Weathering the Slump in Bustling La Jolla

Fred Scott admits it: He’s worried.

For 35 years, hundreds of loyal families have outfitted their children at the venerable downtown La Jolla clothing store that bears the family name, driving from as far away as Point Loma, Del Mar and Rancho Santa Fe for the lineup of goods and personalized service his business provides.

But recently, that steady base of patrons has begun to erode. Weary of fighting the notorious traffic that snarls La Jolla’s streets, convinced they won’t find a parking spot and distracted by the plethora of malls popping up around the region, many of Fred Scott’s dedicated customers are beginning to spend their money elsewhere.

So far, the veteran merchant has weathered the slump. Scott has adjusted his inventory to appeal to a broader clientele and even subleases space in the 7,000-square-foot store to a sporting goods dealer. But in the long run, Scott concedes, such resuscitative measures may not be enough to keep his business alive.

“I’m trying to adapt and find a way to survive, but I’m convinced that when it’s time to renew my lease I’m going to have a real problem,” said Scott, a soft-spoken, bespectacled man who founded the Girard Avenue store with his father in 1951. “I’ve got a good lease now. But when my landlord calls a local broker and finds out what they’re getting for rents around here, I’m doomed.”

La Jolla. With its well-to-do populace and international reputation as a tourist mecca, the palm-studded town would seem a retailer’s dream. Instead, it’s got a 15% retail vacancy rate, high merchant turnover and a growing reputation as one of the toughest places in San Diego County to do business.

Explanations for the town’s economic jitters abound. A building boom has created a glut of retail space. Traffic and parking woes are scaring off local shoppers. Two heavily promoted malls on the edge of La Jolla--anchored by six department stores--provide an array of options that downtown proprietors are hard-pressed to rival.

But more than anything, real estate brokers and business owners say, the escalating rents for retail space in the picturesque village have created competitive conditions in which only the savviest and most well-financed merchant can succeed.

“It’s tough, no doubt about it, and many people come in here with unrealistic expectations, thinking they’re going to make it big with no sweat in a matter of months,” said Mike Slattery, a commercial real estate specialist with Coldwell Banker who has worked in the La Jolla market for six years.

“The truth is, a merchant will only survive if he’s unique, distinctive and has a superior product that will appeal to both La Jollans and outsiders. Without that combination, plus some staying power, it’s risky at best.”

There have been many casualties of the town’s changing business climate, but the hardest hit have been stores like The Scotts--mom-and-pop outfits that have formed the very heart of La Jolla’s downtown shopping district for years.

Most of these stores were established in an era when property values were lower and land in the heart of downtown, an area nestled above La Jolla Cove and anchored by Prospect Street, was controlled largely by local interests. Landowners, who often knew their tenants personally, needed little income to cover their costs, so merchants had it relatively easy.

But as La Jolla’s property values have soared, much of the downtown territory has changed hands and is now held by national and foreign groups anxious about recouping their investments, Slattery said.

“They all go after the highest rent they can get, and a lot of the old-time tenants, which have actually been subsidized by the previous property owners, just can’t compete,” Slattery said.

In many cases, rents that only five years ago were less than a dollar a square foot have been doubled, even tripled as leases come due, brokers say. Today, $5 per square foot is not uncommon in La Jolla, and Slattery is negotiating a five-year lease for space on busy Prospect at $6 per square foot. By comparison, retail rates in local malls rarely exceed $3 per square foot; on-street space in downtown San Diego is in the $1.50-per-square-foot range.

“At these new rates, you simply can’t run a 5-and-10 store,” said Bob Warwick, the tall, scholarly looking owner of Warwick’s book and stationery store, founded in 1902. “You just can’t sell enough pencils. So, we’ve seen almost all the family businesses in town go under. I’d say all but three or four of the originals are gone.”

The exodus of these family-run, community-oriented shops is changing the face of downtown La Jolla. The hardware stores, pharmacies, dime stores and fix-it shops that once formed the backbone of the village shopping district have been replaced by high-fashion boutiques, gift shops, art galleries and other tourist-serving businesses, plus a few chain stores like The Gap and Banana Republic.

That shift, many observers say, may be good for the town’s thriving tourist trade. But some fear that it is stripping La Jolla of its value as a shopping destination for residents.

“I call it the alabaster sea gull syndrome,” Scott said. “More and more, people are finding they can’t get the basic goods here, and they’re becoming turned off to the downtown. Every time they turn around, the shop that used to sell nails or stationery or light bulbs is gone, and in its place is a shop selling alabaster sea gulls.

“We need the tourist stuff, the places that sell T-shirts that say La Jolla on them, but it’s getting so that’s all we have. I think the resident will be the big loser if this continues.”

Though Scott and fellow merchants insist that residents can still fill most of their needs in the central shopping district, they worry that as the number of hard-goods stores dwindles, it becomes harder and harder to convince La Jollans that it’s worth their while to come downtown.

But there is another school of thought on the issue. Despite many merchants’ contention that high rents are forcing out established tenants selling wares that everyday La Jollans need, some observers believe businesses have died because they simply failed to provide a product the community wants.

“I think it’s kind of a cop-out, quite frankly, for people to blame high rent for their business failure,” Slattery said. “The bottom line is many merchants in La Jolla have not kept up with the marketplace. The world has caught up with them, and they don’t want to adapt. So now they’re complaining.”

Indeed, brokers note that despite the difficulties confronting some La Jolla merchants, others run some of the most profitable businesses in San Diego County.

“The marginal tenants won’t make it because they haven’t anticipated the changing business picture and because somebody down the street is building a better mousetrap,” Slattery said. “But there are retailers and restaurants in La Jolla that are extremely successful. And remember, the merchants that survive are only a reflection of what the community wants.”

