Empty storefronts and "For Lease" signs have become a regular fixture along Palo Alto's California Avenue shopping district in recent years. As of this week, there were at least 13 storefronts that were vacant or for lease.
And as buildings remain empty and the number of attractions along the avenue wane, business owners and property managers who have maintained a stake on the dead-end street for multiple decades are now wondering if the city's second downtown can ever make a comeback.
Jessica Roth, owner of The Cobblery, which has operated on California Avenue since 1940, said this is the most vacancies she has seen since she took over her grandfather's shoe repair shop in 1994.
"In my entire life, we have never had more than three empty spaces on this street," said Roth, who is also vice president of the California Avenue Area Development Association, a business advocacy group for the shopping strip. "California Avenue is known for its longevity and keeping businesses."
Jon Goldman, co-president of Premier Properties, which manages over 70 buildings in Palo Alto, said, "The district is falling apart. There's no two ways about it."
During the pandemic, longtime restaurants such as The Counter, Antonio's Nut House and even the Subway franchise have abandoned Palo Alto's once vibrant destination, with business owners either citing financial hardships or employee shortages due to the pandemic.
"COVID-19 affected us a lot," Amanda Lee, who has co-owned several Subways in Palo Alto since 2003, told the Weekly. "The rent is very high in Palo Alto, and we lost many employees during COVID."
Bank of the West also is set to move out of its longtime home at 414 S. California Ave. by the beginning of 2022, leaving behind prime real estate and a big question mark around who will take over the building. (Redwood City's Arton Management Investments, which owns the Palo Alto property and several others in Redwood City, declined to comment.)
According to LoopNet.com, a commercial real estate website, Bank of the West has occupied the 6,195-square-foot space for over two decades.
Lucas Grzeszczuk, the branch manager at the California Avenue location, confirmed the move and said that the branch is relocating a few blocks away near 2700 El Camino Real. He declined to disclose why the branch is moving.
In 2016, Keeble & Shuchat photography store shuttered after 51 years of business, as the photography industry morphed and customers increasingly turned to online shopping. That, along with a scarcity of parking and increasing development in the California Avenue area, made the closure necessary, owner Terry Shuchat said at the time. Portions of the large corner building still remain vacant and available for lease.
Last year, Antonio's Nut House, a popular local dive bar, shut down after 49 years due to pandemic-related restrictions on bars and a looming expiration date on the lease that was held by the late Tony Montooth, the original owner of the bar. The building is currently being gutted and a lease sign is in the window.
"We're losing a lot of money. It's just too difficult to conform to all the regulations and maintain our pricing," Jess Montooth, son of Tony, previously told the Weekly.
In addition, 440 S. California Ave., the longtime home of Country Sun Natural Foods, was listed for sale for $6 million on LoopNet in October.
A person connected to the grocery market, who spoke on the condition of anonymity, emphasized that anything in terms of a sale remains tentative.
"Country Sun is not moving," the person said. "We have no idea if (the property is) going to be sold or not. Even if it is sold, (the store) won't move."
Street closure boosts some businesses, harms others
The city has taken measures to support local businesses in the commercial district during the pandemic — most notably, it temporarily closed California Avenue to traffic to allow restaurants to offer street dining while health mandates limited indoor dining. In September, the council voted to extend the popular street dining program until at least next June.
"Overall, the city has worked to help promote retail and retail-like uses on California Avenue," Meghan Horrigan-Taylor, the city's chief communication officer, wrote in an email. "The council has also worked during the pandemic to think about the role of the street closures in supporting the community and supporting local businesses."
The City Council is scheduled to discuss longer-term closures on Nov. 15, she added.
But some retailers say the benefits of the program are not shared among all businesses on a street dominated by restaurants.
As a retail store that relies on impulse walk-ins, Roth believes that the street closure continues to negatively impact her business.
"Retail is a very funny thing where sometimes you don't know that you want something until you see it," she said. "And walking up the middle of the street, you're not going to see my retail."
