm shift is the retrofitting and how that's affected rents. Property owners have to spend a ton of money, and that's given them license to tear down buildings and charge out-of-sight rents. That is what it is they have to find a way to recoup their costs. It's like a runaway train, and there's not much to be done about it.

"But absolutely, the Copelands have turned it around for this town," he said. "I think the Copelands get something of a bad rap. They grew up here, went to high school here. They're not coming in, making their money, and leaving. They want to keep the downtown vibrant. I think they're pretty passionate about making downtown work. They've got their heart in the right place and some people are making them a scapegoat, and that's unfair.

"Our biggest concern isn't chain stores downtown, it's places like Best Buy and Wal-Mart who are cannibalizing our industry, bringing the best new CD releases in as a loss leader, trying to get people in there to buy a flat screen TV," White continued. "But we're strong, healthy, bobbing and weaving. There are three things in our industry: service, selection, and price. You're not going to get all three in those places, and that's where downtown merchants have to be different. We make it with depth of catalog and customer service. That's the most important thing we do. We owe our existence to customer service."


Unsure of what's next
Few argue that the Copelands' endeavors Downtown Centre, Court Street, the upcoming Chinatown project have and will bring more shoppers downtown but at what price?

What's so confounding for many small-business owners is the perceived mixed blessing of various Copeland projects. Some shopkeepers, such as Costume Capers' Debi Hernandez, thought that Downtown Centre was going to hurt small businesses, but she now admits that it revitalized the downtown, increased foot traffic, and ultimately helped small businesses. Still, she's not of the same mind about the new Court Street project, and she's even less optimistic about the Chinatown Project.

"We found out a year ago our building would be changing owners," said Hernandez, whose costume shop is located in the same building vacated by Cornerstone Real Estate. "We've been here 21 years. Once we knew Copelands were the new owners, because of their Chinatown project, it was a no-brainer that this building would be included in the planning."

Hernandez is concerned about the scope of the project, which would comprise almost an entire city block, and wonders if there'll be a place for her in the new project or even if she could afford the new rent if there were a place.

"It feels like we're being pushed out," she said. "We'll have to move if there's a retrofit, and we probably won't be able to move back."

Hernandez believes that the rents could triple, and while she says she "understands the retrofit needs to happen," she wonders if there's some way for developers to make some concessions as a means of keeping small businesses downtown.

"I think people like to shop downtown because they enjoy the different businesses that aren't chain stores you can find in every town everywhere," Hernandez said. "If things continue as they are, I don't think tourists will find San Luis Obispo as appealing, because it won't be much different than what they have at home."

Not everyone sees the presence of chain stores as a lack of appeal, however.

"It's actually a compliment to the downtown that a chain would locate there," said Deborah Cash, Downtown Association administrator. Like Copeland, she pointed out that chains aren't new to downtown. Historically, they've typically had a place amid the independent shops. Plus, she noted, not all properties are suitable for chains. A large national store likely won't fit into a space where a boutique would settle snugly.

"At some point, it will all even out," she said.

Patricia Wilmore, the San Luis Obispo Chamber of Commerce vice president of government affairs, realizes that some small businesses are being forced out, but she thinks Copeland projects have helped downtown. She also believes that many of the small-business closures aren't due to external forces, but rather internal business problems.

"When you're investing the money [Tom Copeland] is, like at Court Street, it's expensive to build and to buy properties, so rents reflect investments," Wilmore explained. "Court Street is [occupied by] almost half

locally owned and half chain stores. Apparently, some locals can afford to move back in."


The other game in town
Aside from Downtown Centre, Court Street, and the upcoming Chinatown projects, the other big upcoming development is the Garden Street Mixed Use project from John Wilson and Hamish Marshall that will encompass much of the block between Garden, Marsh, and Broad streets. [Ed. note: Wilson recently purchased the building that houses New Times.]

"I think we're going to keep the smaller local retailers," explained Wilson, whose project will essentially replace the already existing retail spaces on Garden and Marsh and add underground parking, a restaurant, a 70-room boutique hotel, and other elements to the city-owned parking lot. "We don't have the space that Copelands has to attract national chains, so we'll keep it small and keep it local."

But what about rents? More and more downtown spaces are reaching $4-a-foot.

"Let me explain it this way," Wilson said. "When we used to build houses, if a city lowered its fees, that didn't mean we'd lower the price of the homes and pass on the savings to the buyer. Likewise, if a city raised its fees, we couldn't charge more for the home instead we'd just make less money. It's market-driven. You sell a home for whatever the market will bear. It's the same with rents."

Whether local independents will be able to afford rents in Wilson's project remains to be seen, but one thing he's not worried about is the Dalidio Ranch development.

"The thing I found ironic was the argument that the Dalidio project was going to ruin downtown," Wilson said. "When I look at the Copeland projects, I don't see many mom and pops, so it's not Dalidio that's killing the mom and pops it's the national chains being brought into the downtown. It's downtown rents that are driving them out.... Earthling bookstore spent a ton of money remodeling, then Barnes & Noble moved in and Earthling was gone.

"I just thought it was a goofy argument that [the Copelands] were all scared of the big beast of Dalidio. They're claiming they saved downtown, but they brought in all the national chains that are hurting mom and pops. I stayed neutral on Dalidio I didn't care one way or another but I think those kinds of projects on the edge of town can be a big draw for downtown."

Ultimately, Wilson believes that the mom and pops that adapt to the changing retail scene will survive: "The little shops that don't compete with the big guys, the unique little stores and boutiques that people love to walk around downtown and go into they'll be fine."



Glen Starkey has no enemies, but is intensely disliked by his friends. Contact him at gstarkey@newtimesslo.com.

 

 

 

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