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Shopping Centers Today -> May 2003
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BAY AREA REVIVAL
New center brings retail, shoppers to old industrial site near Oakland
BY DEBRA HAZEL AND RICK DELVECCHIO
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Bay Street, the latest project in a regionwide crusade to develop better retail in the San Francisco Bay area, opened to great fanfare in November, despite a serious market recession.
The 400,000-square-foot, Main Street-style center, located in Emeryville, a small city that lies between Berkeley and Oakland at the eastern anchorage of the Bay Bridge, is part of a decades-long plan to redevelop a former industrial area into a residential and retail hub. Developer Madison Marquette opened the project just before Thanksgiving to capture holiday business.
“Our clients say they’re doing very well, that it’s a busy, successful center,” said Ted Plant, a broker employed by San Francisco-based real estate firm Edward Plant Co., and who has retail clients at the project.
At press time the property was more than 90 percent leased and committed, according to Bay Street spokeswoman Dee Dee Taft. The project had more than 40 stores and restaurants open, including such chains as Abercrombie & Fitch, Aldo Shoes and Rubio’s Baja Grill. Opening this month is Cold Stone Creamery, with Tri Lu’s Salon & Spa set to follow later.
The site covers three city blocks and includes a 16-screen AMC theater that opened Dec. 18. A second draw is a cluster of restaurants on the second level, with outdoor seating that overlooks San Francisco Bay and views of the San Francisco skyline and the Golden Gate Bridge.
In the past, retailers have largely ignored the area in favor of San Francisco itself and the wealthy communities of Marin County. Consequently, the demand for retail was considerable, Taft said.
“The primary trade area for Bay Street is the Berkeley and Oakland hills subsector and is the only retail subsector with no regional mall and half the national average for shopping center space per capita,” she said. “So Bay Street offers a wide range of national tenants not currently found in the area.”
Nearby, Oakland Mayor Jerry Brown has for several years been trumpeting his city, and particularly its downtown, for both retail and residential development. Brown has vowed to bring 10,000 residents to downtown, and some retailers have arrived to serve them, including Gap and Sears. Ikea and other retail projects straddle both Oakland and Emeryville. The latter, in particular, has a reputation for being extremely development-friendly, in contrast to such growth-shy communities as Berkeley. As a result, what had been a desolate industrial area has become a residential and office hub in less than 25 years.
“The Ikea next door to Bay Street has gone through several expansions, and there is now a great deal of shopping for the upscale customers in nearby cities, including Orinda and Lafayette,” Plant said.
For all the retail demand, though, the timing for Bay Street’s opening has been less than propitious, coming as it does during a national and regional economic recession. The dot-com bust of recent years, which hit this area particularly hard, was compounded by a marked downturn in Bay area tourism after the Sept. 11 terrorist attacks. The subsequent lead-up to, and commencement of, war with Iraq did not help business in the area either.
“The Bay area, like everywhere, is in a recession,” Plant notes.
Even Union Square, in the heart of San Francisco, has been battered by the downturn, with the closure of toy retailer FAO Schwarz earlier this year only adding to the tony district’s vacancy rate.
Consequently, it shouldn’t be too surprising that not all Bay Street tenants are entirely happy.
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“We’re barely making it,” said Catina Stavroulakis, founder and president of specialty bath vendor Art Bath Soul, speaking for herself and other kiosk owners. Stavroulakis, who opened at Bay Street in November, said that despite the kiosk’s location across from the parking garage, it did not realize some $50,000 in expected holiday revenue. “Any time you have owners working, you know there’s a problem.”
On the day she made that comment, she was not the only owner working the counter. Meg Goodspeed, who owns a sunglasses and shirts outlet called Cali-Wear, was on the job as well, an indication that the spot was not generating enough revenue to support a payroll.
“The whole market is down right now,” he said. “[But] even though sales are down across the board, we should be doing a lot better.”
Stavroulakis blames some of the problems she is experiencing on organizational issues stemming from what she believes was a rushed opening.
“They opened early,” she said, “so we were the sacrificial lamb.”
Another hiccup emerged when the project started out by charging shoppers to park their cars, a rarity in the Bay area and for lifestyle projects overall. When customers objected, management suspended the fee and has since hired a consultant to come up with a new parking system.
For her part, Stavroulakis says her lease terms have changed constantly, indicating to her that there is frustration all around.
She says she is holding on to hopes that crowds of shoppers will materialize in the summer.
Goodspeed, who says he operated kiosks at five other locations before signing up for Bay Street, says he, too, is determined to persevere in the hope that business at the center will pick up.
However, competition also is likely to pick up in the future. Westfield America Trust and Forest City Enterprises have teamed to integrate, develop and market the San Francisco Centre and 835 Market Street (the shuttered Emporium department store) in the city’s downtown. The two properties will be connected and anchored by Bloomingdale’s, Nordstrom and a theater complex, and will feature more than 200 specialty stores. Construction will begin late this year, and the developers say they are aiming to complete the project in the summer of 2006. San Francisco Centre will remain open throughout the process.
Westfield America has also begun a massive, $134 million expansion of its Westfield Shoppingtown Oakridge mall, a project that will nearly double the size of the center to 1.1 million square feet.
In Oakland, locally based Jack London Square Partners, a joint venture of Ellis Partners and Bascom Venture Partners, has announced a plan to redevelop the city’s waterfront with a hotel, offices, nearly 400,000 square feet of retail and a cinema. This will dramatically transform what had been an industrial area.
Bay Street, too, will soon expand. Its developers have plans to put 284 apartments and 82 townhouses on top of the existing retail, which will in effect create a 24-hour neighborhood on what used to be a toxic industrial site. The first units are expected to open next year.
As a result, Goodspeed expressed hope.
“I think this place has a huge potential to be very successful,” he said. “The management group has been the best I’ve worked with as far as sitting down and listening to things.”
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