July 22, 2004

Changes are underway at Main Street shopping center

By Shari Kaplan
Staff Writer

The Main Street shopping center at the corner of Santa Teresa Boulevard and Blossom Hill Road could be a new example of the old cliché that “the more things change, the more they stay the same.”

A handful of merchants have left the center in 2004 for various reasons, and a few more are in their last weeks at the center. However, many others are staying, and many new merchants are coming in to fill vacancies.

“We’re completing our 10th year, which means that most of the rents are rolling over. Rents then get restructured to current market rates,” explains Marilyn Scholl, marketing director for Hamilton Management, which runs Main Street. Not all tenants have 10-year leases, however; some are coming due after five years or various other increments.

Scholl says no tenants are being “kicked out,” and on the contrary are protected by option provisions. An option provision gives a tenant the right, at renewal time, to extend his or her lease for another fixed number of years.

Even if a landlord or property management firm didn’t want the tenant anymore, Scholl says, an option provision lets the tenant stay—provided he or she agrees with any rent increases that may be part of the new lease.

Tenants also have the right to challenge rent increases and submit requests to renegotiate.

“It’s not that I’m putting a high price on my shopping center. I want to have a full center; having vacancies doesn’t do me any good,” notes Scholl, adding that some tenants’ gross sales figures simply weren’t enough to justify paying the center’s rent. Some establishments, like Tony & Alba’s Pizza, relocated to smaller shopping centers that charge less rent, according to Scholl, while others dealt with different situations.

“For Blockbuster Video, which closed in June, the video business just wasn’t doing as well, so they’re restructuring. We tried really hard to negotiate with them; we wanted to keep them here,” she says. “The Wherehouse left because the company went bankrupt. Manpower Temporary Services left because there’s just not as many jobs for them to send people to.”

Bascom Donuts is among the recent vacaters. Another Bascom Donuts exists on Bascom Avenue near the San Jose/Los Gatos border, but a spokesman for that shop said Main Street’s Bascom Donuts was under different ownership and he had no information about why it closed.

Jim Trah, owner of Learning Express, an educational toy store at the southern end of Main Street since 1999, says he is closing shop Aug. 8 for a combination of reasons, some of which mirror the situation many small businesses are facing.

“We’ve been really affected by the economic decline here in Silicon Valley. Our business has been declining for the past three years. People just aren’t spending as much money as they used to,” Trah says. “Customers used to come in and spend $25 to $30 for a child’s birthday present, and also get extra stuff for their own child if the child was with them. Now it’s $20 for a gift and nothing extra.”

Trah also says the companies that ship his merchandise are charging more, and his workers’ compensation insurance has also gone up. If he raised store prices to reflect these expenses, however, he’d risk turning off customers, so he kept prices the same and hoped to absorb the losses. He says he is also worried about competition from stores across the street at Westfield Shoppingtown Oakridge Mall, especially the new Target, which opens in October.

All of these factors made for some hard soul-searching as 2003 came to a close, since Trah knew his lease would be up for renewal in August 2004. “I knew in January [2004] that I wasn’t going to renew unless they [Hamilton Management] were willing to aggressively renegotiate the lease. I told them I’d like to stay, but I can’t pay the increased rent,” says Trah, who would have liked a year-to-year lease instead of a fixed-period one, but that was not an option.

What he and other tenants pay is actually a combination of base rent (a certain amount of dollars per square foot) plus “triple net,” which is a combination of common area maintenance costs, property taxes and insurance.

When these costs rise for the property management, as they normally do each year, they also rise for the tenants.

Amy’s Hallmark, located on the same side of the mall as Learning Express, is not closing at the present time, manager Robyn Griffin says, but business could certainly be better. “Last year I had a decent year. This year, business has just plummeted. But that’s not just here; it’s across the board at Hallmark stores,” she says.

“People are still coming in and buying the same things, but they’re just not buying them as often.”

Griffin says the vacant storefronts near her shop, such as the 14,000-square-foot hole left by The Wherehouse, might be one reason business has slowed this year, since customers have come in and commented: “Oh, we didn’t even know you were still here, with all the vacancies.”

Having vacant neighbors also reduces overall foot traffic, which results in fewer people walking by her store. And since fewer window-shoppers leads to less paying shoppers, it’s something of a vicious circle. That’s why Griffin says she’s excited that two different eating establishments are moving into The Wherehouse’s vacancy. “I think business will definitely pick up!” she says, although she also admits to the same fears Trah has of competition from the new Target and other Oakridge stores.

Scholl says she is sorry whenever tenants leave, but she is happy to report that 85 percent of Main Street’s tenants have renewed, including the popular chains like Armadillo Willy’s, Jamba Juice, Johnny Rockets, Kinko’s, Le Boulanger, Pure Beauty, Sleep Train, Starbucks, Una Mas and Watchcare.

“Albertson’s has a 30-year lease; they’re not going anywhere!” she adds of the center’s anchor store, which is currently remodeling. As for the current or soon-to-be vacancies, 90 percent of them have new tenants preparing to set up shop, according to Scholl.

“There’s a huge demand for restaurants. I think our customer base will be delighted with what’s coming in. It’s really going to be an international restaurant flavor,” she says of the Chinese, Indian, Italian and other ethnic cuisines on their way to Main Street. She also promises a day spa, an upscale nail salon, a home loan company and other service and retail businesses.

“The nature of a shopping center is that things change,” Scholl says.

Photographs by Shari Kaplan