Downtown Retail Strategy Update

In a presentation to the Community & Economic Development Committee (CEDC) of the City Council, Downtown Manager Blage Zelalich provided insights into national trends that influence retail expansion in Downtown San Jose, along with an overview of the studies and activities undertaken by the City to encourage retail interests to locate in the downtown area. The full presentation can be viewed online.

Overall, online retail is having an effect on bricks-and-mortar stores, here as in the rest of the country. Retailers are focusing on enhancing the actual experience of visiting a store, differentiating the physical shopping event from doing it online. Drivers for experiential retail are the foot traffic that comes from special events, cultural institutions and entertainment venues, which San Jose does offer, in addition to a built environment with historical buildings, parks and relatively good transit connections.

The city’s major deficit in terms of retail development is residential population. Having doubled since 2000, now there are about 20,000 downtown residents, increasing to 25,000 in the short term as ongoing construction projects are completed. And the City anticipates adding another 12,000 downtown residents in the next three to five years. Our downtown population is characterized by small households, more men than women, with relatively high income and education levels. This presents a challenge, as highlighted in some of the studies that the City is using to guide retail development.

“Women tend to drive retail location selection,” Zelalich pointed out. “They do the household purchasing, gift-buying, and clothes shopping, far more than men.” Adding women to the downtown residential scene will make it more attractive to retailers.

In addition, around 33,000 students attend San Jose State University, of which 15 percent live on campus, and 2,100 live within a mile of campus. Similar to the male population, students are not big shoppers, but do want a lively food and beverage scene. It’s clear that the current retail situation in San Jose is reflecting these demographics, and the addition of bars, coffee shops and restaurants has been quite brisk over the past few years.

In terms of workforce, Downtown boasts some 43,000 jobs, 10 percent in City government. Rehabilitation and reactivation of older buildings will add another 2,000 over the next few years.  Development opportunities exist for another 20,000 jobs, not including those offered by the Google project.

Zelalich highlighted a fairly high level of development activity currently in San Jose, including applications for permits for upgrades and additions to residential properties, especially on the east side of town. In addition, the San Pedro Square area is getting MOMENT, four new retailer spaces built into the Market Street Parking garage, featuring a rotating selection of local entrepreneur retailers.

Further development of the Downtown Retail Strategy includes meetings with stakeholders and a draft set of recommendations to be presented to CEDC in September, before going to the full Council.