ESCONDIDO -- A recent rash of business vacancies on Grand Avenue has generated debate about the future of the city's old-fashioned downtown district and the best ways to bolster the area.

In more than a dozen interviews last week with local merchants, city officials and real estate agents, the consensus opinion was that the faltering economy has been the primary cause of the area's highest vacancy rate since the early 1990s.

But some said there have been other contributing factors, such as scarce downtown parking and poor marketing by businesses and the association that represents them.

Others were more optimistic, contending that most of the vacancies are confined to two blocks at the eastern end of the district near Palomar Medical Center, a part of Grand Avenue that has historically struggled.

They also said that many of the stores that closed in recent months were marginal businesses barely hanging on, and that their departures have created opportunities for more vibrant businesses to breathe life into the area.

Other reasons given for optimism included a developer's plans to begin construction this summer on a seven-story downtown hotel, increased pedestrian traffic from the new Sprinter rail line and planned downtown housing projects that city officials say they expect to infuse the area with a new customer base.

But concerns remain that the growing number of vacancies will create a domino effect that could lead to boarded-up storefronts dominating the street like they did 15 years ago.

City Councilwoman Marie Waldron, whose family owns a T-shirt shop on Grand Avenue near Kalmia Street, said city officials need to take an active role in ensuring that the blight of the early 1990s does not repeat itself.

"I haven't seen this much change or this many vacancies in 15 years," said Waldron, explaining that the problems on Grand Avenue have been a hot topic at City Hall recently.

Waldron said she had asked city officials to be especially vigilant about desperate landlords downgrading the character of Grand Avenue by renting to businesses that attract lower-income customers. She said it was disturbing that a thrift store is temporarily moving into the old Fireside Bank site at Broadway and Grand.

Out of business

City data show that the Grand Avenue district now has eight vacant buildings and several other buildings where some of the suites have become vacant.

Among the vacant buildings are large structures, such as the H. Johnson Furniture site, Best Buy on Carpets, and the former McMahan Furniture site, which most recently housed a variety of art vendors. There are also smaller buildings, such as the former sites of Chaser's Deli, Hidden Valley Emporium, Grand Ave Floral and the Gift Basket Shoppe.

Jo Ann Case, the city's economic development manager, said the current amount of vacant square footage probably rivals the dark days of the early 1990s. But she said shoppers aren't being confronted with as many "out of business" signs because the 1990s downturn featured dozens of small vacancies and this one features several large vacancies.

But Case said this downturn might be more challenging because it is extremely difficult to find tenants for large buildings on Grand Avenue, noting that the J.C. Penney building was vacant for nearly 15 years until the Mingei Museum took it over in 2002.

Tom Crowley, a prominent Escondido real estate agent who has handled Grand Avenue leases for many years, said this downturn will probably prompt landlords to divide up those big buildings because smaller spaces have proved more viable on Grand.

"It's been clear for a long time that these large sites would eventually have to be redeveloped," said Crowley, explaining that Grand Avenue has had to slowly reinvent itself since North County Fair mall opened a few miles to the south in 1986, robbing downtown of all its national retailers. "The recent prosperity has been all about small spaces."

Rents are cheaper in small spaces, which Crowley said is often crucial for the jewelry stores, art galleries and antique shops that have thrived on Grand in recent years.

But Jim Crone, a downtown landlord, said subdividing the big buildings is not going to solve the steadily worsening problem of scarce downtown parking. All downtown businesses must rely on a limited amount of street parking and some public lots that require permits after two hours.

"Our parking problems make Grand Ave less attractive than the strip malls on East Valley Parkway with their huge parking lots," said Crone, who has lobbied the city to build a parking garage on the H. Johnson site. "When I show people the vacancies I have and then tell them how the parking works, I never hear from them again."

Survival of the fittest

Crowley and David Barkin, president of the Downtown Business Association executive board, said it was important to note that most of the vacancies are on the blocks of Grand closest to Palomar Medical Center, an area that has historically had problems.

"It looks dreadful at that end, but it's really not that bad overall," said Crowley. "Everything is full from Broadway all the way west to Centre City Parkway."

Barkin said the strength of Grand Avenue has historically been the blocks west of Broadway.

"Most of the businesses that closed were on a tight rein already, so this burp in the economy has pushed them out," said Barkin, an attorney who owns real estate downtown. "But there is no way things will get as bad as the '90s."

Barkin said his association decided to begin holding its farmers markets on the struggling eastern blocks of Grand, and that the Cruisin' Grand classic car shows have been expanded to help that area.

But John LeStrada, owner of Remy's On Grand restaurant, said the association has not done enough marketing to increase foot traffic near his business on eastern Grand Avenue. He said the association should be advertising the city's "rare historic downtown" in publications throughout the county, not just communities near Escondido.

Other merchants have raised similar concerns recently. But Debra Rosen, the association's chief executive, said last week that vacant businesses are a problem afflicting every part of the country during these tough economic times.

Waldron and downtown coffee shop owner Olga Diaz agreed with Rosen, contending that promotions can only do so much to save marginal businesses.

"The marketing is more about the big events, but they are not going to save a business that is not doing well day-to-day," said Waldron, explaining that revenues have been down 15 percent to 20 percent at her T-shirt store recently.

Diaz, who has announced she will run for City Council this November, said she is satisfied with the marketing efforts of the city and the association.

"Grand Ave is mostly owner-operated businesses, which struggle more in a bad economy because they don't have the same cushion as corporate chains or the same marketing budgets," said Diaz. "But it's the responsibility of the merchants to make it happen. When things are tough, we've got to work even harder."

A brighter future?

Nearly everyone interviewed said that a $60 million, seven-story Marriott hotel slated for construction next to City Hall will provide an immediate boost to nearby Grand Avenue. A groundbreaking on the 196-room hotel is scheduled for this June, and the facility is expected to open in summer 2010.

"The hotel will throw 100 people out on to the streets every night, giving every restaurant 10 more customers," said Crowley. "And we won't have to wait until it opens. As soon as they start construction, it will start a shock wave."

Another source of optimism is several housing projects planned for downtown, which will bring the area a few thousand new residents with income levels high enough to afford condos costing $300,000 to $500,000.

There have been concerns that some of the projects would be postponed or abandoned because of the faltering economy and housing market, but developers are moving forward with nearly every project in the pipeline, according to city planning officials.

Meanwhile, the city and the Downtown Business Association have said they may pay for a shuttle that would take arriving Sprinter passengers from the Quince Street station into the Grand Avenue business district for free.

Waldron said that until prosperity returns to Grand Avenue, the city must remain vigilant about what kinds of businesses open on Grand. She said she was relieved to learn the new thrift store at Broadway and Grand will only be temporary, but she warned that the presence of lower-end businesses could start a domino effect.

Councilman Dick Daniels, a member of the council's economic development subcommittee, said the city needs to make sure the public does not begin perceiving Grand Avenue as a struggling district.

"We've really got to watch things carefully there," said Daniels. "It has a disturbing effect when you see larger stores lay empty for long periods of time."

Contact staff writer David Garrick at (760) 740-5468 or dgarrick@nctimes.com.