Last week three retail stores in the downtown Santa Barbara announced they would be closing.
Volcom and Billabong, located in the 600 block of State Street and owned by the same parent company, have placed “store closing” signs in their windows as Liberated Brands LLC filed for bankruptcy. The company also owns Qucksilver, Roxy, and other surf clothing brands.
Faitell Attractions, the locally owned vintage design and consignment store located in the 100 block of W. Canon Perdido Street, announced it will be closing on March 1 after losing their lease.
Todd Hymel, CEO of Liberated Brands, said, “Macroeconomic issues, including a rapid and dramatic rise in interest rates, persistent inflation, supply chain delays, a decline in customer demand well below the historical trendline, shifting consumer preferences, and substantial fixed costs placed significant pressure on Liberated’s revenue and cost structure.”
Nationwide experts predict a challenging year ahead with the number of store closures set to double. Coresight Research, a leading retail data firm, forecasts that 15,000 retail stores will shut their doors in 2025, a significant jump from the previous year’s closures. This trend underscores the mounting pressures on brick-and-mortar retailers who are grappling with a myriad of issues far beyond the repercussions of international tariffs.
The surge in store closures signals a deepening crisis for the traditional retail model, already battered by a difficult 2024 and ongoing shifts in consumer behavior exacerbated by the pandemic.
John Mercer, Coresight’s head of global research, attributes the anticipated rise in closures to bankruptcies, liquidations, and the strategic abandoning of unprofitable locations by retail chains. These moves come as shoppers increasingly favor internet shopping and outlets that deliver better deals and more seamless experiences, according to the Washington Post.
Adding to the retail sector’s woes are several key obstacles, including the long-term impacts of the COVID-19 pandemic, the stark realities of high interest rates, and a sluggish housing market. President Donald Trump’s tariff policies further complicate the landscape, potentially forcing retailers to hike prices just as consumers are doubling down on discount and value shopping.
Retail niches particularly vulnerable to the ongoing downturn include hobby and craft stores, middle-market apparel retailers, and home goods stores. According to experts, these sectors are not only dealing with a drop in consumer demand due to a less vibrant housing market but are also facing stiff competition from e-commerce giants and the realities of higher grocery prices leading many to prioritize online shopping for affordability and convenience.
Despite the gloomy projections, some retail segments, particularly those offering value and discounts, are poised to thrive even amid the overall downturn. Coresight’s analysis suggests that shoppers, influenced by inflation and economic uncertainty, may continue to flock to discount and off-price retailers, a shift that could have lasting effects on consumer behavior.
As the retail landscape continues to evolve, major chains are adapting by culling underperforming stores and experimenting with smaller formats to cut costs and meet consumer demand for convenience. Meanwhile, the industry watches closely as more than 1,000 store openings early in the year hint at possible pathways for adaptation and survival in the challenging retail environment of 2025.
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Interesting that the article even mentions a connection with tariffs, as the most likely reasons are slow moving shifts in consumer behaviors in a fickle and trend-driven industry. Tariffs could be kind of a ‘straw that broke the camel’s back’ for companies taking their likely effects into long range planning, but it’s mostly too soon to blame them. Yet, anyway.
I think the phrase “we lost our lease” is a simplified, face-saving cover up for either coldly complex business calculations, or a lack of adequate planning, or some combination of both. But it’s way simpler to just deflect, as if to blame the landlord.
Also the owners of commercial property in general don’t seem to have adjusted their profit expectations to the declining brick-and-mortar retail model, and still expect it to be a golden goose of almost-passive income. The times they are a changin’, boss!
Another reason to put more housing downtown at the start charging vacancy tax.
The city needs to start charging a vacancy tax that increases every month a storefront is empty. Another store losing its lease? Greedy landlords.
Vacancy tax is an interesting concept. It says that a property owner cannot do what he or she wishes with the property they own. There is nothing illegal about buying a property and letting it sit vacant. Forcing an owner to accept a tenant they don’t want or face special taxes could be construed as an illegal taking of private property. If the city is willing to purchase the property, that’s one thing. But forcing a property owner to rent or lease a property that they own is certainly in conflict with what we usually consider the rights of the owner. It will make for an interesting court challenge if such a law is passed.
