Renewal or decline: Where is downtown Santa Cruz going?

On a Thursday in mid-April, a late-afternoon sun broke through what had been a murky sky in downtown Santa Cruz. A couple of blocks of Pacific Avenue, and the adjoining block of Cooper Street, were closed to cars to accommodate an annual mini-festival known as Santa Cruz Dance Week. Hundreds of spectators crowded three makeshift performance spaces to cheer on a rotating roster of dance acts.

As the afternoon ripened into dusk, nearby Abbott Square and its many food vendors were jammed with people — teens, elders, singles, couples, many of them holding wine goblets or pizza slices, or occupying the outdoor tables enjoying sushi plates or mojitos.

The event crackled with energy, buzzed with music and laughter. It generated in great gushy fountains a resource that’s thus far been precious and rare for most folks in 2025: fun.

In this environment, with people literally dancing in the streets — cue Martha & the Vandellas — the idea that downtown Santa Cruz is in decline sounds absurd. This was Santa Cruz at its Santa Cruz-iest. Of course, that evening turned out to be an idealized moment, when the downtown had been “activated” by a highly publicized organized event. It’s not typical of an ordinary weekend. As a visual cue to another reality beyond the festive vibe, much of the merriment in the streets took place directly in front of the blank and abandoned storefront at Pacific and Cooper — perhaps downtown’s most prominent retail spot — that, until recently, had been home to O’Neill Surf Shop.

What is going on in downtown Santa Cruz? Do the many vacant storefronts signal a crisis or turning point in the viability of downtown as the city’s (even the county’s) economic and cultural “front porch”? Or is this all just part of the up-and-down cycles that this downtown, or any downtown, experiences over time? Or is it a cocoon stage of a new downtown yet to be born? Will the city’s bold gamble to remake the downtown into an urban neighborhood mesh with its responsibility to maintain it as a commercial district? Can it thrive as both? And if so, what are the drawbacks and the costs? Over the next few weeks, Lookout will examine the changes in downtown Santa Cruz to evaluate where it is now, and where it’s likely headed in the future.

Dueling narratives

Two days after the Santa Cruz Dance Week event, on a lovely if breezy Saturday afternoon, the crowds returned to the same area, this time blocked off for Earth Day festivities. Locals in sun hats, holding dog leashes in one hand and coffee drinks in the other, negotiated the booths on Pacific, while others danced to live music on the patio next to the Octagon. Curtis Reliford, downtown’s most exuberant pied piper, led an impromptu dance circle to the O’Jays’ “I Love Music” in front of his own hand-painted display that declared without shame or nuance “Welcome to Santa Cruz, the Happiest City in the USA.”

With apologies to Curtis, when it comes to the ongoing debate about what’s happening downtown, Santa Cruz is most certainly not the happiest city in the USA. O’Neill was one of four high-profile downtown tenants — with New Leaf Community Market, Forever 21 and Rip Curl — that packed up and vanished within weeks of each other last winter. These new vacancies only drew renewed attention to spaces that were already empty and inactive, many for months if not years, including the former spaces of Palace Art & Office Supply, Joe’s Pizza and Subs, Alderwood Pacific and many others. (The city cites only 19 commercial vacancies in the downtown area, though the reality for residents or visitors suggests more than double that number. The city is not counting spaces as vacancies where there is a prospective tenant that has not yet begun to move in.)

This seemingly rising tide of business failures and relocations, coupled with the considerable anxiety generated by an unprecedented wave of new housing construction in the area, has created a narrative that downtown Santa Cruz is about to crack from urban pressures, that it’s (pick your pejorative) unsafe, dead, sketchy, inconvenient, soulless, depressing. Social media in particular has embraced the view that downtown is dying and/or turning into something ugly and unrecognizable. “Does anyone else feel like Santa Cruz is in decline?” asked one Reddit post. “Total destruction of downtown,” pronounces a Nextdoor post.

But there is another narrative, not as quick to ignite on social media and certainly not as fashionable in these tense and fatalistic times. Call it the “kitchen remodel” narrative. Anyone who has had a part of their home remodeled knows there comes a time in the middle of construction when everything looks and feels like a disaster area, when it’s tough to discern the path forward to a finished product, when you wonder if you’ve hired the right people or chosen the right design, or if all the painful expense and hassle will ever be worth it. 

Downtown Santa Cruz is in the middle of that kind of transformation. I’ve talked to many downtown stakeholders — city officials, property owners, business owners, people who live and/or work downtown — and several of them voice a cautious optimism about what’s coming downtown. It’s a vision in which downtown brings in several hundred new residents living in new apartment buildings, inspiring the opening of new restaurants, cafes, shops and other businesses. 

In this vision, the San Lorenzo River levee on the downtown side is a bustling and attractive public throughway, in which whatever seems to be working so well at Abbott Square can be replicated elsewhere downtown, adjacent to the river levee or close by a new arena for the Santa Cruz Warriors. The downtown’s long-gestating Downtown Plan Expansion, greenlit by the city’s planning commission just this month, seeks to create an entertainment district bridging the traditional divide between downtown and the beach/Boardwalk area. 

