Ask most merchants what drives shopowners to exit the area, and they'll say it's because landlords want to charge exorbitant amounts in the midst of a recession, because business owners are fed up with street work in downtown Los Gatos or because there is a lack of parking.

"I hated to leave Los Gatos. I did a lot of soul searching before I moved," said House of Brass owner Ted Romero, who took his business to Campbell in June after 25 years in Los Gatos.

But, Romero said, he had no choice because his former landlord at 35 N. Santa Cruz Ave. was unwilling to give him rent relief.

"I'm not blaming the landlords because I understand they need to eat too, but when they're unwilling to help you out, you have no alternative," he said.

Last month, Los Gatos Porch and Design owner John Corcoran promoted his store's liquidation sale with an ad that read, "Hello Summer! Goodbye, Lease."

"Greed is driving merchants out of town—greed," said Corcoran, who purchased the store two years ago from a man who became his landlord.

Larry Arzie, who owns the building that housed Los Gatos Porch, said he offered Corcoran a two-year package to stay, including six months of free rent and a 20 percent rent reduction.

"There's not much more we could have done," Arzie said.

According to Arzie, Los Gatos Porch was paying less than $2 per square foot.

"We're not gouging. We're offering our tenants rent that they can make a living on," he said.

His other tenants on N. Santa Cruz Avenue pay anywhere from $1.50 to $3 per square foot in what Arzie described as "the premium heart of town."

"If you can't make a living on that ... you need to go out of business. It's as simple as that," he said.

"Every time we go into recession, we get this crybaby concept from the tenant," Arzie said. "Tenants oftentimes like to blame other people, but most of the time it's their own in-house problem."

Chuck Bergtold, whose family has owned property in Los Gatos for a number of years, said he could understand developers wanting to maximize their profits. However, a landlord who inherited a building from the family and never invested personal time or money should not raise rent, he said.

An advocate of small mom-and-pop stores, Bergtold said raising rent leaves only chain stores that can afford to make the monthly payments.

"It's a difficult situation because you lose some of the charm when only multi-location businesses can afford to be in town," he said.

In addition to increased rent, Bergtold said, some landlords require their tenants to pay what's known as "triple net," meaning that the merchants must pay a portion of additional taxes levied on the property. In sum, tenants might have to pay about 40 percent on top of what they already owe for square footage alone, Bergtold said.

On average, rent is going for $2 to $2.50 per square foot along Santa Cruz Avenue between Highway 9 and 40 N. Santa Cruz, where Domus is located, and around $3 to $3.25 per square foot between Domus and Main Street, said Kent Cooper, a commercial real estate agent in Los Gatos. The rate falls to $2.25 to $2.50 per square foot on E. Main Street, he estimated.

In addition to the rent rate, Romero said the town's mistiming of when to fix up the streets in the downtown area is also to blame for businesses migrating out of Los Gatos.

"On top of Sept. 11, on top of the dot-com fold ... they start tearing up Santa Cruz Avenue," he said.

Work along Santa Cruz Avenue in late April called for partial closure of the street for several days. This interruption left many stores fronting the street with up to a 40 percent drop in sales, merchants said at the time. Some of the business owners appeared before the town council the following week to air their grievances.

Noting that Los Gatos "is becoming not a popular place to shop," Purrsnickety & Bow Wowzer owner Bill Wayker said that though disruption caused by street repair is inconvenient, it is ultimately the rent that drives merchants away.

"The streetscape is a short-term thing; the rent is long term," said Wayker, adding that he is fortunate to have a cooperative landlord.

When Lisa's Tea Treasures said goodbye to Los Gatos at the end of June, the decision was based on factors other than the company's relationship with its landlord or streetscape work, said manager Sheri Nelson.

"We need to go where the business is," she said about the store's move to Santana Row. Since Sept. 11 and the dot-com bust, business in Los Gatos has slowed, she said.

The town's mistake, Nelson said, was in focusing on street construction rather than the parking issue. By default of driving into town to fix up the streets, the contractors took up additional parking spaces in front of stores, she said.

When asked whether he sees a leveling off of the number of businesses leaving town, the town's redevelopment manager, Marty Woodworth, said, "That's the $64,000 question."

"For Los Gatos, we're seeing more turnover than we have in the past. I think that's a function of the economy. It's not just Los Gatos," he said.

At the same time, Woodworth, who works on attracting new stores into town, said other businesses have expressed interest in settling in Los Gatos.

In the upcoming months, Trader Joe's is expected to open its doors on Los Gatos Boulevard and The Learning Game, a store specializing in educational toys and books, will move into the space formerly occupied by Any Mountain on Santa Cruz Avenue. Forbes Mill Steakhouse opened its doors on July 8 in downtown Los Gatos.

"We're hopeful that things will improve," Woodworth said.