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California and the West

Bay Area Cities Try to Stem Dot-Com Tide

Communities: Tech firms are swallowing up office space, driving up rents and, in some cities, stirring up a backlash among those who fear loss of small-city atmosphere.


SAN MATEO — As high-tech businesses desperate for office space push the boundaries of Silicon Valley north toward San Francisco, cities caught in the advancing wave are beginning to rebel.

Confronted with insane housing prices and worsening traffic, worried that local shopping districts will be taken over by Internet companies, many communities on the San Francisco Peninsula are throwing up barriers in the golden path of the dot-coms.

Cities are passing ordinances restricting the location of technology firms, slashing office-space densities and, in some cases, turning down projects that could house dot-com companies.

"What I think you're hearing is, 'We're losing the small-city feel. There's too much traffic, too much activity.' I understand that," said San Carlos developer John Baer. "But the reality is, you've got a peninsula that, bless its soul, is on fire right now."

The concerns are striking because they focus on the home-grown industry, the one that started just down the highway and rained riches and recognition on the area.

From the old-fashioned downtown of San Mateo to the new corporate parks of Redwood City and the leafy streets of Palo Alto's commercial core, there is growing anxiety over the effect of the dot-com explosion, which has driven office vacancy rates below 1% in many cities.

"We need to pay attention to what is occurring," said Susan Arpan, a Palo Alto official and leader of a regional economic development coalition examining the issue.

Joan Bartlett of Foster City knows exactly whom to blame when she talks about how bad the traffic got on U.S. 101 during the two years she regularly drove to Mountain View to visit her mother in a nursing home.

"By the time Mother died [last spring] it was horrendous," said Bartlett, who works part time in a downtown San Mateo bookstore and has lived in the area for 25 years. "That's all due to dot-comers driving with cell phones glued to their ears."

Reminded of the wealth they've brought to the Bay Area, Bartlett replied tartly: "They haven't brought it to everybody. They've brought it to themselves."

One street over from the bookshop is @themoment, a start-up software company that is leasing and renovating an elegant old corner building formerly home to a women's clothing store, and before that, a department store.

The company's arrival about two months ago contributed to quite a stir in this tidy city of 95,000 halfway down the peninsula.

Locals looked at the corner space and then down the block at a former bank building now occupied by an Internet travel agency that closes its blinds to the street.

They didn't like what they saw.

"When this hit, it was a red flag waving," said Bob Nutini, who owns a men's clothing store next to the travel firm and sits on the board of a downtown business association.

Last month the San Mateo City Council passed a moratorium on conversion of core downtown retail space to office use. It later expanded the moratorium to another shopping district, and city officials this week extended for six months both bans while considering permanent zoning restrictions.

Officials in San Mateo and other peninsula cities say it's not that they don't want dot-com offices in their communities. They just don't want them everywhere, squeezing out locally owned stores, taking up parking and gobbling up land that could be used for badly needed housing.

They also worry that if the dot-com industry takes a serious nose dive, they will be burdened with empty buildings.

Merchants Fear Being Pushed Out

San Mateo is particularly protective of its downtown, which has managed to avoid the fate of so many other small urban centers.

It is neither a yuppified, outdoor mall nor a scrawny has-been. It is a healthy commercial core of small independent shops, restaurants and a few chain stores, a place where residents can get their hair cut and buy a pair of shoes or a bicycle.

Store owners are terrified they will be displaced by dot-com firms happy to pay more than the shopkeepers could ever afford.

"Probably in the next five or six years a lot of [merchants] will be leaving here," said Serop Samurkashian, whose wife runs a downtown shoe repair shop that is struggling after a recent $16,000-a-year rent hike.

Shopkeepers aren't the only uneasy ones.

As Toni Montgomery tended to a late afternoon rush of customers at her family's second-generation dry cleaning business, a smartly dressed woman grimaced at a rumor that a big dot-com firm was moving into another downtown store space.

"Two hundred people, I heard. Where are they supposed to park?" she asked.

Peter Pau's San Mateo firm develops and leases commercial space. He is the one who rented 18,000 square feet to @themoment.

"People are being affected and rents are high and a lot of people don't like it," he said. But he hastened to point out that the former clothing store had been empty for more than a year. Pau said he looked for a good retail tenant but couldn't find one.

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