When will downtown San Jose get another grocery store?

The once-busy corner of Second and San Fernando streets in San Jose that was home to a Safeway has been vacant for three years, and retailers are not jumping at the chance to fill the space.

Safeway closed in 2019, after opening in 2009 to great fanfare. It was the only grocery store at the time in downtown San Jose. But since shuttering, the location hasn’t been able to attract a tenant. Part of the problem may be the underground garage below the former market that no longer offers free parking. The perk ended after the garage was sold in 2016. Others said it’s the lack of businesses and safety concerns that are affecting the location.

Gerald Lau, the Prudential Real Estate agent brokering the space at 100 S. Second St., said it’s been an uphill battle trying to find renters or buyers in this sparse business location unless parking is free and accessible.

“The space is just vacant, and it’s an eyesore,” Lau told San José Spotlight. “There is really a need for a grocery store… and that is an ideal space for it.”

Urban Catalyst bought the underground garage in 2020, Lau said. The San Jose-based company builds and manages investments in real estate and isn’t currently offering free parking for visitors to the building. The former Safeway was the ground floor retail in a 22-story condominium high-rise known as The 88.

“We don’t offer free parking,” Josh Burroughs, chief operating officer of Urban Catalyst, told San José Spotlight.

But Burroughs said the company is open to having a retail tenant pay for parking spaces at a bulk discount, enabling customers to park there for free.

Spaces at the parking garage beneath the building used to be free to Safeway customers with validation. Parking in the garage was first subsidized by the agency that succeeded San Jose’s Redevelopment Agency, according to city records from 2016. But then the parking garage was sold to a private owner for $3.78 million, with the San Jose City Council approving the sale in May 2016. This private owner, identified only as MVP San Jose 88 Garage, LLC in public documents, began to charge customers for parking. MVP later sold the garage to Urban Catalyst in a private transaction.

Lau said it was around that same time in 2016 that reviews from customers on Yelp started to take a downward turn and were mostly complaints about parking at Safeway no longer being free.

“The private company saw it as an opportunity, and began to charge (parking) rates that were significantly higher than what the city was charging,” Lau said.

Safeway was then forced to start charging customers for parking, Lau said, creating tension between customers and the grocer that could have been a potential factor in the eventual closing of the 24,000 square-foot grocery store.

At the time, representatives for the Pleasanton-based grocer said the store was closing because it was underperforming compared to other locations. Representatives at Safeway did not respond to a request for comment.

Is parking the issue?

Lau became the broker for the property in 2021. He said he’s spoken to more than 20 prospective tenants about the site and has tried to work with Urban Catalyst to secure free parking for future visitors. But he said the proposals were rejected and that the site remains vacant due to a lack of compromise by the developers.

Burroughs refutes those claims, and said Lau had presented some proposals on behalf of a prospective tenant at one point, but the deal fizzled before a parking arrangement could be finalized. He added that crime and safety, as well as the proximity of other grocery stores, are much bigger factors influencing a future retailer’s decision to open another grocery store downtown—not the lack of free parking.

“They’re looking at their footprint, they’re looking at crime statistics, they’re looking at thefts, they’re looking at safety,” Burroughs said. “We’re overparked downtown; we have ample parking garages, we have ample parking lots.”

Kelly Snider, a professor of urban planning at San Jose State University, agreed with Burroughs and said parking is not the main reason for Lau struggling to attract a new tenant.

“We have a vacancy problem downtown,” Snider said, citing an ongoing lack of support for small businesses in the area. “There just aren’t enough people downtown, and there needs to be so many more—thousands and thousands and thousands more.”

Downtown San Jose Councilmember Omar Torres said he would support the addition of another grocery store in the area to replace the Safeway. He feels a local or regional chain, such as Chavez Supermarket or Arteaga’s Food Center, would be an ideal tenant for that location.

“They seem to succeed wherever they go,” Torres told San José Spotlight. “It doesn’t necessarily have to be Albertson’s or Lucky’s.”

Torres also said the most important factor in attracting new grocers to the area will be more foot traffic downtown.

“With a grocery store in the center of downtown, it will be an important anchor, bringing a significant amount of customer traffic to the center of the town,” Torres said.

Contact Sonya Herrera at [email protected] or follow @SMHsoftware on Twitter.