Downtown study finds retail on the ropes | March 17, 2017 | Mountain View Voice | Mountain View Online |

Mountain View Voice

News - March 17, 2017

Downtown study finds retail on the ropes

Business is great for restaurants and offices, but shops aren't keeping up

by Mark Noack

There's money to be made in downtown Mountain View these days — that is, if you're in the right line of business.

A new city economic report on the Castro Street area found that restaurants and the demand for tech office space are lifting Mountain View's downtown to unprecedented growth and sales. But that prosperity isn't being shared among all businesses. Brick-and-mortar retail shops like bookstores, art galleries and knick-knack sellers are lagging behind, showing modest sales while facing the rising costs that come with a booming market.

It was a mixed-bag of a report reviewed on Tuesday morning by the city's Downtown Committee. The report, conducted by the firm Economic & Planning Systems (EPS) of Oakland, found that downtown sales receipts had nearly doubled since it last looked at the numbers in 2011. That growth was fueled largely by the dining and drinking establishments, which grew in sales by 83 percent over roughly the same period. Meanwhile, sales for all other retail categories increased on average by only 12 percent.

The challenges facing downtown shops in recent years have been readily apparent. Plenty of unique stores have closed their doors for good, including second-hand bookseller BookBuyers, the Mountain View General Store and Seascape pet shop.

Nooshin Zarkabir, co-manager of East West Bookstore on Castro Street, hypothesized that rising housing costs were having a ripple effect on Mountain View's merchants. For years, loyal customers and service workers have been displaced and moved to other areas. The younger tech workers who have replaced those residents haven't shown the same buying habits, she said.

"It's always been like a roller coaster, but we're having a worse time now than after the recession," Zarkabir said. "Luckily we have a very good landlord who loves us and wants us to stay."

In many ways, downtown Mountain View was "a victim of its own success," according to representatives from the EPS consulting firm. Commercial landlords enjoyed an easy return on investment as downtown property values increased by nearly 60 percent over that period. Those property values are being propped up by a tech sector that's willing to pay top-dollar for downtown office space.

Retail space, which depends heavily on location, is typically the highest-cost commercial space in cities, they said. But not in Mountain View, where downtown leases for offices can fetch prices about 80 percent higher, they reported. They suggested that landlords have an incentive to lease to restaurants and other businesses that serve the office crowd.

The tech industry's downtown office growth has brought thousands of highly specialized jobs to the downtown neighborhood, and it has also nurtured a wave of new restaurants in the area. There are only 37 non-food retail businesses in the Castro Street area, according to a 2016 Downtown Business Improvement Area report. Meanwhile, there are 86 establishments for food and drink in the vicinity.

But that's not to say that all cafes and eateries are raking in cash. Ron Manabe, co-owner of the Tied House, said the downtown restaurant game is becoming much more competitive, with many more high-end bistros "bringing their A-game." That didn't necessarily translate to higher profits, he said.

"The consumers in Mountain View have really benefited since Mountain View has become sort of a culinary mecca," he said. "We're doing OK as far as business, but it's not nearly like it was during the dot-com years."

Market forces had clearly demonstrated that bars and restaurants are in demand, said Jason Moody, a principal with EPS. But he suggested city officials should discuss whether having a downtown dominated by restaurants was necessarily a good thing.

"(Business) is doing well but it's focused on restaurants; it's not focused on a diverse set of options," he said. "The question we'd like to pose is whether there's a desire to diversify and create more of a destination than just for the lunchtime crowd."

That question was pretty much left hanging in the air at the Downtown Committee. Alex Andrade, Mountain View's economic development manager, said his team is currently working on a comprehensive report with policy proposals for downtown business that is expected to go before the City Council in June.

"The market is certainly calling for restaurants here, but we want to have a good balance between the uses," he said. "We want to provide a great overall experience when people come to our downtown."

Email Mark Noack at mnoack@mv-voice.com

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