What’s at stake?
The Tower District isn’t alone in dealing with long-term vacancies among its commercial buildings. But there are some factors that make its struggle with vacancy unique, including the many properties owned by multiple family members.
In a neighborhood like Fresno’s Tower District, where some storefronts have stood vacant since the Nixon administration, local lawmakers are seeking out new ways to tackle the blight.
But are their tactics working?
Some say it’s too soon to tell.
Last June, Councilmembers Annalisa Perea and Miguel Arias brought forth a new one-year pilot program that slapped the owners of vacant commercial buildings in Tower with stricter deadlines for rehabilitating their empty storefronts.
If that was the proverbial stick, six months later, Perea returned with the carrot: In December, she passed a new one-year incentive program for the Tower District that promised small local businesses rebates of up to 50% of what they pay the city in sales tax for two years if they become tenants of a vacant property.
“We’re doing more to hold negligent property owners accountable,” Perea said of the new programs in a recent interview with Fresnoland. “On the other hand, I want to do whatever I can to help them get their buildings occupied again.”
In the first six months of the older of the two laws, many of these empty properties have stayed empty. But some see other signs of progress in its wake.
“I think it has helped the communication with some of the building owners,” said Cami Cipolla, interim executive director of the Tower District Business Association.
That’s a notable step forward, she added, in tackling the issue of absentee property owners in Tower who don’t live in the area and are difficult to pin down.
Still, no one is claiming victory yet, and that includes Perea.
She said that more time is needed to see what works and what doesn’t with the new vacant building pilot. As for the incentive program that passed last month, Perea’s office has yet to receive any applications — and is working on getting the word out to more businesses.
“We’re going to be, this week, filming a couple promo videos at different spots in the Tower District, so we can better get the word out,” she said. “Simply passing an agenda item doesn’t necessarily tell folks what’s going on.”
Others think the city may not have found the right combination of strategies for eliminating vacancies yet.
Arias, who co-sponsored the vacant building pilot program with Perea, said a goal for the remaining year of his term at City Hall is to introduce a vacancy tax for some property owners. That would add onto the existing property tax bill of building owners whose properties stay vacant for a certain period.
“The fact is, a vacant property costs the public a lot more resources than (an) occupied property, both in police and fire time and code enforcement,” Arias said. “If somebody is going to intentionally keep their property vacant, the rest of the public should not have to pay or subsidize the amount of public resources required to maintain that property.”
But not everyone feels confident the stick — or even two sticks — will move the needle on commercial vacancies.
That includes Scott Miller, head of the Fresno Chamber of Commerce.
Miller co-owns multiple Tower businesses, and is also the owner of a vacant commercial property in the program’s pilot zone off of Olive and Vagedes. He said he’s been “treated very fairly” under the new program, but is still concerned it “presupposes” owners can rent or sell their properties more quickly “if they try harder,” when that’s not always the case.
“It’s been vacant for a little while,” he said of his property, which started as a nursery and was most recently home to an ice cream shop before it became vacant last March. “But that’s how it works. I want to get somebody in there, but it’s not outrageous with a property like this that’s so unique and different.”
Veronica Stumpf, a commercial real estate broker with clients in the Tower, said she hasn’t seen the new pilot programs inspire a change in behavior from the property owners she works with “just yet.”
“What I’m seeing is owners often become more willing to sell only after a fire or major incident happens,” she said, “which is exactly what this ordinance is trying to prevent.”
What do the new vacant building programs in Tower require?
The vacant commercial building pilot comes with new requirements for owners in Tower. For one, the owner of any boarded-up building must make their property ready for occupancy within four months of when it’s first boarded up.
There are some exceptions for owners to blow past those 120 days: For example, if the building has an active permit and the owner is “progressing diligently” toward permitted construction.
There’s also an exception for properties the City Attorney’s Office declares aren’t a “nuisance” — a requirement Perea said was intended to give the code enforcement team flexibility.
“I have not seen our City Attorney’s Office abuse that definition,” she said. “If it gets to a point where somebody from the community feels like we are not adequately using that definition the way they see fit. You know, I’m happy to look at that.”
Vacant property owners must also, under the pilot program, add information about their space to a registry if it’s vacant longer than 30 days. That information includes contact information for the owners, any agent or representative they may have and anyone with “legal interest in the property,” as well as the date on which the property became vacant. This information builds on existing requirements already under the city’s Blighted Vacant Building Ordinance that’s been on the books since 2003, according to Fresno Municipal Code.
Since the pilot took effect last summer, Perea told Fresnoland that 55 notices have been issued to vacant property owners.
Of those, 23 of those cases were subsequently closed because code enforcement determined the property wasn’t actually vacant.
Another 20 of those cases have since closed because the property owners came into compliance.
“Whether it was broken windows that they went and fixed,” Perea said, “whatever the issue was, they addressed them.”
Nine of the 55 cases remain open. Perea said a majority of those cases remain active since property owners have yet to remedy violations, while a handful are because the city hasn’t been able to get in touch with the owners.
As for the tax incentive program, Perea said the eligibility criteria were written with mom-and-pop shops in mind. For instance, applicants are required to have a minimum of three employees, and chains aren’t eligible.
That’s mainly due to the results of a previous incarnation of this small business incentive program, Perea said, which aimed to revitalize businesses along what was then called Kings Canyon Boulevard (now Cesar Chavez Boulevard). The only business that ended up taking advantage then was a Taco Bell.
