Battling Rising Rents on Laurel Street

Increases in rent prices leave small businesses struggling on Laurel Street in San Carlos, CA, presenting both opportunities for large retail chains and threats to a unique downtown.

Family-owned businesses that have served as community hubs for decades and have helped create the “City of Good Living”, as it is known, have begun to sell their buildings to developers such as JMS Development, which owns many of the properties on Laurel Street. This natural unfolding of events follows the considerable increase in building values over the years as the city sustains its reputation as an attractive place to live.
For example, The Reading Bug, established in 2008 by the Savage family, is a children’s bookstore that caters to local families and hosts book clubs, storytimes, classes, and author talks. JMS purchased the building in December 2019 for about $5 million, according to co-founder Lauren Savage.
Since then, the store’s rent has increased from $1 per square foot to $1.44 per square foot. This monthly rent remains below the market rent of $4 per square foot. Its lease will end in 2027, at which time JMS has the option to demolish the building and build a new two- or three-story structure in its place should the store decide to move rather than pay the going market rate for rent.
The store opened over a decade ago when San Carlos and much of the mid-peninsula were still relatively sleepy. Annual traditions such as Hometown Days and the Pet Parade added to the charm of this bedroom community. Today, with a population of around 30,000, the city is bursting with unique attractions such as Eucalyptus Street, whose wild holiday decorations bring visitors from all over the peninsula each year. San Carlos is in close proximity to jobs in both San Francisco and San Jose and boasts quaint neighborhoods, good schools, leafy parks and outdoor concerts. It is common to see kids scootering through the safe streets on well-maintained bike paths. As word spread, residents and visitors were drawn to San Carlos in a “coming of age” that included an influx of downtown shops and chains — and a corresponding increase in market rent.
“It’s sad in a way to be that instrumental in building a community, and still fighting after 14 years in that place to be there,” Savage said.
Small businesses, as compared to large chains, can bring a unique and small-town feel to communities. Many residents enjoy popping into little shops to chat with the owners, whom they know personally. In addition, independent businesses often hold deep personal significance for the owners. In the case of the Reading Bug, Savage knew she wanted a “special place” for her children when she founded the bookstore with her family. Her goal was to create a gathering place and to promote a feeling of unity in the community.
“Small businesses are definitely a labor of love,” Savage said. “They’re exhausting.”
However, San Carlos risks being taken over by larger enterprises that can better afford the rent as small businesses are forced to shutter and developers seek new tenants to fill vacant buildings. The appeal of San Carlos means that property on Laurel Street is highly sought after, causing rent prices to rise. Local stores are sometimes unable to adjust to the higher rent. As an unintended consequence, San Carlos could begin to resemble any upscale suburban downtown in America: lively and free of vacancies, but with a generic main street consisting mostly of chains. Many believe that independent restaurants and businesses are essential to Laurel Street. If small businesses are replaced by chains, the street could lose its allure. In years past, Laurel Street also boasted small boutiques such as quilting stores and a photography shop that have since closed.
“There was more reason to go downtown [back then],” San Carlos resident Annie Baker said.
Today, many of the stores are higher-end businesses that sell more expensive merchandise, and while the street is still family-friendly, bygone attractions such as a movie theater and shoe store provided more appeal to families. Pat Davey has lived in San Carlos for 52 years and laments the changes Laurel Street has seen.
“It’s really a rotten shame. It kept kids busy and out of trouble,” Davey said.
Davey commented that people were more likely to say “good morning” back then and that there were more small businesses whose owners knew your name before they “turned into a lot of banks, a lot of beauty stores, and restaurants.”
Laurel Street felt like a tight-knit community.
“The kids would be friends with everybody,” Davey said.
Some worry that the continuing trend of chains and higher-end stores will contribute to a downtown similar to nearby Palo Alto and Burlingame, which have lost their distinctive flavor. However, in today’s world, this seems almost unavoidable.
Since property owners sell for the highest possible price, developers and contractors must charge what the market allows to recoup their investments. However, this pushes small businesses out while chains with deeper pockets like Paris Baguette, which is new to Laurel Street as of September 2023, move in. This is not necessarily a bad thing, as many residents, such as Davey, enjoy the new Paris Baguette for its pastries.
Restaurants face pressures of their own. Although developers tend to welcome them as occupants because of their steady income streams, downtown can only support so many restaurants before the mediocre ones are weeded out, putting pressure on them all to continually innovate and perform.
“I am sad to see that it’s mostly restaurants downtown,” Baker said.
The city of San Carlos is trying to encourage residents, through marketing, promotion, and even email communications, to shop locally, according to San Carlos Mayor Adam Rak. Additionally, the city is planning to close the 700 block of Laurel Street to through traffic permanently, a future Davey looks forward to. A pedestrian mall could help support businesses by encouraging potential customers to gather downtown. There is also talk about widening sidewalks on the 600 and 800 blocks to provide more dining and gathering space, promoting Laurel Street as a destination. However, while these changes could draw more patrons downtown, they could also cause rent prices to soar, resulting in a tricky balance. Fortunately, small businesses are important to the city government.
“I think San Carlos has traditionally liked a downtown with small businesses. That is what has been the attraction. I think having businesses downtown, having restaurants and attractions and retail is important to having a vibrant community,” Rak said.
The city also attempts to appeal to people of all ages. Rak spoke to the San Carlos Youth Advisory Council and understands that young people need more things to do downtown.
“We want downtown to be inclusive and good for everybody of all ages,” Rak said.
However, the city has no control over rent. Building owners and developers can set whatever rents they choose.
“They’re going to get as much money out of us as they can, then knock it down,” Savage said. “A developer is not someone who really cares about you, it’s someone who cares more about being profitable.”
The city is actively working to promote Laurel Street and provide tenants with as much foot traffic as possible. For example, this year’s annual Goblin Walk, in which youngsters trick-or-treat at downtown businesses on an afternoon before Halloween, brought many visitors from nearby cities, making it nearly impossible to navigate the street for the crowds. Recently, residents gathered at the annual Night of Holiday Lights on Laurel Street, the city’s holiday festival, while a local student choir caroled.
“We're going to continue to invest in the downtown to make it even better. But I do hear a lot from people that, not just in San Carlos but people coming from other communities, that they like our downtown. They liked the mix of restaurants and retail and they like coming here,” Rak said.
In the meantime, small shops such as The Reading Bug hope customers will support them during the holiday season, which is when they make the majority of their sales. Savage encourages people to stop by the store to buy gifts rather than shopping online if they want to preserve small businesses.
“Don’t think that anyone else is going to take care of it,” Savage said.