The downtown Santa Cruz of 2030, according to this perspective, will experience a revival as both a neighborhood and a commercial district. 

The optimistic view is beset with what-ifs. What if the increase in housing inventory does not lead to any discernible increase in affordability, and the mammoth apartment buildings downtown stay stubbornly unoccupied? What if a recession squelches new businesses opening, or even halts groundbreaking or construction on planned redevelopment projects? What if the work-from-home trend hollows out day workers downtown and consumers dive even deeper into the Amazon-inspired convenience of online shopping? What if there’s a catastrophic natural disaster or political crisis — both of which seem more plausible today than they did a decade ago — that derails the transformation of downtown? 

Downtown Santa Cruz has faced such a transformative moment before. The 1989 Loma Prieta earthquake not only destroyed many of the buildings downtown and remade the look of the city, it brought about an abrupt end of the Pacific Garden Mall era, for better or worse. The “Mall,” as many longtimers still call it, was a lush, tree-shaded design on Pacific Avenue beloved by many for its colorful street-art vibe. In the years that followed, the city changed direction in its design and downtown was transformed into something new. There were great gusts of free-floating anxiety attached to that transformation as well. The grand old Cooper House, for many the dominant symbol of downtown, was demolished due to earthquake damage, and its loss broke the hearts of many locals. Yet, with a newly redesigned Pacific Avenue, that heartbreak faded with time. The comparison is imperfect — the circumstances, business environment and downtown culture were all quite different — but it’s still possible that a decade from now, with a new downtown in place, no one will remember too much about today’s hand-wringing about all this new construction. Of course, it’s also possible that this period will be seen in retrospect as a fatal turning point when the city’s grand plans delivered a simulacrum of — shudder — downtown San Jose, or something worse.

Amazon and beyond

The struggles of downtown Santa Cruz are taking place within the context of much larger trends in consumer behavior and urban culture. What you might call the “Amazon-ification” of the economy has hollowed out retail sectors across the country and around the globe, and there’s no reason Santa Cruz should be any different from other cities whose retail businesses have to compete with the convenience of one-click internet shopping.

Still, brick-and-mortars have been dealing with the threat posed by Amazon and other online retailers for 20 years or longer. In that respect, the Amazon factor is an unsatisfying explanation for a sharp uptick in storefront vacancies in Santa Cruz. The pandemic was also like a Category 5 hurricane to the larger economy, and we’re just learning how profound its long-term effects really are. Both the Amazon phenomenon and the pandemic changed consumer behavior. They demonstrate that what’s going on in Santa Cruz is not unique and that local city officials and business owners are at the mercy of larger currents in the economy.

Looking closer at the downtown vacancies suggest that each vacancy has its own set of challenges and circumstances, resisting easy generalizations about why businesses are closing in downtown Santa Cruz. Forever 21, for example, abandoned what is the largest single retail space in downtown. But the retail chain was on the verge of bankruptcy at the time, and is in the process of closing all its retail stores. New Leaf desperately needed a larger space than the old Bank of America building it occupied at Pacific and Soquel. 

Healthy downtowns generally have a diverse mix of large retail chains and small local shops. But, as one downtown property owner reminded me, national chains have no commitment to any specific downtown and close stores on strict bottom-line considerations regardless of the local economy. A much more immediate indicator of the health of a downtown, he said, are the “mom & pop” shops, who have much deeper commitment to their locality and are more inclined to stay open during downturns. “Just watch the mom & pops,” he said. “They’re willing to withstand a lot more than the corporations are willing to tolerate.”

Changes in property ownership can also disrupt small businesses. A longstanding relationship between landlord and tenant can change dramatically when that landlord dies, for example, and their heirs, paying little heed to that long relationship and perhaps subject to the advice of outsiders, seek to increase rents. 

Also, many retail vacancies need major upgrades or remodels to fit with a prospective retailer’s plans. Chains, in this respect, often serve an important purpose in a downtown ecosystem by having the wherewithal to make the proper investments in infrastructure. Even if a chain outlet abandons a space, it has made the upgrades to allow a less well-financed Mom & Pop to move in afterward. On the other hand, e-commerce has largely eliminated the need for retailers to keep a lot of inventory, so the demand for smaller retail spaces is generally higher than bigger spaces, leading cities and property owners to consider the complicating factor of subdividing big spaces. 

Additionally, in Santa Cruz’s case, new housing developments are bringing with them many new first-floor retail spaces, dramatically increasing the inventory of available spaces, the result of a prevailing if-you-build-it-they-will-come strategy. But Santa Cruz has to grapple with questions preoccupying cities and business leaders across the country: What works in retail these days? How many coffee shops or second-hand stores can one city support? Should businesses focus on tourists and local visitors? Or is it time for more daily-need shops for all the people who will soon be living downtown? Is downtown turning into just another neighborhood? Who does a downtown serve these days? Is the concept itself outmoded, or in desperate need of rethinking?

