As rents rise, Santa Barbara’s State Street loses small retailers and national stores

Jill-Marie Carre stands at the door of the new State Street storefront for Chocolats du CaliBressan, the shop she owns with her husband inside La Arcada in downtown Santa Barbara.
Jill-Marie Carre stands at the door of the new State Street storefront for Chocolats du CaliBressan, the shop she owns with her husband inside La Arcada in downtown Santa Barbara. Noozhawk

Those paying close attention to business trends wonder if a new shift is afoot in downtown Santa Barbara, especially as rents on State Street, the popular thoroughfare — and across the city in general — continue to rise.

State Street can be a tough place for small-business owners, who fight to balance the desire for foot traffic with the ability to pay bills.

It’s also not so peachy for national retailers, who seem more hesitant to approach spaces available for lease, said Brad Frohling, a principal with Radius Commercial Real Estate & Investments, during a recent economic forecast event.

Within the past few months alone, Guess, American Apparel and Panera Bread closed up on State Street, with Saks Fifth Avenue recently converting to a discounted version of its brand called Saks Off 5th.

The move away from high-end retailers is perplexing business advocates, who are considering hiring a consultant to assess the retail mix downtown and ways to influence what shops go in and out.

“The difficulty is that this isn’t like a mall, with one owner,” Santa Barbara Chamber of Commerce CEO and President Ken Oplinger said.

“The question sort of becomes is State Street the retail center for the residents of Santa Barbara or the retail center for the visitors of Santa Barbara? How do we ensure that we have the retail options?”

The Santa Barbara Downtown Organization is mulling over the assessment idea, but Executive Director Maggie Campbell said it was too early in the process.

Campbell wanted to highlight the many businesses in Santa Barbara that are doing well on or near State Street, acknowledging the downtown area is dynamic in terms of leasing and demand.

Local Laura Knight, who owns Pascucci Restaurant on State Street, just helped open a new tapas concept called The Globe on Cota Street, for example. She’s also planning to open a second Pascucci in Goleta’s Camino Real Marketplace. The new managers of the Paseo Nuevo Mall in downtown Santa Barbara are hoping to bring in new tenants and do some remodeling.

Café Primmo recently opened at 516 State St. as a spinoff of a Southern California concept, along with the Shade Store and Big Dogs. Gandolfo’s Deli is planning to join the State Street crowd, and longtime retailer Samy’s Camera moved from Chapala Street to State Street earlier this year.

“With hundreds of different property owners, businesses have different experiences in different locations,” Campbell said in an email. “There are so many variables, from whether a business has a good business plan, to whether their business model is able to adapt over time to changing consumer preferences and trends, to how motivated a given landlord is to competitively maintaining tenants in their property.”

Where some find success, others face challenges.

Owners of the Brasil Arts Café, which opened about two years ago at 1230 State St., have put out a call for locals to help them save their restaurant and martial arts studio. Palazzio Restaurant at 1026 State St. ran into some unexpected, expensive renovations that forced the longtime staple to close until owner Ken Boxer, his landlord and insurance companies figure out who pays for what.

Two restaurants on the same block — Chase Bar & Grill and Aldo’s Italian Restaurant — are up for sale, according to online listings.

Brad Shermann, who five years ago took over Aldo’s from the original owners who opened in 1986, said he has at least a year left on his lease and wants to stay in the space, but his landlord is asking Shermann to take over 6,000 square feet instead of the current 2,000 square feet. The additional space is currently rented out as offices, but the landlord wants Shermann to renovate and oversee all of it.

“Taking over 6,000 square feet on State Street is a death sentence,” said Shermann, who has been in the restaurant business 30 years, also owning Nectar Restaurant on Cota Street. “Right now, it’s very, very sustainable the way that it is. Maybe a larger chain could take over that much space. For the small businessman, it is unsustainable.

“All of the small businessmen have been pushed to the side streets. When you’re sustainable in a space, your landlord should be working with you. It’s big money in this town, and nobody wants to ruffle feathers. Everything is up in the air.”

Chamber president Oplinger acknowledged that there are some difficulties regarding State Street because of rising rents.

“Small businesses struggle to afford the cost,” he said. “But that’s also what the market is charging now. While it’s unfortunate when businesses can’t afford it … we have to look at the bigger picture.”

Business leaders are hopeful new managers at Paseo Nuevo will be able to bring fresh tenants to the outdoor downtown mall. They’re also planning some renovations to spruce up the place.

Gina Potthoff is a staff writer for Noozhawk, a Santa Barbara-based news website. She can be reached at