Absolutely true Anon.
I am always amazed at the number of people that want our government to operate like the governments of dictatorial countries where the government can order individuals as to what they can or can’t do.
We are still a free country where individuals can do what they wish with their property without government interference. We should respect that freedom.
A bit of an extreme comparison. People or companies who own property still have to follow some rules. There are complexes and neighborhoods that have HOAs. Downtown and business districts have rules and organizations that run them too. Like on State Street you can’t have massive signs or neon signs, etc. If we allowed people to do what they wish without government interference, State Street could look like the strip in Vegas. I see nothing wrong with imposing a tax if a storefront on State sits vacant for a long period of time. Look at the La Arcada Plaza. Affordable rents, only local and independent businesses allowed, and no vacancies. What a concept.
Surfer, What you say about following rules is true. But no such rule – vacancy tax – currently exists.
So if a property is purchased that conforms to the current rules and then the rules are retroactively changed, that’s wrong.
If the city ultimately decides that a vacancy tax is appropriate, then the city would have to honor the current laws under which the properties were purchased and phase in the new laws when the property changes hands. That might result in no change for many years.
California is already one of the most business-unfriendly states in the union. New laws as proposed would add to that and make things worse.
Much better to work with property owners to resolve these challenges rather than resort to heavy handed dictatorial laws to try to regulate all aspects of business.
@Anon – Of course no such rule exists, that’s why we’re debating it as a hypothetical on a community comment board. And what you say isn’t true about rules changing retroactively. The government can change the rules any time and we are forced to comply unless a judge rules otherwise. Look at what’s happening now on a national scale. Many Americans have less rights today than they did three weeks ago, their rights aren’t grandfathered in. Same thing would happen with a vacancy tax. I have no clue if a vacancy tax would solve the problem, but it would force corporate landlords to reconsider their high rental prices.
Vacancy tax?? Hey, Let’s take the government overreach to the max level in Sb! Good luck finding any more business people who wanna deal with that. Terrible idea. How about SB cleans downtown up? It’s just generally a bad for business vibe. It’s a free for all down there and the City is still doing studies, meetings, community outreach, and consulting to decide what to do. No, with the current voter base, nothing will change.
Surf’s up, and so will be the E.Coli counts in the lineup from homeless fecal runoff from those very same sidewalks and streets of Downtown Santa Barbara.
Look like the Vegas strip? Bad analogy. The Vegas strip is packed with visitors and and making money hand over fist. Then again, the street is open to vehicles . No vagrants deficating there either. Open State Street up and clean it up. Bring back the parades. The trolley, the landshark etc being able to cruise State. or maybe spend another million dollars of taxpayer money ‘planning’.
Go home.
CHALF – you can’t seriously be comparing the economic success of the Vegas strip to State St. Not even going to waste time trying to explain the vast and incomparable differences there.
“Absolutely true Anon.”
Absolutely a lie.
“I am always amazed at the number of people that want our government to operate like the governments of dictatorial countries”
Yes, all the millions who voted for Trump.
Government interference is what you see happening now with the gang of plutocrats savaging our rights and attempting to plunder the national treasury, not these attempts to reduce exploitation and greed that you are complaining about.
” CoUlD Be cOnStRuEd”
Not honestly.
“in conflict with what we usually consider the rights of the owner”
Where “we” are “tax is theft” sociopaths.
“Could be construed” is a legal term, meaning subject to being contested on those grounds. My point was simply that there will be legal challenges to any action taken.
As for “‘tax is theft’ sociopaths,” what in the world does the term “sociopath” have to do with those who object to paying a new tax? Simply pointing out that you disagree with their position, and why, would have been an effective response. Calling someone a sociopath for opposing taxes is only meant to be provocative. To use a sports analogy: “Is that all you got?”
They claimed “what we usually consider the rights of the owner” — who is “we”? The people who object to such taxes and insist that taxes are contrary to “the rights of the owner” are libertarians *and other sociopaths*.
