Are high rent and parking restrictions forcing businesses out of downtown SLO?

It’s easy to spot vacant storefronts when walking around downtown San Luis Obispo.

Buildings now sit empty that were once occupied by businesses such as Forden’s, Which Wich, The Gap, Chipotle and Aaron Brothers, just to name a few.

Some local leaders say the voids represent the normal ebb and flow of downtown commerce, caused by many factors. Others cite three major challenges to achieving business success in the downtown: high rent, parking availability and ongoing hotel construction.

“My experience was that a lot of locals aren’t going downtown anymore because of construction and lack of parking,” said Karen Staeheli, owner of Naked Fish Sushi, which left 857 Higuera St. in November. “The rents are high, and because much of the customer base is college students who don’t tend to spend as much, it doesn’t justify the high costs to do business there.”

A number of downtown San Luis Obispo business spaces are vacant. Joe Johnston

But champions of downtown SLO say the departures aren’t necessarily a long-term problem — just the normal turnover and evolution of what’s working in downtown.

“Right now, at this moment, it seems like there are more vacancies than in the past few years,” said Damien Mavis, owner of CoVelop, which owns the Creamery Complex, a collection of shops and restaurants on the south end of downtown. “I don’t see that as a trend, but as a coincidence.

“Businesses close for any number of reasons, whether it’s someone retiring, a corporate decision made a couple of thousand miles away or simply because it’s hard to get a couch out the back door.”

Mavis said downtown brings a flow of potential customers, including people looking for unique experiences, including products and services difficult to find online, helping some businesses more than others.

“There is certainly a premium to rent in downtown SLO,” Mavis said. “Downtown is where most of the tourism happens.”

Businesses cite obstacles to success

Staeheli called her $12,000-per-month rent a “ridiculous amount,” significantly more than what her business pays in Paso Robles, where Naked Fish has been successful.

Naked Fish co-owner Daniel Cardinale recently told The Tribune the restaurant is planning to open a new location on Laurel Lane on the south end of SLO.

Daniel Cardinale, co-owner of the Naked Fish sushi restaurant, said his rent was too high to stay in downtown San Luis Obispo. “I don’t think sole proprietors can compete anymore,” he said. Joe Johnston

“I think we’d be capturing a more honest representation of the local market (outside of downtown),” Cardinale said. “... A lot people don’t want to go to downtown SLO because of parking, congestion, homeless and drunk people. (On Laurel), the rent is lower, and we’re hoping to attract a higher per person spending average.”

Debbie Thomas, owner of Thomas Hill Organics, closed her restaurant at 858 Monterey St. near the mission in December 2017 after about a year to focus exclusively on her Paso Robles business for a variety of reasons.

Thomas cited challenges such as nearby construction of Hotel San Luis Obispo, the second-story space where her restaurant was located that wasn’t eye level to street traffic and hard to find for some, and less spending per customer than in Paso Robles. In Paso, she said, wine country tourists in particular are willing to pay more for meals and beverages.

Thomas said if she had tried to weather the first few years of business losses, she would have risked also having to fold her 10-year-old downtown Paso Robles location as well.

“My landlord (Jamestown) was helping and trying everything possible during the whole (Hotel SLO) construction process to help , but it just wasn’t enough,” Thomas said. “I think SLO is a very competitive market. The wages aren’t there to support it. Customers are looking for a deal, not to spend.”

SLO restaurant owner Leonard Cohen, who owns Ciopinot and La Esquina Taqueria in the Creamery, has told The Tribune that parking complaints are among his biggest challenges for drawing customers.

The city is planning a new, 445-space parking garage at Palm and Nipomo streets, but that’s likely at least a couple of years away.

“The parking in downtown is terrible,” Cohen told The Tribune last year. “It keeps getting worse. The city shouldn’t have allowed any developers to build anything until the parking structure was finished.”

Is downtown rent too damn high?