The Tower District Business Association was pleased to see the provision barring chain stores written into the pilot legislation.
“That was definitely a concern that our membership had. Is this going to benefit these businesses or these companies that can afford $200,000 renovations and whatnot,” said Cipolla, the organization’s interim executive director, “but then we lose our uniqueness in Tower?
“I just can’t picture a Chili’s going into Chicken Pie Shop,” she added, the latter being a multiyear vacancy in the heart of the Tower on Olive and Wishon. “Especially when you’ve got a place like Irene’s that’s just right there on the corner. We have people that have been going to that restaurant for 30 years.”
How severe are commercial vacancies in Tower?
Though the Tower District is ground zero for some of the city’s new approaches for targeting empty storefronts, it has a slightly lower commercial vacancy rate than the city as a whole.
Tower’s rate sat at roughly 5.3% as of mid-January, while the City of Fresno’s was higher at 7.5%. That’s according to data from CoStar, a commercial real estate analytics platform, provided to Fresnoland by the Fresno Economic Development Corporation.
Tower came in at a lower commercial vacancy rate than downtown Fresno, where the rate was about 6.8%, as well as southeast Fresno, where the rate was 12.4% by CoStar’s estimates. Woodward Park, on the other hand, has a slightly lower vacancy rate than Tower at 4.8%.
At the same time, CoStar figures show Tower has the lowest “absorption rate” of all these regions of the city at -2.4%. That rate measures how quickly commercial real estate is taken off the market, compared to how much gets added.
In that sense, positive absorption means “there’s more space being leased than what is being added to the market,” Stumpf said — a sign of a recovering or expanding market.
A negative rate like Tower’s, on the other hand, means “new space is being delivered faster than what could be leased” — the signs of “hyper-supply” in the market, she added.
While commercial vacancies plague multiple neighborhoods, Tower’s issue with vacancies has some unique factors. For instance, many of its property owners are families with “multiple decision-makers” in charge, Stumpf said, some of whom may live outside of California.
“A lot of the property owners are asset-rich, but they’re cash-strapped,” she added, “meaning they’re families that have inherited these properties, and they have a fair amount of real estate, but they don’t have the resources to rehabilitate their property, or they can’t quite get their family members on the same page to lease their properties, or they’re in a position where they can offer their property for half market rent, but they don’t have the capital upfront to make tenant improvements.”
Those costs then fall to the businesses looking to rent the space, not many of whom are willing to spend between $250,000 and $500,000 on improvements to a building they’ll ultimately lease rather than own, Stumpf said.
Cipolla is facing this dilemma with her own plans for a Tower business. Her dream is to open an arcade of sorts, where families living in the neighborhood could have fun “playing old-school PacMan.” She also envisions boardgame rooms, plus drinks and small bites for patrons after dark.
She has her sights set on the vacant Chicken Pie Shop for this endeavor. But imagining the renovation costs for that property is daunting.
“I’ve tried to get in touch with (the owners) multiple times, and it’s gone nowhere. But my understanding is it’s completely gutted on the inside,” she said, “which means you’ve got to start from the bottom up.”
Different philosophies on how to tackle vacancies
Finding the right strategy to combat vacancies often comes down to the strength of a given market, said Alan Mallach, a senior fellow with the Center for Community Progress, a national nonprofit focused on tackling vacant properties.
“The real question is,” he said, “is there demand there for all of this space?”
“If you’re looking at a really distressed neighborhood, and there are people who are walking away from houses because they don’t have much value, sticks in that kind of context are really a pretty bad idea,” he added. “In an area with a strong market, where there are people who want to get into storefronts and run stores and restaurants and things like that, it could be helpful.”
Arias, who represents the Tower District south of Olive as well as downtown and Chinatown, believes “the stick has been necessary” to force negligent landlords to maintain basic health and safety standards for their buildings in his district. By bringing forward a vacancy tax in the next year, he hopes to work toward subsidizing the financial burden of problematic vacant properties that otherwise falls largely on taxpayers.
“Some of the properties in my district, I’ve learned, are intentionally vacant,” he said. “There’s very little incentive that the city could generate to convince them to develop.”
But incentive programs like the new one in Tower can also have a place in a city’s broader strategy, Mallach said — although businesses aren’t necessarily the only one to try targeting.
“Having carrots for landlords — not just tenants — I think can be useful,” he said.
Mallach said he’s seen other cities offer low-interest loan programs to rehabilitate their properties.
Stumpf pointed to other initiatives from the city that could help her clients in Tower, such as expediting the permit process, streamlining approvals for basic tenant improvement plans and having dedicated case managers for rehabilitative projects in the pilot zone.
“Owners need tools,” she said, “not just deadlines.”
For Miller’s vacant building, he said he was planning “to do the right thing anyway” and find a new tenant for the property, with or without the new pilot program. He thinks he’s far from the only owner with that mindset.
“Nobody that I’m aware of buys a building and invests in a building,” he said, “to leave it vacant.”
He said he’s eager to see the broader results of the vacant commercial building pilot over the course of the 12-month pilot.
“If we can point to a building that’s been vacant for multiple years that is now not, and it’s as a result of this program, then it’s successful,” he said. “If not, it’s just another layer of stuff that business owners need to navigate.”