Right now, there is no law against maintaining a vacant property. The property owner has that “right” until a law is passed revoking that right. Such an action would be contested in the courts, and neither side is an obvious winner.
I note that you seem to love the term “sociopath.” Ever looked it up? Let me help: “Sociopath – A sociopath is an outdated, informal term for someone who has antisocial personality disorder (ASPD). People with ASPD lack empathy, may not feel remorse for their actions, and often take advantage of others for personal gain.”
“Sociopath” is not a term that has anything to do with “people who object to…taxes.”
” those who object to paying a new tax?”
Who is paying the tax? No one is talking about imposing a tax on *us*. This formulation is dishonest.
What part about a vacancy TAX do you seem to miss? As long as the tax is on somebody else it’s not a tax?
Anon: Dalgorf is partly correct. Not sure about the odd UC/LC letters though.
I agree about a vacancy tax mechanism of some kind, because allowing properties, especially commercial properties in high traffic zones to sit vacant for extended periods is bad for the community as a whole and the property owner needs to take some responsibility.
However, how do you know it’s “greedy landlords”, in this case? I mean, yeah there are a lot of greedy landlords around, but businesses leave and fail for lots of reasons. “We lost our lease” is a convenient deflection, a cover up for the truth possibly, and in no way does it tell the story of why that business is leaving.
Is this article to excuse the continued shut down of State Street that is destroying our downtown? How about some real world statistics and projections from actual people in business:
https://www.forbes.com/sites/joanverdon/2025/01/22/retail-outlook-positive-for-2025-with-spending-expected-to-top-3/
“Nearly half of the executives surveyed said they plan to make moderate to significant investments in physical store remodels or new locations in 2025.”
Nationwide commercial real estate brokers:
“The U.S. retail market is sizzling with action in Q3 2024. Retailers are getting creative, snapping up second-generation spaces like they’re going out of style.”
https://www.us.jll.com/en/trends-and-insights/research/retail-market-outlook
“in-store sales posted a strong 2.8% gain, compared with a 2.3% rise in 2023”
https://www.kiplinger.com/economic-forecasts/retail-sales
The article does not “excuse” anything; it simply points out that it is happening. If there were money to be made, businesses would pay the extra rent, and all the new stores would flourish. Sales tax revenues would soar, ending the City’s budget woes. Wages in the community would rise and new affordable would be subsidized with all the additional wealth. A real win-win-win solution! But wait – the retailers aren’t taking advantage of the “sizzling” retail market you talk about. 15,000 additional stores are estimated to close nationwide in the next year. Could it be that retailers just don’t see the sizzle that you do?
The article, by painting a picture of doom and gloom in the brick and mortar retail industry, would have you believe that stores closing on State Street is just a part of a much bigger, nationwide, issue. My statistics and articles refute that. So, the problem on State Street must be something else. I contend that it is the continued closure of State Street in what was a once a thriving heart of Santa Barbara.
“Could it be that retailers just don’t see the sizzle that you do?” No, I think this article does a very capable job of ignoring other facts in evidence to suggest downtown is just another victim of the Biden economy along with the internet.
How does reporting on “the continued shut down of State Street that is destroying our downtown” *excuse* it? And what point are you even making with your non sequitur statistics?
To help you understand the point of the “non sequitur” statistics, they are cited to refute the overall picture painted by the article with quotes from other sources of authority. Does that help?
I have heard various times from various people that if a downtown property is empty, it is somehow subsidized (partiallly? completely? not at all?) by some form of the government. Obviously, I have no relevant details to add; I’d like to know if it’s true, though. Especially since it seems like a large part of the downtown area is either owned by a few families/orporations or is a non-profit or church so not paying taxes at all. (That adds the burden of all necessary maintenace, like roads, lighting, parking provisions to those who do pay taxes.)
Sort of. If a corporation owns 100 commercial spaces and 60 of them are empty, it will offset the taxes they have to pay for 40 of them. If the building is owned outright then there really isn’t a big incentive to lower rents, they’d rather wait until someone can afford to insane price.
Downtown continues to CTD – circle the drain.