The going rate for commercial rent in downtown SLO by rough estimates is about $2 to $4.75 per square foot.

“There are outliers on both ends of that,” Mavis said. “ For retail, it’s hard to find anything below a $1 per square foot anywhere in SLO.”

Some of the recent listings on the LoopNet website include:

A number of downtown San Luis Obispo business spaces are vacant including this space that used to be occupied by Which Wich. Joe Johnston

$4 per square foot for 1,349 square feet of available space at 1035 Chorro St. (formerly Which Wich sandwiches), or $5,396 per month

$3.95 per square foot for 4,200 square feet of available space at 857 Monterey St. (formerly Forden’s store), or $16,590 per month

$2.65 per square foot for 2,775 square feet of available space at 691 Higuera St. (formerly Lucky Lulu’s clothing), or $7,353 per month

$2.25 per square foot for 11,279 square feet of available space at 1105 Higuera St. (formerly Bank of America), or $25,377 per month.

And on Craiglist, a listing of spaces next to the Wineman hotel shows pricing on the highest end:

$4.75 per square foot for 1,745 square feet of available space at 845/849 Higuera St. (formerly Downtown Donut Factory and SLOFly clothing), or $8,289 per month.

While several different owners lease properties in downtown, the largest portfolio belongs to Jamestown, an Atlanta-based, multi-billion dollar national real estate corporation.

Jamestown purchased 195,000 square feet of retail space and 28,000 square feet of office space from the Copeland family in 2013, a $100 million transaction including debt assumption.

A number of downtown San Luis Obispo business spaces are vacant including this space that used to be occupied by Guiseppe’s. Joe Johnston

Jamestown’s SLO properties currently include (among others):

Downtown Centre (including Barnes and Noble and the movie theater complex);

the “Monterey Street” strip near the mission (including Mint + Craft, LuluLemon Athletica, Junk Girls, and others);

Court Street retail space (including Peet’s, Banana Republic and others);

the former Copeland’s and Sports Authority space at 1144 Chorro (currently a proposed six-story, mixed-use project);

the Victoria’s Secret building at 894 Higuera St.;

▪ and the Moondoggies Beach Club space at 837 Monterey St.

Jamestown’s portfolio represents a mix of businesses, including chains such as H & M and Williams Sonoma, and locally owned stores such as Junk Girls and McConnell’s Fine Ice Creams, a regional brand out of Santa Barbara with a “local feel,” said Therese Cron, Jamestown’s representative.

Cron said Jamestown doesn’t reveal its rent prices, but that they are competitive with market rates.

“We care about our downtown and strive to create a merchandise mix that appeals to both locals and visitors,” Cron said.

The company’s noteworthy vacant commercial spaces currently include: 1010 Court St. (formerly Palazzo Guiseppe’s restaurant), which moved down the street in 2016, and the former Gap space at 879 Higuera St. (closed Jan. 28). Jamestown is also in the process of renovating its space at 959 and 949 Higuera St., across Higuera Street from the Apple store.

Cron said the finishing touches are taking place to lease the Gap space, but the company isn’t ready to announce the new tenant.

A new restaurant called Mestiza will open in April in the space formerly occupied by Thomas Hill Organics, Cron said.

A number of downtown San Luis Obispo business spaces are vacant including this space that used to be occupied by Forden’s. Joe Johnston

Parking and construction — temporary disruptions?

This summer, Hotel San Luis Obispo is expected to open next to the Palm Theatre at 877 Palm St., and Hotel Cerro (formerly named Hotel Serra) will open at 1125 Garden St.

And the Monterey Hotel near Grand Avenue at 1845 and 1865 Monterey St. is nearing its opening, having “completed some pretty big inspections,” said developer Andrew Firestone in an email.

Together, the three hotels will bring about 250 new rooms and potentially thousands of new visitors each week to downtown SLO. But the temporary impact of construction in and around local businesses has been disruptive for some.

