A WELL-DRESSED couple and their young daughter walk north on Pacific Avenue to the intersection of Water Street. Behind them, downtown glitters with restaurants, boutiques, gift stores and coffeehouses. Ahead of them, six lanes of crosswalk and a beggar-beleaguered Clock Tower frown. Huddling closer, the child tugs on her mother's skirt, and the family turns around and walks back.

North Pacific, though technically still part of downtown Santa Cruz, has always been a rather lonely dot on Pacific Avenue's "i." The 14-acre wedge of asphalt bordered by River and Water streets and Pacific Avenue, and split by Bulkhead Street, is home to quirky establishments like Serpent's Kiss, as well as insurance and attorney's offices and the 70-unit condo development at 2030 North Pacific. Foot traffic has never brought a reliable source of customers to the doors of the block's businesses. But in the last two years, things have gotten really bad. In March, eight months after it opened, only 13 of the condos at 2030 had sold, other offices across the street at 2027 stood empty and the businesses that were left saw big drops in profits as the national and local economies tanked.

Now, with a little love from the city of Santa Cruz and a little luck from some revamped business plans, North Pacificans think they may have turned the corner.

"I think everyone's excited about the possibilities of the block coming back to life," says Reuben Helick, chief broker for 2030 North Pacific, who, after taking the condos off the sales market and putting them up for rent, now has every residence rented. All that remain are five empty offices. "It's a very, very difficult time for business right now and we had to rethink how we were operating," Helick says. "The actions by the City Council have us really optimistic and I think others are too."

Last month the Santa Cruz City Council reversed a zoning ordinance allowing only retail businesses to set up shop on ground floor commercial space along most of North Pacific. The move has opened the way for attorneys, startups, nonprofits and other offices seeking a downtown location at a bargain. And there's plenty of space. Nearly the entire ground floor of 2030 along Pacific Avenue is vacant commercial space, and 1,600 square feet at 2027 remains empty. Owners at both properties had complained that interested entrepreneurs had been turned away from moving into the space because of the retail-only ordinance, but now that it's gone, nearly every neighboring business is hoping to see an influx of tenants.

"I think seeing anyone move in at this point would be good," says Don Eppenbach, principal insurance agent and co-owner of Bedell Nelson & Harbert Insurance Agency, whose offices are directly across Pacific Avenue from 2030. "I'd rather it be someone moving in with a sandwich shop or a coffee shop or something I can use. But just getting anyone in there is a good first step."

The Ground Floor
Moving an office onto North Pacific is being pitched as getting in on the ground floor of a skyward investment. Lease rates at the two open properties at 2027 and 2030 average $2.75 per square foot of finished commercial space between them and have never been lower. And if the downtown commercial property market returns to pre-recession rates--which, according to Helick, reached around $4 per square foot in 2007--a savvy investor could turn a big profit by holding on to the property until then.

For Jason Mattia, co-owner of automotive marketing company AutoEngage, the decision to purchase a two-room office unit at 2030 was an investment in his favorite city. He says he'd like to sell the place or lease it to someone else eventually, but he's prepared to wait until the market rebounds.

"I moved in here because I was tired of driving over the hill. I wanted to surf more and hang out with my kids more," he says. "We wanted to invest in Santa Cruz and we really believe in downtown."

Softening regulations on what kinds of businesses can occupy downtown buildings took little consideration by city leaders. From 2007 to 2009, vacant office space downtown tripled from about 60,000 square feet to more than 180,000 square feet. Vacant space equals dwindling sales and property taxes for city coffers, and at 2030 North Pacific, Santa Cruz city leaders have an especially high stake in seeing business begin to boom.

That's because in May, with the condo complex on the verge of default and $1.2 million in fees still owed to the city, 2030's lead developer Christopher Garwood turned over two 867-square-foot condos to the city as payment. Now both units are rented, bringing in $1,695 per month for the city, and Santa Cruz Mayor Cynthia Mathews says she expects to eventually turn a profit, presuming the real estate market turns around and a buyer comes along. But for now, Mathews, Mattia, Helick, Eppenbach and the rest of the North Pacific community are just happy to see anyone walking on the block--even if it's not tourists with credit cards.

"Getting people in the vacant space, that's the biggest step," says Helick. "The rest will come along eventually."

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