SLO will lower rent on big downtown space to keep major retailer from leaving
San Luis Obispo will lower the rent for a prominent downtown space after the building’s tenant, Shoe Palace, threatened to leave.
The San Luis Obispo City Council quietly approved a lease adjustment for Jamestown Premier Property at its meeting Tuesday night. The item was approved without comment along with other consent agenda items.
According to a city staff report, Jamestown previously leased the 15,000-square-foot city-owned retail unit attached to the Marsh Street parking structure to for $14,353 per month. The company in turn subleases that space to Shoe Palace.
The city lease expires on Jan. 31, however, and ahead of that, Jamestown asked for the rent to be lowered after Shoe Palace representatives indicated the business was not interested in renewing its current sublease through Jamestown “due to financial impacts of the pandemic and decreased sale volume.”
“Jamestown representatives indicated that they would not be interested in extending the lease ... because large commercial spaces in the downtown are challenging to fill,” read the staff report.
Jamestown asked that the rent be reduced to $11,000 per month, with 3% increases at the start of each year beginning in 2025. That would drop the rent per square foot to $0.73.
City staff recommended the council approve the rent decrease because “having the space occupied benefits downtown businesses through ongoing activation and foot traffic, and stimulation of the local economy.”
“Locally, the city has seen these types of spaces vacant for months if not years, while smaller spaces tend to fill rapidly,” the report read. “Given the size and structure of the Shoe Palace retail space, if it were to become vacant, it could remain that way for a significant period of time, and may need significant investments in tenant improvements in order for a new tenant to move in.”
According to additional correspondence included with the agenda ahead of Tuesday’s meeting, comparable monthly rental rates in the downtown area are generally between $2 to $4 per square foot per month.
For example, the formerly Beverly’s Fabric, is $1.99 per square foot per month, according to the correspondence.
City staff also clarified that the lease agreement is with Jamestown Premier Property, and not the tenant, so if Shoe Palace decides to leave the spot after the rent adjustment, “Jamestown would still be required to meet the contractual terms of the agreement.”
“It would be in Jamestown’s best interest to maintain Shoe Palace as a tenant or find a new tenant as quickly as possible if Shoe Palace terminates use of the property,” staff said in the correspondence.
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