Mike Townsend, president of the La Jolla Town Council, has a similar view.

“It may make many of us sad, but the time has come for things to change in La Jolla,” said Townsend, whose family owns Geri’s Liquors on Pearl Street. “The land is too valuable for a lot of the resident-serving things like hardware stores and shoe-repair places. And there’s demand for these Paris boutiques and pricier establishments. I’m afraid the old days are gone for good.”

Although the older businesses have been the first to feel the pinch, newcomers on the retail scene struggle as well. Lured by the mystique of La Jolla and convinced they can’t miss with the town’s demographics and bustling tourist trade, many entrepreneurs find quite a shock when they open their doors, brokers and merchants said.

“People from Detroit or Chicago come here in the summertime and see all the people in the shops on Prospect, day and night, and figure this is a gold mine,” said Brian Borkum, who owns Jigsaw clothing store and a leather goods shop in La Jolla, plus a third business in Horton Plaza. “They open up, things go great in July and August, then October hits and La Jolla becomes a ghost town. It’s crazy.”

Brokers could not provide any estimation of the number of shops that close in a given month, but they concede that the town’s turnover rate is extraordinarily high. Bob Warwick knows it is. He prints business cards and letterhead stationery for the new arrivals, then watches them go under.

“It’s an amazing phenomenon,” said Warwick, who is running a strong business but predicts stiff competition from a new Crown Books store down the block. “These nice people from Kansas or Mexico come in, get their office supplies, open an account with us and then suddenly the ‘Going Out of Business’ sign goes up. We’ve seen three or four fold up in the last few months. I can’t even remember their names.”

Though sympathetic to the plight of those merchants who fail, established business owners say the turnover, complete with the “grand openings” and “going out of business sales,” makes their plight all the worse.

“Here we are just getting by . . . and then some guy that’s struggling cuts his prices and takes that little margin of profit away,” said Townsend, whose business “has not exactly been going gang-busters” lately.

Moreover, the empty storefronts and for lease signs on almost every street except Prospect saddle La Jolla with an image as an unstable business community, merchants say.

“People look at an empty shop and wonder, ‘What’s wrong here?’ ” Scott said. “When all of La Jolla is for rent--and some of these buildings have been standing vacant for three years--that’s a pretty pervasive feeling.”

Compounding the high turnover rate is the vast amount of new retail space available in La Jolla, much of it in sprawling, plaza-style buildings painted in trendy pastel colors. An unusual ordinance designed to curb the amount of office space downtown required that all new buildings provide retail space on the ground floor.

“The intent (of the ordinance)--to keep people from eliminating retail and putting a bunch of banks on prime corners--I agree with,” Slattery said. “But it has forced the creation of retail space in buildings that are totally ill-suited for it, either because of their design or location. And now it’s all sitting vacant.”

The La Jolla Town Council, concerned about the health of the economic climate in the village, has embarked on a campaign to assist retailers and boost the shopping trade downtown. In March, the council’s Business and Professional Committee held a summit meeting of sorts to discuss problems besetting the retail district and drum up solutions.

One key issue is La Jolla’s parking problem, which most merchants insist is not a problem but “a myth.”

“It’s funny,” said David Ish, executive manager of the La Jolla Town Council. “People will drive to UTC (University Towne Centre) and park at the very edge of a huge lot and walk a quarter-mile to the mall. But if they can’t park right on the street, in front of the store, in La Jolla, then the town has a parking problem.”

To ease the crunch, or at least allay the fears of would-be patrons, the committee is pushing a parking validation program. So far, however, shoppers don’t seemed interested.

“I was first in line for that when we first tried it five years ago,” Scott said. “We advertised, put a sign in the window. I still have my first book of tickets. People want to park right out front. They won’t walk half a block.”

Also under way is an effort to free up as many as 1,000 on-street spots by providing employees with discount spaces in underground garages. Ish said he is negotiating an appropriate price for the spots with Ace parking.

To assist merchants with their first few months in business, the Town Council is assembling a “Welcome to La Jolla” packet with information on available parking, trash pickup, sign ordinances and assorted other hints on getting by in the community.

In an attempt to attract a nighttime trade and boost revenues, some merchants are experimenting with longer hours. In particular, several galleries are breaking a long tradition and staying open until 10 p.m. on Thursdays. Other business owners are talking about cooperative advertising campaigns, though there is little agreement on the best vehicle and a collective message.

“We need to get everyone united around the common goal of promoting La Jolla, of convincing La Jollans and everybody else to shop La Jolla,” Townsend said. “We’ve got an image as a place that’s hard to shop and expensive. Unless we change that, we can’t compete with the malls.”

One factor the Town Council and local merchants realize they cannot control is the mix of retail stores in La Jolla. Shopping malls like UTC and La Jolla Village Square regulate the variety of merchandise available to patrons, ensuring that an extensive lineup is available to entice shoppers, but conditions are different in downtown La Jolla.

“In malls, you’ve got one property owner who’s concerned about having the right tenant mix,” Slattery said. “Unfortunately, in La Jolla you’ve got 150 property owners, and they all want the highest rent they can get, which is often from the high-end fashion boutiques.

“It may mean the end of hardware stores and other desirable tenants, but in a free enterprise system, you simply can’t dictate who a property owner can rent to.”

Many longtime La Jolla merchants say they see the handwriting on the wall.

“I guess it’s the dinosaur syndrome,” Scott said during a recent interview at his store, as his wife, Barbara, assisted a customer in the toddler clothing department. “So far, we’re managing. But when you start to lose that base of loyal shoppers, it gets real iffy.

“Towns go through cycles. Some bounce back, some don’t. Whether we’ll be around after this cycle is over, I don’t know.”