Palace Art & Office Supply exterior.
(Kevin Painchaud / Lookout Santa Cruz)
COVID Economy

Even as empty storefronts pile up, downtown Santa Cruz merchants’ resolve perseveres

The new year started with a bad omen in downtown Santa Cruz. Palace Art & Office Supply — one of downtown’s signature businesses that first opened in 1949 — announced that it was closing its doors.

Cue the dark clouds and apocalyptic music.

But, though no one is celebrating Palace’s closing, it’s only a small part of the story as Santa Cruz sinks deeper into the pandemic winter. For one thing, Palace isn’t going out of business. It is merely consolidating its retail operations in its Capitola store.

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And, though there are likely to be more businesses shuttering in the coming weeks — on the heels of the closing of DNA’s Comedy Lab in December — many downtown merchants aren’t yet in panic mode.

According to figures compiled by the Downtown Association of Santa Cruz, 29 businesses have ceased operation downtown since the beginning of the pandemic last March, including such landmark establishments as The Poet & Patriot, Rosie McCann’s, Pono, and 99 Bottles (not to mention chain stores like Walgreens and Starbucks).

But in the same time period, 10 new businesses have come into Santa Cruz, including a seafood restaurant called Crazy Crab on Front Street, Twig’s Taphouse on Walnut, and a vintage clothing shop called The Cat’s Meow on Lincoln.

For Palace, pandemic ‘accelerated change’

As for Palace, the company said that the pandemic only accelerated a change that would have probably come anyway. Palace’s Director of Operations Mark Rispaud said that, due to the changing nature of retail in general and Palace’s business in particular, it was time to choose one of their two stores over the other.

“Look at the industry of retail,” he said, “and you tell me where there are two stores (of the same company) within five miles of each other. Even with the big-box stores, that just doesn’t happen so much any more. There is just not enough energy and foot traffic anymore to sustain two businesses in that close proximity.”

The Capitola store is larger than the Santa Cruz store, and it doesn’t require a second standalone warehouse for storage as the downtown store does. And the Capitola store has a classroom space for art classes. “There’s a lot of opportunity out at the Capitola store,” said Rispaud. “We’re very excited about it.”

The marquee at Regal Theater sits vacant
The marquee at Regal Theater 9, which neighbors the now-vacant Palace Art & Office Supply storefront, sits blank as the movie house waits out the pandemic.
(Kevin Painchaud / Lookout Santa Cruz)

Company president Roy Trowbridge has been working at Palace since he was a teenager in the early 1960s. Palace itself traces its roots back more than 100 years when it was a soda fountain in Monterey. Trowbridge’s family bought a Santa Cruz satellite of the original business in 1949, and have been part of downtown ever since, albeit in four different locations on Pacific Avenue.

The Palace company now has a sister business — Palace Business Solutions — that caters to schools and businesses all over central California with everything from furniture to tech to cleaning supplies.

“The thing we’ve learned collectively is that you have to keep re-inventing what you do,” said Trowbridge. “We’ve gone through several metamorphoses under the same name — actually, we’ve even changed our name a few times, but it was always Palace plus something else.

“We’re all sad that we’re not going to have our downtown location, because we have a lot of attachment to our history there. But when I look at the big picture, I think of all the changes that Palace has been through, from being a soda fountain to where we are today.”

Zigging and zagging

For years, Palace found itself between two of the biggest foot-traffic draws in downtown, Peet’s Coffee and the Regal Cinema 9, now both diminished because of pandemic restrictions. There is no doubt that COVID-19 has wrecked any sense of normal in downtown Santa Cruz, just as it has done in towns and cities across the state and the country. But where the pandemic is zigging, some businesspeople are zagging.

For example, Jennalee Dahlen saw business at her Yoso Wellness Spa fall off as much as 80 percent in 2020, and as 2021 dawns, the spa is at a standstill. But last summer, instead of contracting, Dahlen expanded, opening a new retail annex to the spa on Cooper Street right across from Abbott Square, selling wellness and skin care products, a move, she said, she would not have made if not for COVID.

