Oakland's Plan to Become the Next Brooklyn: Free Rent!

Oakland doesn't just want more business. It wants a downtown retail district that attracts the Bay Area's best start-ups. The plan? Rent-free leases in already vacant spaces.

OAKLAND--The city of Oakland wants to emerge as the Brooklyn to San Francisco's Manhattan. It's getting there. Thanks to a hipster exodus from more expensive San Francisco, Palo Alto, and Silicon Valley, a lot of tattooed millennials are riding around downtown Oakland on fixed-gear bikes. The bar and restaurant scene is taking off. A massive festival called Art Murmur draws thousands of people on the first Friday each month.

And yet retailers still largely struggle to survive in Oakland's downtown. "There aren't enough people here," Brian Kendall, project manager for the Oakland Redevelopment Agency, explained on a walk last month. Downtown is a major professional center featuring Kaiser Permanente's regional offices, the seats of city and county government, and music-streaming company Pandora. But for much of its history, it has been a commuter center, with few residential or shopping opportunities.

There's not much foot traffic. Kendall pointed out blocks where many ground-floor spaces are either vacant or offices that turn shuttered blinds to the street. On Telegraph Avenue, a major thoroughfare, two new shoe boutiques rely on online sales for 30 to 50 percent of their revenues, he said. Meanwhile, city officials estimate that Oakland residents spend $1 billion each year shopping outside Oakland, often taking their wallets to neighboring towns with already-flourishing shopping districts.

City hall, local entrepreneurs, and a small business incubator called Popuphood see retail as the final stage of Oakland's urban revival. And they're helping merchants with creative solutions that could apply to Main Streets and downtowns nationwide.

Alfonso Dominguez knows how hard it is to survive as a retailer in downtown Oakland. While his restaurant in historic Old Oakland—an authentic Mexican place he co-owns with his mom—survived the 2008 recession, his nearby denim store and home-goods store did not. As Dominguez watched the bad economy wipe out emerging businesses, he worried about the neighborhood's future, and about decreased foot traffic to his restaurant.

So in 2011, Dominguez teamed up with artist Sarah Filley and approached his landlord with a new concept: instantly reviving a whole block in Old Oakland by giving five vacant storefronts to retailers for six months, rent-free. The goal was to lower the start-up costs of opening a store, and to help entrepreneurs ease into paying full rent. By opening alongside other restaurants and boutiques, a store owner also wouldn't have to wait for other retail outlets to take a chance on the neighborhood. "You can't expect someone to go and set up shop in a transitional neighborhood and wait five years for it to come up around them," Filley says. Dominguez and Filley called the concept 'Popuphood,' a word that's now the name of their consulting company.

"We didn't feel like we were sacrificing much," says Martin Ward, asset manager for the building owner, Peter Sullivan Associates. The company had been trying to lease the spaces for years. Ward believed that activating ground-floor space with retailers would make the area more attractive to office tenants.

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Sophie Quinton is a staff reporter for National Journal.

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