Posted on Sun, Jul. 21, 2002

Rush of restaurants
By Sheila Himmel
Mercury News

When the economy goes sour, people stop eating out. At least, that's the conventional wisdom.

But in the midst of Silicon Valley's worst slump in a decade, a surprising number of new restaurants are opening.

To be sure, many South Bay eateries -- particularly in downtown San Jose -- are struggling and others are dropping prices. At some high-end places, reservations are no longer a necessity.

But within the next few months, almost two dozen new, mostly upscale restaurants will have opened. Some are national and regional chains, like P.F. Chang's China Bistro, which have the deep pockets needed to ride out economic slides. Others have the backing of big names, like Martin Yan or Bradley Ogden. And independent restaurants are also coming to town or have already opened.

With Silicon Valley unemployment going from 1.7 percent in January 2001 to 7.5 percent in June 2002, the question arises: What are these restaurateurs thinking?

Two possible explanations are lower rents and a touch of desperation.

Optimistic ventures

Greg Ochinero, the former director of the Silicon Valley Restaurant Association who now sells insurance to many area restaurants, says, ``The only thing I can think of is that someone opening a restaurant is eternally optimistic. No matter what's going on with the economy, they think they'll do well.''

Richard Carlson, chairman of Spectrum Economics in Mountain View, sees falling commercial rents as a boon to new restaurants. ``It's a renter's market,'' Carlson said. ``Not that long ago, marginal restaurants were being put out of business by high rents.''

In downtown Palo Alto, for example, commercial rents peaked at $12 a square foot. ``The latest deals I've seen are $3 a square foot for office space, and retail follows the office market,'' Carlson said.

In addition, some people came out of the dot-com boom with lots of money and time on their hands. Which leads to Carlson's other theory: ``Maybe they've always wanted to start a restaurant, and they can't get a job as a computer programmer. These days, restaurants look healthier than Internet start-ups.''

Entrepreneurial spirit

Ron Paul, a national restaurant consultant, agrees.

``In tough times, people are forced to be entrepreneurs,'' said Paul, president of Technomic, a Chicago-based restaurant consulting firm. ``Everybody's an expert on food. Restaurants and food are a big hobby, certainly in California.''

Nationally, restaurant sales are up 5 percent over last year, Paul said.

Not in downtown San Jose.

``Everybody's off 20 to 40 percent from last year,'' said longtime restaurateur Steve Borkenhagen, who owns Eulipia and Blake's Steakhouse in downtown San Jose as well as Valeriano's in Saratoga. ``Summer is always bad, but this is excessive.''

Business started slipping in March 2001, he said. But the big problem for white-tablecloth restaurants was not tanking dot-coms. ``Blue-chip expense account business just dried up -- the Intels, HPs and Ciscos,'' he said.

Still lining up

There are lines at the new P.F. Chang's at Stanford Shopping Center, which opened 2 1/2 months ago, just seven months after P.F. Chang's in Sunnyvale opened. And other restaurants slated to open in the coming months are hoping for the same kind of crowds.

A national restaurant, the Cheesecake Factory, is set to open this fall at Westfield Shoppingtown Valley Fair. Across Stevens Creek Boulevard, 40-acre Santana Row will have these upscale regional restaurants: Left Bank, Straits Cafe, Amber India, Blowfish Sushi, Martin Yan's CreAsian (the celebrity chef's first South Bay venture) and Bradley Ogden's Yankee Pier.

Several independent upscale restaurants have opened recently in Santa Clara, Cupertino, Los Gatos and Palo Alto, and more are scheduled this fall.

Tam Thanh Huynh has hired eminent restaurant architects, the Engstrom Group of San Rafael, to transform an American grill, Perry's, into an urban contemporary Southeast Asian restaurant, Tamarine. Engstrom designed A.P. Stump's in San Jose and Parcel 104 in Santa Clara.

Jerry Boone, who recently sold two Mio Vicinos and closed a third but opened an upscale Italian restaurant in San Juan Bautista, has another theory about all the newcomers: ``There's 9/11, there's the economy. Sometimes you have to escape for a minute. A restaurant is a good place to do that.''

Contact Sheila Himmel at shimmel@sjmercury.com or (408) 920-5926. Fax (408) 271-3786.