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Pop-ups could be part of growing trend: Temporary downtown retail arrangements benefit merchants and landlords
By Elliott Burr
Some new business owners in downtown Los Altos discover that, at first, pitching a tent is more suitable than pouring concrete. Figuratively speaking of course.
A wave of new retailers in the downtown triangle that city officials have labeled "very different" from the typical downtown merchant have rushed in with minimal cash and at times token inventory to fill vacant storefronts.
Popping up around town
They are called "pop-up shops," and they could be around for mere months or maybe years - depending on how their owners and landlords see it. The two most prominent and recent examples downtown are the bike shop 359 State and Skateworks, a purveyor of skateboards and magnet for the occasional youth-laced crowd gathered outside Feet's Coffee and Tea next door.
A faltering economy can spell p-e-s-s-i-m-i-s-m for prospective tenants mulling a long-term lease. What if they don't make it through the first year and they're on the hook for another six? But the unique arrangements of pop-up retail, which can provide shorter contract terms and fewer tenant improvements and merchandising requirements, supply a four-way win for tenants, landlords, the community and city alike, and are a major reason it's a growing trend in town and across the country.
To boot, The Sock Shop, a spinoff of European Cobblery at the intersection of State and First streets, opened approximately seven months ago as a pop-up, although an employee said the shop would eventually be more permanent.
And on the horizon is Play! Los Altos, Bumble proprietor Mary Heffernan's Gymboree.-esque venture, slated to occupy the old Linden Tree spot on State Street, according to Los Altos Economic Development Manager Kathy Kleinbaum.
"I've always thought pop-ups were a great way to fill vacancies and incubate new businesses," said Kleinbaum, who signed on with Los Altos late last year after a stint at Oakland's redevelopment agency. ''As part of the economic downturn, people are looking for more inexpensive ways to get a foothold into starting a business."
In Los Altos, there are two types of pop-up, according to Community Development Director James Walgren: those that conform to downtown zoning laws, i.e., retail or restaurants, and those that don't (think service-related businesses).
The former can operate just as any retail store as long as it and the landlord agree, but the latter must secure a nonconforming-use permit from the city. That's no daunting task, but it usually means the store would be operating only for a very short time, perhaps three months.
"The zoning rules for State and Main are so strict, but maybe there's a use (for the vacancy) that can bring visitors downtown," Walgren said. "The provision is for a short-term temporary use permit ... no more than 12 months."
Play! Los Altos' stay will likely be temporary, as its use doesn't comply with downtown zoning. But because it will function as a pop-up shop, it provides Heffernan with an opportunity to test the market before fully committing. Kleinbaum added that it's much more attractive to an on-the-fence tenant "if you can get into a storefront with minimal improvements to test out a business model without investing lots of money."
A wait-and-see approach
The jovial owner of 359 State, Jeff Selzer, said he didn't choose to go pop-up because he was looking for a cheap way to start his business. But the terms offered by Passerelle Investment Co., which owns several buildings near the corner of State and First streets, didn't hurt.
With his crosstown shop Palo Alto Bicycle consistently proving a cash cow, Selzer said, it's not as if he were a rookie entrepreneur sniffing around for a deal to get started. Passerelle's courtship proved a "great opportunity", and Selzer opened in November.
"It was a way to explore the downtown district for a business opportunity," he said, noting that when his lease expires in October, be will evaluate whether to stay. "Anytime you can do that relatively affordably, it's a good thing to do .... It was also a great opportunity to help enliven the downtown community."
Business is a bit tepid currently, but Selzer attributes that to the poor bike-buying season right now. Apparently not everyone rides rain or shine.
The "View" from the landlord
Passerelle bas been the trailblazer for pop-ups downtown. In addition to the aforementioned wheel-based ventures, the company's slate includes the Kilgoris Project Marketplace, a collection spot for a non-profit group that benefits economic development in Kenya. It was housed for a few days late last year in the old Linden Tree locale.
The investment company's co-founder, Taylor Robinson, said the Kilgoris venture bad "evoked a negative reaction'' after it closed, because observers figured it bad gone out of business.
"Not turning into a permanent tenant is not always a sign of failure," she noted. "Sometimes tenants deliberately commit to a short term."
Robinson noted that pop-up arrangements can lead to elimination of "dead zones" downtown as well as allowing prospective tenants time to test concepts.
"Pop-ups benefit the landlord and tenant alike by allowing both to test a concept in a market prior to engaging in a long-term business commitment:' she wrote in an email to the Town Crier, adding that they make "the streets more walkable and engaging for all."
A prudent path
Jason Strubing, Skateworks' owner, said he recently signed a longer-term-lease with Passerelle after starting as a pop-up shop in summer 2011.
For Strubing, the thought was: Why get all wet before testing the waters? Especially in a town like Los Altos, not widely known for its skater culture.
Strubing debated whether or not to set up shop, choosing the path of prudence.
"I had just come out of a long-term lease and wasn't looking to jump into anything serious," he said. "I would've never come here on a long-term lease."
But after waiting for a bit and realizing that a venture like his could be successful in downtown Los Altos, Strubing decided to take root.
"What pop-up gave us was a chance to see if the community can get behind us and support a store like ours," he said. "It gave us enough time to adjust our product mix to tailor it to the community.''
The easygoing manager said that after entering a more permanent arrangement he thought could prove fruitful, a variety of possibilities have opened up. Now he can justify making tenant improvements and expanding his inventory to an ever-growing customer base.
First on his list - after physically stripping the pop-up sticker from his front window, Strubing had a 3.5-foot-by-16-foot half-pipe built inside the store - introducing what Robinson said was the Peninsula's only indoor training facility.
With no skate park near town, why not make your own?
Walgren said the arrival of pop-ups in town has created a significant buzz, one he said could attract further foot traffic and catalyze a downtown revitalization.
And besides, does anyone consider the view into an empty store appealing?
"It's better to have something there," Walgren said. "Perhaps it's bringing schoolchildren - at least it's bringing people downtown."
Although pop-up retail has become a "hot trend," according to Kleinbaum, she implored city officials and landlords to uphold rigorous standards for the types of businesses that are allowed to operate in Los Altos.
''You have to choose the right one." she said.