Shoe Palace asks SLO to reduce its rent 

Soaring rent for retail spaces in downtown San Luis Obispo is warding off new businesses and discouraging the old ones from staying put.

But there's one incentive that might tempt such storefronts to continue operating in the city center: slashed rent, something the Shoe Palace was hoping for.

click to enlarge

• Photo By Bulbul Rajagopal
• TEMPORARY INCENTIVE Downtown SLO's Shoe Palace is negotiating a new lease agreement with city officials through Jamestown Premier Property, which includes a rent reduction from roughly $15,000 to $11,000.

"Given the size and structure of the Shoe Palace retail space, if it were to become vacant it could remain that way for a significant period of time and may need significant investments in tenant improvements in order for a new tenant to move in," a city staff report said.

Jamestown Premier Property is poised to prevent that vacancy. While trying to renew its lease, Jamestown brokered a deal with the city to help Shoe Palace continue operating downtown. SLO's master lease agreement with Jamestown allows the company to lease the city-owned property to commercial tenants like Shoe Palace.

According to a city staff report, Jamestown subleases retail space to Shoe Palace for $14,352 a month, which forms part of the overall parking fund for SLO. Shoe Palace's sublease with Jamestown expires on Jan. 31 and can be extended by five years if both parties agree.

"In April 2023, Jamestown representatives notified the city that the current tenant, Shoe Palace, is not interested in renewing their lease with Jamestown at the current rate due to financial impacts of the pandemic and decreased sale volume," the staff report said.

Jamestown told city officials that Shoe Palace would continue renting with them if the rent was reduced to $11,000 a month. The new non-renewable five-year lease would begin in February, with the rent increasing by 3 percent every year. The SLO City Council will make a decision on the terms during its Jan. 9 meeting. Jamestown and Shoe Palace didn't respond to New Times' requests for comment.

An in-house review of downtown market values found that commercial lease spaces are generally priced at $1.75 per square foot. Shoe Palace's 15,000-square-foot space could command a rent of $26,250 but the city appeared willing to relax the cost.

"The city has received very little interest in the rental of this space due to the size and location," the staff report said. "Virtually all of the retail space in the downtown in excess of 15,000 square feet is experiencing challenges or has remained vacant."

During Jamestown's discussions with city officials, the property company said it wants to continue working with Shoe Palace and that finding new tenants proved to be difficult. Around that time, city staff contacted representatives at another property management company called California West, which confirmed that there was low interest in properties of Shoe Palace's size and location.

Molly Cano, the city's economic development and tourism manager, told New Times on Jan. 3 that occupied retail spaces benefit all of downtown because of the number of people those businesses can attract. She added that after the onset of the pandemic, businesses across the county started moving away from large-scale retail spots. As a result, bigger commercial buildings are tough to fill.

"However, from January to October 2023, San Luis Obispo's downtown actually saw more businesses open than close—29 new businesses opened, while 19 storefronts have closed in the downtown—according to recent data collected by our partners at Downtown SLO," Cano said.

City staff is recommending the council approve Jamestown and Shoe Palace's lease agreement, acknowledging that not modifying the lease or calling for renovating the space to make it smaller would result in a lengthy wait for a new tenant, reducing the value of the downtown area. Δ