If You Offer Free Rent, They Will Come

Oakland looks to build a downtown retail district with start-up, rent-free leases in already vacant spaces.

Yoko Kumano, owner of Umami Mart, one of the pop-up stores taking a chance on the retail potential of Old Oakland.
National Journal
Oct. 11, 2013, 8:24 a.m.

This art­icle is part of a weeklong Amer­ica 360 series on Oak­land.

OAK­LAND—The city of Oak­land wants to emerge as the Brook­lyn to San Fran­cisco’s Man­hat­tan. It’s get­ting there. Thanks to a hip­ster ex­odus from more ex­pens­ive San Fran­cisco, Pa­lo Alto, and Sil­ic­on Val­ley, a lot of tat­tooed mil­len­ni­als are rid­ing around down­town Oak­land on fixed-gear bikes. The bar and res­taur­ant scene is tak­ing off. A massive fest­iv­al called Art Mur­mur draws thou­sands of people on the first Fri­day each month.

And yet re­tail­ers still largely struggle to sur­vive in Oak­land’s down­town. “There aren’t enough people here,” Bri­an Kend­all, pro­ject man­ager for the Oak­land Re­devel­op­ment Agency, ex­plained on a walk last month. Down­town is a ma­jor pro­fes­sion­al cen­ter fea­tur­ing Kais­er Per­man­ente’s re­gion­al of­fices, the seats of city and county gov­ern­ment, and mu­sic-stream­ing com­pany Pan­dora. But for much of its his­tory, it has been a com­muter cen­ter, with few res­id­en­tial or shop­ping op­por­tun­it­ies.

There’s not much foot traffic. Kend­all poin­ted out blocks where many ground-floor spaces are either va­cant or of­fices that turn shuttered blinds to the street. On Tele­graph Av­en­ue, a ma­jor thor­ough­fare, two new shoe boutiques rely on on­line sales for 30 to 50 per­cent of their rev­en­ues, he said. Mean­while, city of­fi­cials es­tim­ate that Oak­land res­id­ents spend $1 bil­lion each year shop­ping out­side Oak­land, of­ten tak­ing their wal­lets to neigh­bor­ing towns with already-flour­ish­ing shop­ping dis­tricts.

City hall, loc­al en­tre­pren­eurs, and a small busi­ness in­cub­at­or called Popu­p­hood see re­tail as the fi­nal stage of Oak­land’s urb­an re­viv­al. And they’re help­ing mer­chants with cre­at­ive solu­tions that could ap­ply to Main Streets and down­towns na­tion­wide.

Alf­onso Domin­guez knows how hard it is to sur­vive as a re­tail­er in down­town Oak­land. While his res­taur­ant in his­tor­ic Old Oak­land — an au­then­t­ic Mex­ic­an place he co-owns with his mom — sur­vived the 2008 re­ces­sion, his nearby den­im store and home-goods store did not. As Domin­guez watched the bad eco­nomy wipe out emer­ging busi­nesses, he wor­ried about the neigh­bor­hood’s fu­ture, and about de­creased foot traffic to his res­taur­ant.

So in 2011, Domin­guez teamed up with artist Sarah Fil­ley and ap­proached his land­lord with a new concept: in­stantly re­viv­ing a whole block in Old Oak­land by giv­ing five va­cant store­fronts to re­tail­ers for six months, rent-free. The goal was to lower the start-up costs of open­ing a store, and to help en­tre­pren­eurs ease in­to pay­ing full rent. By open­ing along­side oth­er res­taur­ants and boutiques, a store own­er also wouldn’t have to wait for oth­er re­tail out­lets to take a chance on the neigh­bor­hood. “You can’t ex­pect someone to go and set up shop in a trans­ition­al neigh­bor­hood and wait five years for it to come up around them,” Fil­ley says. Domin­guez and Fil­ley called the concept ‘Popu­p­hood,’ a word that’s now the name of their con­sult­ing com­pany.

“We didn’t feel like we were sac­ri­fi­cing much,” says Mar­tin Ward, as­set man­ager for the build­ing own­er, Peter Sul­li­van As­so­ci­ates. The com­pany had been try­ing to lease the spaces for years. Ward be­lieved that ac­tiv­at­ing ground-floor space with re­tail­ers would make the area more at­tract­ive to of­fice ten­ants.

Two years later, the store­fronts in Old Oak­land have hos­ted sev­en busi­nesses and a trav­el­ing art lib­rary, se­lec­ted by Domin­guez and Fil­ley from a pool of ap­plic­ants. They lean to­ward busi­nesses that sup­port or re­flect Oak­land’s cre­at­ive eco­nomy — such as a former gal­lery own­er who sells goods hand­made by Amer­ic­an artists, and a pair of Ja­pan­ese-Amer­ic­an life­style blog­gers whose store spe­cial­izes in im­por­ted bar­ware. Par­ti­cip­at­ing re­tail­ers meet monthly, share com­mun­al re­sources like Wi-Fi, and are ment­ored by Domin­guez and Fil­ley.

So far, two par­ti­cipants have gone on to sign leases in their Popu­p­hood spaces, and a third re­cently signed a lease at an­oth­er Old Oak­land loc­a­tion. Re­tail­ers that suc­ceed in the in­cub­at­or tend to have two qual­it­ies: they come in­to it with an ex­ist­ing on­line fol­low­ing or as a second loc­a­tion for an ex­ist­ing busi­ness, and they turn their stores in­to ex­per­i­ences. Crown Nine, a jew­el­er, hosts classes and makes cus­tom en­gage­ment rings. Um­ami Mart, the Ja­pan­ese pur­vey­or, hosts events like sake tast­ings. En­tre­pren­eurs that suc­ceed go bey­ond brick-and-mor­tar: they have on­line stores, whole­sale busi­nesses, blogs, and In­s­tagram ac­counts. They hustle like crazy.

A ven­ture like Popu­p­hood re­quires land­lords will­ing to take risks and hard­work­ing en­tre­pren­eurs. But re­tail­ers set­ting up shop in Oak­land have also be­nefited from state re­devel­op­ment funds for down­town façade and ten­ant im­prove­ments, man­aged by City Hall’s Kend­all. Such money has been stra­tegic­ally de­ployed in Oak­land for years to com­bat urb­an blight — not­ably in the 2000s, when then-May­or Jerry Brown spent lav­ishly to re­store the art deco Fox Theat­er and fin­ance new apart­ments. In 2012, now-Gov. Brown elim­in­ated the pro­gram, for­cing the city to ex­plore oth­er op­tions for help­ing en­tre­pren­eurs.

The City of Oak­land re­cently partnered with Kiva Zip, a crowd­fund­ing plat­form. The city will en­dorse loc­al busi­nesses on the site, with the hope that the stamp of ap­prov­al will help them at­tract more cap­it­al. The re­devel­op­ment agency has also taken a Popu­p­hood-style ap­proach to some down­town prop­erty it owns. That in­cludes Domin­guez and Fil­ley’s cur­rent of­fice space, which the city has offered them rent-free in ex­change for their en­tre­pren­eur-in­cub­a­tion work.

Popu­p­hood has sub­leased most of the space it gained from the city to HUB Oak­land, an or­gan­iz­a­tion that provides cowork­ing loc­a­tions throughout the city. What was once an empty bank branch is now hum­ming with en­tre­pren­eur­i­al activ­ity. Across the street, a store called Oak­land­ish prints T-shirts and oth­er gear em­blazoned with un­abashed Oak­land pride. And down the block, Awaken Cafe serves up lattes and avo­cado toast, and it’s of­ten so crowded with people work­ing on laptops that all the wall out­lets are taken.

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