The elephant in the room

One thing that’s not new amid all this change is a widespread and deep-seated suspicion of downtown, sometimes coming from people who haven’t visited in years. That suspicion is often expressed in euphemistic adjectives — Is it safe? Will I feel comfortable? That coded language is not necessarily referring to crime, but more often to the presence of what is now referred to as “the unhoused.” (Though homelessness as a social problem has stubbornly persisted, the names applied to those caught in its grip have mostly been pushed into taboo. At the time of the earthquake, the downtown conversation was dominated by references to “UTEs,” or “undesirable transient elements.”)

In our series, we will examine the trends when it comes to crime and homelessness in the downtown area, as well as what the police and other organizations are doing to help people on the streets and to mitigate the perception that downtown is a dangerous or uncomfortable place. 

In speaking with a variety of people, I encountered a prevailing dilemma: People don’t want to be seen as uncompassionate to the unhoused, but they are no longer willing to deny their feelings about being uncomfortable downtown. One person connected to the commercial real-estate market told me that many are making excuses, evoking Santa Cruz’s shaggy-dog tolerance for renegade personalities, to avoid addressing the real problems that homelessness imposes on businesses: “This [attitude] of ‘Keep Santa Cruz Weird’ has been very lax on not supporting the downtown as a commercial corridor where a lot of sales taxes happens, and making it feel like an environment that’s not inviting for a lot of people.”

Police say their data does not reflect the perception that downtown is getting more dangerous, and that those experiencing homelessness downtown have never had more resources to draw from than they do now, including people on the ground able to help with substance abuse and mental illness problems.

What business owners generally fear is a kind of vicious cycle in which negative, largely false perceptions of downtown actively contribute to those perceptions becoming reality. Jennalee Dahlen is the owner of Yoso Wellness Spa downtown and a member of the board of directors at the Downtown Association. “That narrative is affecting people coming downtown,” she said. “So people say, ‘I don’t shop downtown because it is not clean or safe,’ downtown businesses don’t make any money, then they have to close, there are more vacancies, and more people don’t want to go shopping downtown.”

The city is attempting to hold property owners responsible for not maintaining their vacant storefronts in an effort to fight the public perception that downtown is in decline. 

‘Patience is hard’

Business owners in downtown Santa Cruz are not a monolith. Each individual merchant’s experiences and attitudes are distinctive if not downright unique. They have different ideas about downtown parking, crime, homelessness, fees and taxes, tourism and the city. Political turmoil and economic ferment will always be a part of downtown culture, even during the best of times. 

David McCormic of the city’s economic development team was among the city officials who visited San Luis Obispo in March as part of an annual chamber-of-commerce tour, to get a better understanding of how that city is dealing with many of the same issues that are at the forefront in Santa Cruz. This comparing of notes left McCormic more convinced that downtowns are still a vital part of everyone’s civic experience. “Obviously, e-commerce has had an impact,” he said. “But where you have the attractive community and the vibrant downtown that goes with it, people still want to be out and about. They want those third spaces [after home and the workplace] to go and spend their time and their money, and to meet with friends and things like that. The task is to build toward that, to reimagine downtown and to create new amenities to make it more attractive.”

The city’s initiative to create more “paseos” – pedestrian passageways that can double as shopping spots or recreation spaces – and to activate the riverfront are part of that effort to lay the infrastructure where entrepreneurs can reenvision the downtown. One person familiar with not only downtown Santa Cruz, but other downtowns in the Bay Area told me, “I actually think downtown Santa Cruz is overperforming compared to many places, and actually has a bright future, but it’s going through a transitional period that’s pretty painful.”

The numerous vacancies downtown paint a bleak picture, particularly for those who visit the area only rarely or occasionally. Iconic once-thriving businesses like Logos and Caffe Pergolesi not only have been closed for years, but have left behind intact recognizable shells that are constant reminders to old-timers of what has been lost. When there are fewer shoppers downtown, the proportion of people in distress downtown is higher. But the narrative that downtown Santa Cruz is in a spiral of decline doesn’t mesh with the boom in construction that’s utterly remaking the south end of downtown. The city is gambling that lots of new housing, two hotels, a new downtown arena and a revitalized and reimagined riverwalk on the San Lorenzo River are going to create a new Santa Cruz. The question is what will survive and what will be lost in the transition between now and then.

“There’s something really wonderful about growth and change,” said business owner Jennalee Dahlen, “because it can bring new possibilities and transformation. Patience is a hard thing to sit through. But when we are patient, we can watch something unfold and it can bring us so much more. We’re in this transition time that is confusing and overwhelming, but if we’re patient, it will be wonderful for downtown businesses, whether you’re a restaurant or retail or a service-based business. We’re going to get through this.”

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