The Santa Barbara City Council unanimously voted Tuesday to move forward with a redevelopment proposal for the Paseo Nuevo shopping center.
The proposal would transform the former Macy's building into office space for Yardi Systems, a Santa Barbara-based software company, while redeveloping the former Nordstrom building into between 80 and 112 housing units. Under the city's inclusionary housing requirements, 10% of those units would be reserved for moderate-income households.
Council members described the project as a major opportunity to revitalize a downtown district that has struggled with vacancies following the closures of Macy's and Nordstrom.
"Our downtown is struggling," Councilmember Eric Friedman said during Tuesday's meeting. "We had a worldwide pandemic that changed the way that we function as a society, that changed the way we use our downtown spaces. And this is the opportunity for us to give back and position ourselves as a city and bring our past, our present, our future all into one."
The plan is the result of negotiations between Yardi Systems, mall owner Arrow Retail Management, developer DSP and city officials.
This is the second proposal reviewed by Santa Barbara city council members. It follows a previous plan that called for demolition and larger scale construction. Unlike the earlier project, the new proposal focuses on preserving the existing Macy's and Nordstrom structures while introducing new uses within them.
Mayor Pro Tem Kristen Sneddon called the proposal a public-private partnership that balances private investment with public benefits.
“$100 million dollars of entirely private dollars to revitalize a mall that's been woefully underperforming for the better part of a decade,” Sneddon said. “I frankly struggle to see any viable alternative plan emerging.”
Several council members also encouraged project partners to consider additional community benefits, including local-first retail leasing policies, consultation with Chumash leaders about a permanent cultural heritage space and additional support for affordable housing programs.
Council member Wendy Santamaria suggested exploring an ongoing partnership with Yardi Systems to help support the city's Local Housing Trust Fund, arguing that future downtown growth could increase demand for service workers who need affordable housing options.
The council’s vote directs city staff to return with development agreements and other related documents for consideration later this month.
