The evidence is irrefutable: Downtown Napa is going through the worst of times. Or is it among the best of times?

Mervyns is closing, Copia is scaling back to three days a week, store vacancies along First Street abound. Clearly, downtown is not immune to the nation’s economic slowdown.

At the same time, the greatest construction binge in downtown history is moving toward completion, with high-end hotels, classy retail space, even riverfront condos coming on line.

Recession or no recession, downtown will emerge in a few years with a dramatic new look, even if finding tenants is harder than a year ago, developers say.

“It’s a fairly tough economic time,” said Harry Price, whose development company, CDI, will be opening the $25 million Napa Square office/retail project at First and Franklin streets next year. “No one would like to bring a project on in a market like this,” he said.

Fortunately, downtown Napa should weather the downturn better than most cities, Price said. “We’re still in a bubble compared to a lot of communities,” he said.

Despite the slowing economy, Napa Square has leased two-thirds of its 66,000 square feet, with local financial firms taking most of the space, Price said.

At the same time, “I’ve never seen as many vacancies on First Street,” said Cassandra Walker, the city’s economic development manager for the past 12 years. “We know we’re going into a really rough retail cycle.”

For the first time, the city is considering using downtown redevelopment revenue for an advertising campaign to promote local businesses, Walker said.

While downtown may have had fewer vacancies a decade ago, the central business district didn’t have the vitality that comes with today’s many Zagat-rated restaurants and wine tasting rooms, Walker said.

Nor did the old downtown have commercial projects valued at $200 million under construction or just opened, with the $250 million Ritz-Carlton resort hoping to break ground in the spring, she said.

Napans need an attitude change, Walker said. “Why do we keep focusing on ‘It’s coming’? There’s been a renaissance. It’s here.”

A there there

“It’s sort of white-knuckle time,” said Jeff Doran, a downtown property owner who is trying to lease 12,500 square feet of retail and restaurant space in the Avia hotel under construction on First Street, opposite Napa Square.

Demand for retail space isn’t what it was two years ago when two unidentified “heavy hitters” had signed letters of intent for Avia’s first floor, Doran said. When the national economy soured, they pulled back, he said.

“I’m guilty again of having my rose-colored glasses on,” Doran said. “My game plan is to hold off as long as we can to lease that property. I believe the demand will be much higher in six months.”

“Everybody is just being very cautious right now,” said Scot Hunter, managing partner of the Wiseman Company, which completed the 27,000-square-foot Main Street West at Main and Clinton streets earlier this year.

Less than 10,000 square feet of office and retail space remains unleased, Hunter said. Economic conditions in Napa are much better than in Solano and Yolo counties, where Wiseman has other projects, he said.

The key to leasing up downtown will be the new hotels — the just-opened 180-room Westin Verasa, the 142-room Avia due to open next year and the recently approved 351-room Ritz-Carlton, Hunter said.

“Once the hotels start to bring in customers from other places, they’ll understand there’s a there there in downtown Napa,” he said.

Eyes on the Riverfront

George Altamura Jr., whose family is downtown’s biggest commercial real estate owner, said the slowing economy will make it harder to redevelop older properties on First Street and for his family to attempt a mixed-use retail and condo project on the eastern half of Napa Town Center.

His family will continue to bide its time until the economy improves and the market for downtown condos is proven, he said.

“National tenants are in the dumps right now,” Altamura said. He expects retail expansion to resume by spring.

The Altamuras are watching what happens at Channel Properties’ Riverfront project on Main Street. This ambitious project, with a premier location on the Napa River, is selling 50 condos as well as lease office and retail space.

Although the first 10 condos were snapped up last month for up to $1.7 million, it remains to be seen how the rest of the project will fare in today’s market, Altamura said. “Mike DeSimoni (of Channel Properties) put his neck out very bravely,” he said.

The Riverfront is close to announcing an anchor restaurant with star power. That tenant would take a quarter of the project’s 40,000 square feet of retail, Craig Semmelmeyer of Main Street Property Services said Friday. Semmelmeyer is the leasing agent for retail at the Riverfront.

