Downtown San Jose’s economy falters, report says

New analysis shows downtown San Jose is economically reeling from the pandemic — more so than its neighboring suburbs.

According to the report, presented to a council committee on Monday, the city center’s recovery has been bleak and economically lagging as many of its driving forces, including business projects and events, have not returned to levels of before the pandemic.

Downtown was hit extremely hard when shelter-in-place mandates came into effect during the COVID-19 pandemic. Long-standing businesses closed, leaving the streets littered with empty restaurants and dark storefronts. Restaurants and bars have suffered as tech workers walk away.

The report found that downtown sales tax has dropped 38.5% over the past year, compared to suburban San Jose businesses which have dropped just 1%. Parking usage rates and revenues have also returned to just 50% to 75% of pre-pandemic levels, indicating that fewer people are going downtown.

This stands in stark contrast to neighboring communities like Santana Row, a mixed-use development of retail, restaurants and housing, which seemed to rebound quickly.

City officials said this week that the solution to revitalizing the downtown economy was to increase the number of people living in the heart of the city and that would happen through more housing. Just two residential high-rises were completed last year, adding another 15,022 units.

San Pedro Square, like most of downtown, doesn’t have as much activity during the week as it does on weekends. Photo by Jana Kadah.

“Never has this been more evident than during the pandemic, when residents have stayed close to their neighborhoods for meals and meeting daily needs,” said Blage Zelalich, deputy director of economic development. “In order to realize its true potential as an active and vibrant downtown, the downtown must attract many more residents and provide more housing at different income levels.

bring people back

In an effort to attract more developers to downtown, San Jose rolled out the red carpet.

Developers who revitalize economically depressed areas called Opportunity Zones, which include downtown San Jose, can benefit from tax incentives and tax breaks. And just three months ago, San Jose leaders voted to cut the fees commercial developers pay instead of building affordable units on-site to make construction cheaper.

Fred Buzo, San Jose director at SPUR, agreed that more housing is the No. 1 solution to stimulating economic activity in the downtown area. “We can’t go back to how he was,” Buzo told San Jose Spotlight. “The pandemic has changed the way we live and we can no longer expect our old techniques to work. We need to adapt to more people working from home.

While leaders say more housing is downtown’s saving grace, others will say it’s more about commercial activity – giving residents a place to eat, drink and relax after a week of busy work. There is some improvement there.

Notable commercial projects are underway, such as the Almaden Office Project and the Paseo Project, which will bring millions of square feet of office space in addition to retail.

And despite the pandemic’s pause on community activities, nightlife has resumed and events have resumed. Zelalich said more than 1.7 million people have attended 73 downtown events, such as Christmas in the Park, Viva Calle and First Fridays in the SOFA district, over the past year and that is expected to increase exponentially.

“While we’ve seen some developments continue, new businesses are opening up, it’s been exciting to have this little ray of hope,” said council member Raul Peralez, who represents the downtown area. “Downtown residents are really going to make a difference.”

Guy Cavicchia, assistant manager of Olla Cocina restaurant stands inside his business. Photo by Jana Kadah.

Some downtown restaurants are also hopeful.

“We’re seeing a lot of patronage, probably tripling what we had at this time last year,” Olla Cocina assistant manager Guy Cavicchia told San Jose Spotlight.

Cavicchia said the best thing the city did for its Mexican restaurant on San Pedro Street was to close the road as part of the Al Fresco outdoor dining program.

“It gives more of a community feel, more of a neighborhood feel and I think it brings people together instead of just walking two doors down,” Cavicchia said.

Contact Jana Kadah at [email protected] or @Jana_Kadah on Twitter.

David H. Henry