For decades, Walnut Creek’s traditional downtown has been home to an interesting mix of independently-owned shops and restaurants able to pay the area’s sky-high rents. Now, with sales shifting online and concerns mounting over limited parking and shrinking foot traffic, the edges are starting to fray, and empty storefronts are becoming more abundant.

To combat these trends, Walnut Creek Downtown and the City are investing in community gathering spaces and outdoor seating areas, as well as special events to draw people back downtown. “The retail environment is changing swiftly,” said city Economic Development Director Jessica Cole, before her November departure from the City of Walnut Creek. “Vacancy continues to be a top focus. We’re working to create opportunities for pop-up retail in some of the empty storefronts and create experiences you can’t get online. The good news is that year-over-year data shows sales tax revenue is up 8%, restaurant revenue is up 3%, and retail is up .5%. Walnut Creek remains a thriving sales hub for the county.” Annual sales tax revenue from all sectors was reported at $25 million by city officials in November; one percent which goes into city coffers.

“Walnut Creek’s downtown leasing market is in a transition,” says John Cumbelich, a regional commercial real estate broker and CEO at Cumbelich & Associates. Cumbelich points to several high-profile spaces previously occupied by H&M, Apple, Panera Bread, and Chico’s that remain vacant, some for over two years. He says Forever 21, Destination Maternity, and Uniqlo are the next to go which is sparking concern about future trends. “The stability of the national economy over the upcoming quarters, and a possible slowdown, will have a profound impact on the next significant move in occupancy rates and rent levels,” Cumbelich says. “One explanation for the inventory glut is the Broadway Plaza expansion project. When the city approved it, did they consider that one consequence might be that not enough demand exists to absorb hundreds of thousands of new retail square feet? The shopping center’s expansion shifted the focus south of Mt. Diablo and took several tenants along with it. A consequence is retail space flooded the historic downtown market.”

The good news, explains Cumbelich, is that rents are plummeting. “This presents a great opportunity for a user to come in and secure a property at unusually low rates. One phenomenal way to deal with all the vacancies would be to allow financial services, dentists, chiropractors, and other service sectors to absorb some of the space.” 

There is continued tension among city officials over the conversion of retail space to office space and other uses. Walnut Creek’s General Plan specifies what types of businesses can open in designated areas of the city with strict zoning rules to protect the retail environment. “Our goal is to keep the downtown pedestrian-friendly and vibrant with a mix of businesses and activities. It’s all about zoning balance,” says City Manager Dan Buckshi.  “People are coming here for the experience.”

Clearly the market will continue to cope with the oversupply of space for the foreseeable future. Work is expected to begin in late 2020 on the city’s General Plan 2025—a blueprint for future development expected to rezone areas of the downtown, raise height and density limits, and focus on increasing the housing supply.