National chains are pulling back, but those aren’t the Riverfront’s target tenants, Semmelmeyer said. Channel Properties prefers regional and independent retailers and restaurateurs. “It shouldn’t be that someone from Marin comes over and says, ‘I have that in my backyard,’” he said.

Fortunately, these smaller operations are less affected by the nation’s “economic funk,” he said. “If I were trying to do an Olive Garden deal, I’d be dead.”

The Napa City Council approved the Ritz-Carlton resort this summer. This five-star resort will reportedly cost $270 million to build and will draw an affluent international clientele. Having such a prestigious hotel operation in downtown is a game changer when it comes to making Napa a tourist destination, city officials say.

Brad Weiser, developer of the Ritz-Carlton for the Continental Companies of Miami, said this week that the project was moving ahead “full-speed,” although getting financing is harder these days.

“There’s no question the economic situation makes things more challenging,” Weiser said. “There’s no question (the lenders) are doing more due diligence than in the past.”

While these are “challenging times, I think we’ll get through it,” Weiser said. The cachet of the Napa Valley remains strong. The riverfront location at First and Silverado Trail is exceptional, he said.

Construction drawings are being completed, permits are being sought from natural resource agencies, with ground breaking in the spring, Weiser said.

“I think if anyone is going to pull it together, it’s them,” Walker said of the Ritz project.

First Street scene

Napa developer Joe Rossi said the economy had made it harder for him to lease the 7,400 square feet of retail space in the new Zeller Building on the west end of First.

“We have to make more concessions to get people to move in,” Rossi said. Subway is leasing a food space, but at a lower rent than first proposed, he said. A women’s cosmetics store is close to signing, leaving one available space, he said.

As Rossi sees it, the west and east ends of First Street seem well on their way to prosperity. Downtown’s biggest problem is the hole in the middle, he said.

This middle zone contains the Gordon Building that once housed Bookends, Napa Wine Merchants and NapaNet as well as the former Merrill’s drug store and Modern Eve. All are owned by the Altamuras.

The void in downtown’s middle could get larger when Mervyns closes by year’s end, potentially adding 75,000 square feet of emptiness.

The future of the Mervyns space, which is not an Altamura property, is uncertain, Walker said. Mervyns’ parent company, which has a lease that runs until 2016, is in bankruptcy. Exactly who will end up controlling the property will not be known until next year at the earliest, she said.

The big players at the east end of First in the new Oxbow District are the Oxbow Public Market and the just-opened Westin Verasa.

The public market, which has been open less than a year, is 93 percent leased with such prime draws as Taylor’s Refresher and Oxbow Wine Merchant, said Steve Carlin, the market’s president and CEO.

A year ago, Carlin had predicted one million visitors annually when the market is fully up and running. The market is likely to draw 500,000 to 600,000 visitors in its first year, he said.

“We’re feeling OK,” he said. “These are tough and unusual times, but we’re holding our own. It could be better. I’m not saying we’ve hit a home run yet. There’s plenty of work to do.”

Napa County Assessor John Tuteur has lowered assessments on thousands of Napa County homes because of the housing downturn, but he’s still bullish on downtown Napa.

The Napa Valley has a global reputation, with benefits beginning to flow to downtown, Tuteur said. “They want to come to Napa because it’s Napa,” he said.

To see how good Napa has it, you only have to look at cities such as Fairfield in surrounding counties, Tuteur said. “They don’t have the upside that we do. They don’t have the hotels going up. They don’t have the cachet we have.”

By next year, downtown will have absorbed 600,000 square feet of new construction in just a few years, said Jennifer LaLiberté, a city economic development manager. “That’s substantial,” she said.

If downtown ends up pausing after the current wave of construction is finished, that may not be a bad thing, she said.

The city is about to begin a master plan directing how downtown should grow when the next wave of stores, hotels and mixed-use developments comes the city’s way, she said. The city can use a breather to prepare for what happens next.