While Berkeley’s office vacancy rate is the lowest in the East Bay, the city is not so fortunate when it comes to retail space—those street-level locations so prized by merchandisers and restaurants.
The city got an unpleasant jolt and reminder of this fact in recent days with the announcement of the closing of the See’s Candy store at 2170 Shattuck Ave. The See’s closing as part of a move by the South SanFrancisco-based chain to shift operations to shopping malls. See’s is owned by billionaire investor Warren Buffett.
While a public protest last month apparently has saved the last See’s store in Oakland—in the city’s Lakeshore District—Berkeley’s store is closing without a fuss. A new store will open on Bay Street in Emeryville’s mall-heavy Bay Street.
And the loss of See’s was not the only blow.
Joining the list of Berkeley’s commercial casualties late Thursday afternoon was computer manufacturer Gateway Inc., which announced it was closing all of its 188 retail stores in the nation, including its downtown Berkeley outlet. No date was available at press time for the actual closures.
Berkeley’s Gateway store stands on Shattuck Avenue next door to the Eddie Bauer retail clothing outlet, also recently closed by a national chain, and only a block away from Huston’s Shoes, a retail store which went out of business last year. The loss of the three retail outlets, one right after the other, leaves an enormous hole in Berkeley’s downtown.
No one’s sure just how poorly Berkeley’s retail leasing sector is doing, because retail vacancies aren’t tracked with anywhere near the same precision as office space. But all the sources contacted for this story agreed Berkeley houses too many vacant storefronts.
Downtown has been the hardest hit, while the Solano Avenue, College Avenue, Fourth Street and South Shattuck corridors have been faring better.
“The last update I had was a year ago, and we were running about ten percent vacancies downtown then,” said Ted Burton, the city’s Economic Development Project Coordinator.
That’s better than 1992, when vacancies hit 16 percent, but a lot worse than 2000, when the rate was four percent.
“I don’t think it’s bottomed out yet,” said Burton’s boss, acting Manager of Economic Development Thomas A. Meyers. “Investors and developers are going to hold back a little longer to see how the national and state economies are going.”
Another crucial factor facing the city is the fact “most agents dealing in retail space don’t do business in Berkeley,” said Jim McMasters, national retail chair for Colliers International, a major trans-national real estate agency. “Berkeley’s always been an enigma. It’s is a very difficult market to lease space in. The city isn’t a popular market for traditional retailers. The cultural environment doesn’t welcome chains, they don’t like fast food outlets or the chain coffee shops. Berkeley wants unique shops and boutique retail stores.”
Both city officials and Berkeley consumers seem to agree that, except for drug stores, auto parts shops, supermarkets, gas stations, and a clothing store or two, Berkeley prefers to remain unchained.
Berkeley’s distaste for mass production and mass marketing poses unique difficulties. “New mom and pop stores don’t have the track records and credit histories of chain outlets, and if you’re leasing space, you have to find one well equipped to survive,” McMasters said.
The population of Berkeley differs from the rest of the Bay Area too, he added. “There’s a heavy student population and a liberal, health oriented populace that’s not as interested in acquiring things as people in Walnut Creek and Concord.”
And chains, the dominant force in retail elsewhere in America, rely on standardization, concentration and locations in major shopping centers with massive on-site parking facilities.
Acting Manager of Economic Development Meyers acknowledged that “it’s definitely more of a challenge to get a particular retail client to match a particular location in Berkeley, in part because city residents play a greater role in deciding which businesses will locate in the city. The community has a more focal input to city government, and that’s definitely a double-edged sword.”
Restrictive zoning in the city also poses more challenges to business trying to locate, here, “and to our credit,” Meyers said.
“We’re having a hard time attracting big tenants,” said John Gordon of Berkeley’s Gordon Commercial Real Estate Services. “The worst news I’ve heard in a long time is that the former Pier One store [at 1824 University Ave.] is becoming a Salvation Army Thrift Store. The larger tenants are having difficulty here and they’re moving to places like El Cerrito.”
Chains also face the additional challenge posed by the lack of large sites and major parking facilities. “We don’t have the facilities for stores like the Gap and Old Navy,” Meyers said, but added that the city does offer potential locations for outlet stores.
Researchers looking for information on the extent of retail vacancies have a much harder time coming up with hard numbers compared with office and apartment vacancies.
“In the Bay Area, there are probably 800 brokers specializing in industrial space and 600 or so specializing in office space. But when it comes to retail there are only 80 or so, and the bulk of business is done by 12 or 15,” McMasters said. “Most of that business is in new growth areas like Concord, Walnut Creek” and out into the Central Valley.
Gordon’s agency is handling downtown Berkeley’s biggest vacancy at 2201 Shattuck Ave., the site just vacated by the closing of the Eddie Bauer clothing store.
“The new Vista College building and the new university hotel project will help downtown,” Gordon said, “but the thing that will make retail thrive is more housing downtown. When you have more people on the streets, it enhances the retail sector.” §