On January 4, Macy’s announced it was pulling the plug on 100 stores nationwide, downtown Santa Barbara included. For the city’s central business district, that decision constituted a shrill and urgent wake-up call. Late this Monday morning, about 30 movers and shakers crammed into a small meeting room at City Hall and collectively tried to answer the phone. What they said wasn’t nearly as important as the fact that they tried. Even more important is who was in the room trying to say it.
Assembled together in one space were more downtown property owners than Bob Tuler has ever seen at one time, and Tuler — a head honcho with Radius — has been leasing commercial real estate in Santa Barbara for 40 years. When Tuler started out, J.C. Penney was the commercial mastodon of State Street. But like mastodons everywhere, J.C. Penney has come and gone, now Macy’s with it. Two weeks ago, Tuler surveyed the central business district in search of similar departures. What he found were 45 empty spaces. That doesn’t count the vacancies in Paseo Nuevo. “If we had this during the recession of 2010, that would be expected,” said Tuler. “But to have this now, during one of the longest, most sustained recoveries ever? That’s surprising.”
For many downtown business owners, the word “alarming” is more like it. Tuler said he hasn’t seen downtown so bleak since the recession of 1991 and 1992, before Paseo Nuevo was built. Maggie Campbell, executive director of the Downtown Organization, said she was encouraged so many property owners — not just merchants — attended Monday’s confab, convened by Mayor Helene Schneider. “There is an absolute economic imperative to turn this around,” Campbell declared. “The entire city is supported by the economic engine we call downtown. Everyone has a stake in what happens here.”
Attending the meeting were big-name landlords — Richard Berti, Jim Knell, Gene Montesano, and Ray Mahboob all showed up. So, too, did councilmembers Bendy White and Jason Dominguez, City Administrator Paul Casey, planning czar George Buell, Police Chief Lori Luhnow, and a host of commercial agents and business owners. To encourage a frank exchange of views, the media was not allowed. According to several participants, the discussion was blunt and at times unvarnished. The red tape required by City Hall was singled out by some. Yes, rents were high, some acknowledged, but it was the panhandlers, vagrants, bums, and otherwise “abusive” homeless who were chasing customers and investors away. More profoundly, Internet sales and Amazon.com have fundamentally changed the way Americans shop as the drop in city sales taxes — down more than 3 percent than projected — bears witness.
Not everyone was thrilled by the discussion. Dick Berti — a major player on State Street since the 1970s — walked out, “discouraged” by what he heard. “The city doesn’t get it,” he said. “They don’t have money to spend, yet they’re going to spend it.”
Others, like relative newcomer Barrett Reed — who developed the Funk Zone cluster of restaurants, shops, and liquor emporiums known as the Waterline — were more optimistic. Landlords, he said, need to change the way they operate. “The old passive ways simply won’t work anymore.” Instead of letting tenants fend for themselves in the city’s design review process, Reed said he holds his tenants’ hands. “My architect was their architect,” he said. “We got through it together.”
Reed said he’s about to try a similar project on the 400 block of State Street, where he hopes the synergies created by a porous combination of smaller food, alcohol, and retail establishments can provide an experience residents and tourists will flock to despite a relatively large number of homeless people. Where older shoppers bought stuff, the experts say, younger shoppers want a sense of place and experience.
Others, like Gene Montesano — owner of Lucky Brand Jeans — pushed to close off State Street to traffic two weekends a month, allowing business owners to set up shop on the sidewalks, creating a quasi-famers’ market feel. As for the homeless, Mayor Schneider urged those in attendance to participate in collaborative efforts now underway to find housing for those in need. New laws banning smoking anywhere, she said, gave police a new tool. Chief Luhnow noted retirements and transfers have left her department down by eight officers, but a wave of new recruits were just starting. In addition, she announced she’ll be starting a new “ambassador” — volunteers dressed in uniforms and equipped with radios — program to provide a positive presence downtown.
But cops cost money, and City Hall is stretched thin and getting thinner. If property owners are willing to tax themselves — via a revised business improvement district — the proceeds can be used to pay for enhanced security, among other things. For that to happen, said Maggie Campbell, a lot more property owners need to be not just in the same room but on the same page. Her organization, she noted, will celebrate its 50th anniversary next week. In that time, she said, the downtown has had to reinvent itself over and over again. It can do it again.
Bob Tuler of Radius said he was gratified the meeting took place at all, but he expressed a keen sense of urgency. “How many more vacancies do we have to see for the city and the owners to step up? Do we have to go from 45 to 60?”
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Summary of market insights and analysis from Q2 2019 South Coast commercial sales and leasing activity: Download the complete report here …