Pearl Alley sits empty in downtown Santa Cruz, yet another sign of the pandemic.
Pearl Alley sits empty in downtown Santa Cruz, yet another sign of the pandemic.
(Kevin Painchaud / Lookout Santa Cruz)

“It was really hard,” she said of the decision to open the Annex. “We were not generating income and it was going to take a lot of money. But I felt the chaos was going to be worth it. We needed to help people get through this from afar. So, the thought process started last summer, and when a spot became available I felt I had to jump on it.”

On Tuesday, the Downtown Association kicked off an effort to focus on post-pandemic economic recovery on a Zoom meeting with a number of downtown merchants, as well as representatives from Santa Cruz city government and others.

Lessons from Loma Prieta

The brainstorming session included ideas on building a “cultural economy,” incubator programs for young entrepreneurs, and reflections on the lessons learned from the economy recovery that followed the 1989 Loma Prieta Earthquake.

“We all know we have many more months that we need to stay safe and care for each other and prioritize that above even doing business,” said the DTA’s executive director Jorian Wilkins, “but can we be doing and looking forward to at the same time? What’s going to happen when the sun comes up? Let’s let hope be part of our wait-out.”

Joe Ferrara, the proprietor of Atlantis Fantasyworld on Cedar Street, is one of the few downtown business owners still around who went through the entire drama of Loma Prieta, including the quake, moving into the temporary pavilions, and finally landing in his permanent shop.

The O' My Sole store lays empty in downtown Santa Cruz.
(Kevin Painchaud / Lookout Santa Cruz)

Ferrara said that the conversations happening downtown today remind him of the beginnings of the recovery plans in 1989, which culminated in Vision Santa Cruz, a 36-member committee drawn from all sectors of the community that worked together to rebuild the downtown business district.

“Where is the downtown going to go?” he said. “That’s exactly what we’re asking at this point. Who do we ask to help us formulate both a short-term plan and a long-term plan. I think it sounds very much like the beginnings of wanting to put together something along the lines of Vision Santa Cruz.”

Bonnie Lipscomb, the Director of Economic Development at the City of Santa Cruz, said that the city, in partnership with the DTA, the Chamber of Commerce and other entities will be continuing to survey business owners through the coming months to find out what they need. The city will also be looking at vacant storefronts as lower-cost points of entry for would-be entrepreneurs, and other ideas to seed new business.

“I think the long-term solution and answer is to make sure the downtown is as vibrant as it can be,” said Lipscomb. “And that’s through having more bodies live downtown, through activating our public spaces, and supporting the (private and public) development.”

Retail was changing before the pandemic, she said. “This has only escalated a process that was really well underway.”

Next few weeks key

Wilkins of the DTA said that even while planning for later in 2021, many in downtown are also bracing for more potential bad news in the coming weeks. Many small businesses, she said, won’t really know about their long-term viability until they look at the numbers from 2020, coming in the next few weeks.

“Some businesses manage their finances closely, and some let their CPA do that and give them a report once a year. And for people in the latter category, they may not know what the impact has been for the pandemic year as a whole until this month. So we’re all holding our breath.”

Still, there’s a lot of optimistic talk floating through downtown. Joe Ferrara is impressed by many of the young entrepreneurs he’s meeting.

“I’m very encouraged by these young people,” he said. And there’s plenty of evidence that Santa Cruz is pulling for its downtown businesses to hang on. “What we’re all experiencing is that the visitors to downtown want us to continue and succeed. I can’t tell you how many of my customers have said, ‘We’re glad you’re here.’”

Jennalee Dahlen at Yoso Wellness Spa is simply refusing to give up. “I’m not going to close my doors, at all. I’m just not going to let that happen.”

This month is especially hard for Dahlen and others in the fitness and wellness industries. Winter is normally their busiest time, when holiday indulgence inevitably leads to New Year’s resolve. January and February are the months that places like Yoso get new clients.

“But if we continue to get creative and evolve through this,” said Dahlen, “and if we find new ways to create and connect with our clientele, who knows? This could go further. I think there’s going to be a huge boom in this industry.”

She not only sees a light at the end of the tunnel, but also, she laughed, “a beautiful meadow that I’m going to frolic through.”

Contributing: Isabella Cueto

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