Jean Young, Natural Cafe’s vice president of operations, previously cited reasons for the restaurant’s closure at 698 Higuera St. as shortages of available nearby parking, disturbances from neighboring hotel construction and a shift in foot traffic away from the block to other parts of downtown.

“It’s very sad for us,” Young told The Tribune in March 2018. “We loved being a part of the community. People have been very good to us. SLO is great. Our staff was excellent. It was very hard to make the decision to close that restaurant. We had a lot of loyal customers.”

But Bettina Swigger, the CEO of Downtown SLO, a nonprofit with a mission to foster an economically vibrant downtown, recently said that parking problems are often as much a perception as they are a reality, and that once the hotels are up and running it will be a boost to local business.

Swigger said there are 2,869 parking spaces in the downtown, including 1,177 in parking structure spaces, 1,147 on-street spaces and 545 spots in lots. Lack of availability is not a problem, she said, though people may have to walk a couple of blocks or park in a garage.

“I think sometimes the perception is much worse than the reality,” Swigger said. “... The data hasn’t shown there’s a parking problem.”

A number of downtown San Luis Obispo business spaces are vacant including this space that used to be occupied by The Gap. Joe Johnston

A different perspective on the business health of downtown SLO

Ideas are in the works to help boost the centralized business district, such as an envisioned city Business Retention and Attraction Plan and a proposed Downtown SLO property tax assessment to help clean up downtown, greet visitors with paid staff and connect homeless to services.

Pop-up business advertising in windows and temporary use of vacant spaces at discounted prices are two key ways to help drive new business, Swigger said.

Charlene Rosales, the city’s economic development director, said the city will soon explore a variety of ways to try to stimulate the local economy through its anticipated business retention plan, noting that she foresees a mix of different types of businesses.

“We have always had a mix of national chains and small local businesses in the downtown,” Rosales said. “We have had ebbs and flows of both of those. I would foresee that mix in the future.”

But the free market determines certain business considerations, such as rent prices, which SLO has no control over, Rosales said.

Michael Codron, the city’s community development director, said some U.S. cities have imposed fines on landlords who don’t fill their spaces with businesses.

Monterey Street - Junk Girls (003).jpg
Melissa James (left) and Jenny Kompolt (right) of the Junk Girls store. Barry Goyette

San Francisco, for example, has a policy around registration and penalties for vacant storefronts. But that isn’t being discussed in SLO, and isn’t likely to be considered, Codron said.

And while some businesses have closed, others are thriving, business leaders say, such as Junk Girls, a locally-owned business at 870 Monterey St. that turns discarded items into usable products and crafts, such as clocks and chimes.

“What I’ve noticed and appreciate is a sense of community among businesses in the downtown,” said Jenny Kompolt, co-owner of Junk Girls, which opened in SLO last May. “Our move to downtown SLO from Cambria was a big deal for us. We support the community and feel supported, whether it’s referring customers to other businesses here or having them recommended to us.

“There’s a diversity of businesses, from food to shopping to services, and we feel very lucky and appreciative.”

Kompolt said their business hasn’t felt the impact of the nearby Hotel San Luis Obispo project, receiving “not one customer complaint.”

Kompolt said her business has had gradual, steady growth, and part of the reason for the move was to expand their space, which they’d outgrown in Cambria. Kompolt declined to give percentages of growth or her rent price.

They have an online component of their business, as well, and sell work from local makers, establishing a strong local customer base, Kompolt said.

“We have a larger square footage, which enabled us to have more product to increase sales,” Kompolt said. “At first we were thinking, ‘How the heck are we doing to fill this?’ Now, we’re saying, ‘Where do we put this?’”

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Nick Wilson covers the city of San Luis Obispo and has been a reporter at The Tribune in San Luis Obispo since 2004. He also writes regularly about K-12 education, Cal Poly, Morro Bay and Los Osos. He is a graduate of UC Santa Barbara and UC Berkeley and is originally from Ojai.