Why Safeway will close downtown San Jose store

SAN JOSE — Safeway intends to shut its store in downtown San Jose within weeks, city officials said Tuesday night.

“There is no question, this is a big loss,” San Jose Mayor Sam Liccardo said in an interview.

Safeway employs about 40 people at the downtown San Jose store, Wendy Gutshall, a spokeswoman for the supermarket chain, said Wednesday. Gutshall said those employees are expected to be placed in nearby stores.

The soon-to-close Safeway store, at 100 S. Second St., is scheduled to cease operations by June 14, a memo issued by the office of San Jose City Councilman Raul Peralez said. Peralez represents the downtown San Jose area.

“We are very sorry to see Safeway close its doors,” the city memo said.

The main problem: Free parking vanished for Safeway patrons, despite strenuous efforts by the city to gain ownership of the underground parking garage adjacent to the store.

A government agency that is the successor to the defunct San Jose Redevelopment Agency frustrated the city’s multiple efforts to buy the parking garage. As it’s obliged to do, the successor agency sold the garage to a high bidder, according to government sources.

Eventually, a private investment group bought the garage and jettisoned free parking for Safeway patrons in the form of a store validation. That, in turn, undermined the financial stability of the Safeway store, government sources said.

“Despite the city’s best efforts, we were unable to maintain public ownership of the garage,” Liccardo said.

Rumors had circulated for several months that Pleasanton-based Safeway was considering closing the supermarket. The store is one of the smaller markets for the grocery chain.

“The decision to close a store isn’t one we make lightly or without a great deal of deliberation, Gutshall said. “Like all retailers, we’re constantly evaluating the performance of our portfolio of stores, and it’s occasionally necessary to close locations that aren’t meeting company goals.”

Safeway will still have 12 stores in San Jose once the downtown store is closed, Gutshall said.

“We recognize the great value that grocery retailers have to our downtown residents and the concerns that arise once Safeway discontinues its operations,” the city memo said.

However, a number of grocers are located within a mile of the historic core of downtown San Jose. Those include Whole Foods, Target, Trader Joe’s and Grocery Outlet.

What’s more, according to the city memo, several ethnic grocers are nearby, such as Santo Market, Cardenas Market, Arteaga’s Food Center and Nijiya Market.

“I will be happy to pick up the phone, do whatever I can to encourage a grocery store, or other retail, for the Safeway site,” Liccardo said. “We recognize how important it is to have grocery services downtown.”

The mayor believes residents and workers will increasingly demand additional supermarket and retail options in downtown San Jose.

Chief among those: Google has proposed a transit village near the Diridon train station, while Adobe intends to dramatically expand the size of its downtown campus of three buildings by adding a fourth office tower at an adjacent site.

Potentially 25,000 workers could be added to downtown San Jose in the next several years. All of this points to the potential for dramatic changes in the city’s urban heart.

“With the resurgence of the downtown, we expect a lot of demand for grocery stores and more retail in the area,” Liccardo said.

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