January 21, 2005

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Palo Alto Online

Winds of change chill small businesses

by Jocelyn Dong

Charleston Shopping Center in south Palo Alto has long been the kind of place where neighbors come for a haircut, ice cream cone or coffee klatch - not to mention a bag or two of groceries from Piazza's.

At Tony Nicosia's barbershop, Princess -- a mop-like Lhasa Apso -- roams freely among the chairs. At Café Sophia, proprietor Sophia Omar has been baking goodies and brewing coffee since well before the Starbucks craze took off.

But that, like so much in life, seems to be changing. Next month, Café Sophia will leave the center, allegedly forced out after 14 years by lease conditions Omar didn't want to accept. The firm that owns the center, Village Properties, has declined to discuss her departure or the new tenant, but city records indicate Sophia's café is making way for a corporate enterprise: Peet's Coffee & Tea.

Omar, pressing oatmeal dough into a cookie cutter this week, thought that her departure was due in part to banks being more likely to loan money to developers with chain tenants rather than independently owned stores.

"I'm not IBM. I'm not HP. I'm a tiny business; that's why they're kicking me out. They can't borrow money against me," said Omar, who counts up to 500 people a day as her customers.

If Omar is correct, then Peet's arrival signals a new trend for the neighborhood retail center: going corporate. Several other corporate-backed franchises and chains have moved into the center in recent years: Gentle Dental, Great Clips and Gymboree.

Village Properties bought the center in 1999 and has improved its parking lot, repainted buildings and added new master signage, according to property manager Larry Jacobs.

Although many mom-and-pop shops remain at Charleston, some storeowners are beginning to wonder how long they will survive.

Several merchants cited a familiar Palo Alto refrain -- rising rents -- as a big concern. A number of them have had their rents doubled during their tenures, although Nicosia said that some rates were low to begin with.

The owner of Neighborhood Liquor and Video, a woman who declined to give her name, said her family-owned business has taken a hit in recent years. Video rentals are down, and cigarettes aren't the profit leaders they used to be, she said.

There's no doubt money is tight for some entrepreneurs. When Nicosia, a Menlo Park resident, opens his shop these chilly winter mornings, he flips on three electrical space heaters to warm up the place. Overhead hangs a built-in furnace, in need of repair. Nicosia shrugs; the landlord said it's his responsibility to fix it, and he can't afford the $1,000 bill.

Some former tenants have moved out, including an art-supply store, Accent Arts, and a plumbing studio. In April, Palo Alto Orthopedics, a 10-year tenant, will move to Mountain View, where it has bought a building, according to store owner Jerry Benton, Sr. He said rents were a factor, but not a driving force in the move.

Asked whether he'd heard of any plans for his space, Benton said the management has been tight-lipped, but that if a chain were to move in, it might need to expand beyond just his shop.

Nancy Chan, owner of Back to Fitness physical therapy, hasn't heard from management about any changes. Her lease is up this year though, she wryly noted. Meanwhile, Gary Schoen, owner of Rick's Ice Cream, said the idea of having to sell his shop "strikes fear" into his heart.

Mayor Jim Burch, a frequent Café Sophia customer, said property owners are allowed to manage their land as they see fit. Nonetheless, he is concerned over the loss of small businesses. Even with Peet's moving in, "it wouldn't be the same. [Café Sophia] is more of a community center."

Burch brought the city's economic-resources planning staff to meet with Omar this week, to see what help the city could provide in relocating Omar's business within Palo Alto.

Peet's at Charleston will be the company's third location in Palo Alto. Another Peet's opened recently in Los Altos on El Camino Real.

Nicosia plans to remain optimistic -- and tenacious -- about carrying on the small business he's built. The sign outside his shop says it all: no fancy lettering, no brand name, just a red-white-and-blue striped pole out front and the words, "Barber Shop."

"I've been here 36 years," Nicosia said, "and I need to be here longer."

Senior Staff Writer Jocelyn Dong can be reached at jdong@paweekly.com.

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