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Update – San Jose retail strategy


America’s love for online shopping is hard to miss: Just look at the smiley-faced Amazon boxes that are probably dotting your neighborhood porches right now. But even amid the disruption, San Jose’s brick-and-mortar retail sector continues to grow.

Now City officials are working to position San Jose to maintain – and improve – the city’s retail position for years to come. On November 26 – the Monday after Black Friday — OED joined with Planning, Building and Code Enforcement staff to present a Citywide Retail Strategy that includes ideas for supporting retail and being ready for what’s next. You can access video of the presentation and the supporting documents online.

From left, Jared Hart, Supervising Planner, PBCE and Nathan Donato-Weinstein, Business Development Officer, OED; presenting on retail strategy , Nov. 26, 2018.

The strategy, presented to the Council’s Community and Economic Development Committee (CEDC), examines the retail scene citywide. It is the second of three retail strategies undertaken in the last two years. The first, focused on North San Jose, was adopted in April 2017.  The CEDC will hear the final section, on Downtown San Jose’s retail situation, in January 2019, and the full retail strategy analysis will be brought before City Council in February.

Why care about retail enough to do a strategy on it? A few reasons. Sales taxes – of which general retail sales are a big part — represent he second largest contributor to the City’s general fund, and a robust retail environment is critical to the quality of life for the 10th largest city in the country. Also, retail is a big employer, representing about 11,000 jobs.

Just as important is something less quantifiable: quality of life. Retail provides access to goods and services, makes our communities more livable, and provides entertainment while it creates places for people to socialize. Small-scale retail keeps our neighborhoods interesting and supports local entrepreneurs.

San Jose’s Retail Performance

The November 2018 presentation delivered information on San Jose’s retail performance, the city’s retail supply and demand, the impact of big-box closures and proposed strategies for supporting retail.

First, some facts: San Jose’s existing retail is performing pretty well, according to a sales analysis performed by consultants Strategic Economics and Greensfelder Commercial Real Estate. Large centers such as Westfield Valley Fair, Westgate Center and The Plant outperform similar centers in the region. The City’s general sales tax receipts are stable to slightly rising, as is retail employment.

Still, the city has certainly been impacted by several chain-store closures in recent years. 2018 was particularly significant, with the sudden closure of OSH and Toys R Us and the announced closures of Sears and Lowe’s. The recent shutterings will increase available space by about 560,000 square feet, out of a total retail base of about 36 million square feet.

What’s the future for these spaces? San Jose remains a desirable market for expanding retailers, with new arrivals prospecting the area for places to land. Many of these replacement stores will sell goods, but some will not – focusing instead on offering services and experiences.

Some spaces will still take time to backfill as landlords work to regain control of boxes and get them re-leased. In the interim, smart owners will creatively activate these spaces: For instance, at Eastridge Center, owner Pacific Retail is filling a former Sports Chalet space with a temporary roller skating rink that is proving a very popular destination for shoppers.

Strategies

In general, San Jose residents have good access to retail as defined by proximity to grocery and drugstores, but a few areas appear to be underserved (see the report for more detail). Several neighborhoods with excellent transportation access or existing retail anchors can support additional expansion. These areas include: Downtown; the Winchester corridor;an area near the intersection of Highways 101 and 280; the Berryessa BART area at Oakland/Brokaw; and the existing South San Jose retail hubs. In addition, San Jose appears primed to support additional supply in certain retail sectors, such as home furnishings, food and drink and supermarkets.

So how do you support the continued vibrancy and expansion of retail in San Jose, especially in a rapidly changing landscape?

Staff outlined a range of suggested approaches, which you can read in the full report. A selection includes:

  • Redouble marketing and outreach effort for retail recruitment. San Jose has a positive message involving planned residential and job growth, transit investment, existing demographics, and unique neighborhoods. Staff is developing marketing materials to help tell this story and highlight opportunities, while also attending/hosting retail industry events and proactively targeting tenants in the market with information on San Jose opportunities.
  • Design viable ground-floor commercial space. A significant portion of future retail supply will involve mixed-use development. Staff will soon present a checklist, developed by experts, to educate developers who may not be experts in retail design.
  • Assist smaller retailers with space needs and services. San Jose’s biggest weapon on this front is the Small Business Ally service – two staff members who provide concierge guidance on city permitting and processes for small businesses, many of them retailers. The Storefronts Grant Program also assists with permit fees and tenant improvements for small retailers. To build on this, the City could explore provisions in the zoning code that encourage non-formula retail. For instance, in Urban Villages, a developer could meet the amenity requirement by including deed-restricted commercial space for non-formula retail.
  • Respond effectively to big-box closures. PBCE and OED staff will need to react quickly to help property owners retrofit spaces for future tenants. Staff will also maintain an updated database of big-box vacancies that includes all information a tenant or developer would want to know at a glance when assessing an opportunity.
  • Work closely with mall owners on forward planning. San Jose is lucky to have several high-quality malls, but the industry is rapidly changing. City staff should host quarterly meetings with these owners to stay abreast of issues, changes, trends and plans while communicating city investments and initiatives.

See the full presentation and access the documents online.