However, Roth said she understands the purpose of the closure and ultimately supports the cause since it has helped restaurants during the economic crisis. But come winter, when it becomes colder to eat outdoors, she questions whether the street closure will be useful.
"When you walk down (California Avenue) … all I can think of is a failing street," she said. “It’s really sad.”
Businesses move in, despite tough conditions
As someone who has sounded the alarm bells for several years to the city about California Avenue, Goldman said businesses are not clamoring to grab the vacant locations in the commercial district.
But the avenue will welcome a few newcomers soon.
Recently, Goldman's Premier Properties, which currently lists five retail locations on California Avenue available for lease on its website, helped secure a retail space for Nob Hill Hardware at 251 California Ave., next to FedExOffice. While it's an exciting opportunity to add a retail use to the street, Goldman said the level of permitting and inspection that the business had to undergo for a 3,144-square-foot space has been "brutal."
"This construction has been going on for more than one and a half years ... and they're not building anything," he said.
In addition, Boba shop Ume Tea is preparing to move into the former Subway site at 421 S. California Ave. And Local Kitchens, which describes itself as a "digital food hall" focused on food delivery service apps, is set to take over the former location of The Counter in November. Customers can order from a variety of restaurants and pick up their food at the location; there is no seating for dining in.
"We couldn't be more thrilled to bring our micro food hall to California Avenue, which will feature a mix of incredible Bay Area restaurants including Señor Sisig, Wise Sons Deli and The Melt," Jon Goldsmith, CEO of Local Kitchens, wrote in an email. "The reaction from guests has been tremendous since our inaugural store launch last year, and we are excited to serve Palo Altans with convenient and diverse food options."
Other than these new retailers, however, businesses that consider moving to the avenue are facing some tough conditions — some of which predate the pandemic, retailers said.
Property managers and business owners who spoke to the Weekly pointed to what they considered questionable policy decisions the city made over past years that have only made it more difficult to operate a business and attract willing newcomers.
Roth at The Cobblery, for example, highlighted one ordinance that she ironically once supported by gathering petition signatures for its implementation: the "formula retail" policy adopted in 2015, which restricts chains with more than 10 locations from setting up shop on California Avenue. The law made exceptions for Benjamin Moore Paints, The Counter, FedEx, Starbucks and Subway, which already operated on the street at the time.
"That's one of the things that maybe needs to be relooked at," Roth said.
Mike Meffert, a commercial real estate agent for Alhouse Deaton who has worked in the Peninsula for 20 years and also owns an office building at 480 S. California Ave., agreed that the formula retail policy is among the barriers that could be deterring businesses that may have the ability to increase foot traffic on the street.
"As far as I know, other cities (with downtown districts) don't have this formula retail restriction," he said. "I think that is fairly unique."
More recently, the city enacted new policies around parking that have left business owners frustrated and feeling that they were left out of the conversation when changes were discussed.
On Oct. 5, the city agreed to increase the cost of parking permits for its public garages and eliminate its on-street parking permit program in the Evergreen Park and Mayfield residential neighborhoods, which employees in the California Avenue district rely on for parking.
The city expects cars to move off neighborhood streets and into the new 626-space garage at 350 Sherman Ave. and has assured that the structure is large enough to support the 250 or so vehicles that currently use the on-street permit parking program.
Michael Ekwall, owner of La Bodeguita del Medio on 463 California Ave., believes that the new parking policies are a blow to the business district, especially as the restaurant industry continues to struggle with an employee shortage.
"When we have an employee that can't find parking, they just don't work for us," Ekwall said. "We're in a very challenging position right now in terms of being able to fully staff our business and when our people can't get parking permits, it just makes it worse."
Ekwall said taking away the residential parking program and increasing the cost of garage permits is a step backward. He's not convinced that the garage will provide enough spaces to accommodate all of the business district's employees.
Meffert and Goldman echoed Ekwall's sentiment, saying that adding restrictions to parking in the neighborhoods makes it challenging for businesses to operate.
"If you kill off the parking, you slowly kill off the businesses, too," Meffert said.