Santa Barbara’s closure of State Street, and the COVID-19 pandemic-inspired “ad hoc” creation of a 10-block “pedestrian mall” has been a disaster for downtown retail.
The permanent “promenade” that the City of Santa Barbara and its State Street Advisory Committee is currently considering will have catastrophic consequences for Santa Barbara and for one of the most beautiful and historic Main Streets in America.
A long-term closure of State Street will destroy its appeal as a retail center. We are seeing well-known and established businesses leave State to move to Montecito or elsewhere.
Restoration Hardware has announced it will move to a large space in Montecito’s Upper Village. Long-time local favorite Rooms & Gardens is following. They will join successful local businesses like K. Frank in leaving State Street.
We know, from talking to those businesses, why they leave State Street.
First, they leave because sales are dropping. A major issue for most is the continued unchecked vagrancy downtown.
Businesses that are leaving also cite their inability to receive deliveries on State Street and the lack of access for customer pick-ups or drop-offs.
Some businesses are leaving or want to leave because of the degraded appearance and feel of downtown no longer matches their brands. Some are tired of being crowded out by the expansion of nearby restaurant/bar seating in the street.
Many say their longtime local customers tell them they avoid downtown as much as possible.
There is a common misperception that “retail, as we knew it, is dead. And it’s not coming back.”
Nothing could be further from the truth.
Prior to COVID-19, “bricks and mortar” retail sales were 92% of all retail sales, and growing 5% per year. Digital sales were 8% of all retail sales and growing 10% a year — however much of that sales growth was from the growing online presence of bricks-and-mortar businesses.
Digital sales did grow during COVID-19, but bricks-and-mortar sales have rebounded and now account for approximately 86% of all retail sales. And, important, digital sales have slowed to a 4% annual growth rate.
The slowing of online sales is an indication that people are reverting to more normal shopping and social behavior. Bricks-and-mortar retail is alive and well and surging again around the country.
There are hundreds of small and large retailers that should be in Santa Barbara. Los Angeles and Orange counties have an almost endless number of unique and qualified local and regional retail tenants that should be here.
There are many “digitally native” brands that are expanding into bricks and mortar across the country. Many of them have looked at State Street and have passed.
Savvy retailers say they do not want to be on a “closed street.” And there are good reasons for that.
They know that downtown pedestrian malls in the United States have a well-documented 90% failure rate. They know that street closures negatively affect customer traffic, access and visibility.
And they know that downtown pedestrian malls have all had problems with vagrancy and blight.
Santa Monica’s Third Street Promenade is used by the MIG consultants and the State Street Advisory Committee as a model for a successful pedestrian mall. It is currently experiencing both a high vacancy rate of around 40% and has an extreme vagrancy problem.
Retailers and potential tenants know these facts and are unlikely to make commitments to downtown Santa Barbara. Especially while the city is committed to a long-term process — five to seven years — of planning and implementation for a State Street solution.
The data on State Street vacancies are overwhelmingly bad.
According to local commercial real estate brokers, the vacancy rate downtown is 14% to 20% plus, and growing. But if we look at the vacancy rate by square footage, we are pushing 50%.
This is a level at which a street, a mall, a retail district will start to face an irreversible decline. Several senior executives from major retailers have described downtown Santa Barbara as a disastrous, dying, C-level mall.
By closing 10 blocks of State Street to vehicle traffic, we are blocking the economic engine that drives Santa Barbara — tourism.
We get about 2.5 million tourists per year. They stay an average of three days, or 7.5 million visitor days per year. They spend $200-plus per day on retail and food and beverage, or $1.5 billion per year.
With State St. closed we have created obstacles for those visitors who want to experience State Street and downton Santa Barbara.
No one — tourist or resident — is going to casually walk 10 blocks or more to dine or to shop.
With all vehicle traffic banned from State Street, we force people to navigate ancillary streets just to shop and dine downtown.
The Santa Barbara City Council set us on this path. The council earmarked nearly $1 million to a consultant, MIG, to work with the State Street Advisory Committee. It does not seem that any members of the committee are currently commercial landlords or retail business operators in downtown Santa Barbara.
Downtown Santa Barbara retail has struggled for years. Unless the City of Santa Barbara changes direction, the retail exodus and the decline of State Street will continue.