Retail in Palo Alto is easy to support but hard to define.
Every member of the City Council believes retail space should be protected, whether from being turned into offices in the downtown area or chain stores around California Avenue. To that effect, the council is set to consider on Monday night an urgency ordinance that would ban conversions of ground-floor retail (or "retail-like") use to offices or any other non-retail business anywhere in the city.
For the council, a new ordinance is both an immediate step toward protecting retail and a chance to reflect on what exactly is being protected. While the word "retail" often connotes book stores, restaurants and neighborhood-serving florists, cobblers and dry cleaners, the city's zoning code takes a broader look. The city's requirement that buildings in the heart of downtown all include "ground-floor retail" extends the definition to also include hotels, nail salons, art studios and day spas, and other personal services.
Existing rules also allow downtown property owners to apply for permits that would allow them to use ground floors for business schools, financial services or general business services -- uses that stray even further from the popular conception of "retail" as treasured mom-and-pop shops.
The Wells Fargo building on University Avenue is allowed to operate through such a permit, much to the chagrin of Councilman Greg Scharff and others who favor the popular notion of retail.
"How can we force that building to actually provide retail use?" Scharff asked at the council's April 6 discussion of the topic, before suggesting amortization of Wells Fargo as a possibility.
The new ordinance, which will require eight votes of support from the nine-member council to pass, would expressly ban such permits. Councilmen Pat Burt and Scharff proposed this change in April, with Burt citing the numerous locations where a permit was granted for financial-service institutions in places where offices normally would not be allowed. These types of establishments can afford to pay higher rents than traditional retail operations, which struggle to keep up in the hot real-estate market. A great deal of the city's problem, Burt said, is that "we're seeing locations that have supported retail for a long while in the community that are being driven out" by rent increases.
Recent trends illustrate this trend. According to Planning Department data, downtown rents for retail have climbed from $4.64 per square foot in 2013 to $6.48 in 2015. For downtown offices, the rate has climbed from $6.47 to $7.33 during the same period.
Furthermore, as the staff report points out, the city has lost about 70,000 square feet of retail-type uses between 2008 and today. The report cites "increases in office rents that have effectively created an incentive for conversion of ground floor retail to office use where this is permitted by the City's zoning ordinance." It lists numerous sites where retail space has recently been lost, including the former Zibibbo restaurant on Kipling Street, Inhabiture at 240 Hamilton Ave. and Palo Alto Bowl in south Palo Alto.
The new law would also address a separate peeve that pertains to retail: the tendency of some buildings to include token retail operations just to qualify for the requirement.
Though they meet the letter of the law, buildings such as the Institute for the Future and the Christian Science Reading Room scarcely qualify in the public imagination as "retail" operations. Under a proposal made by Mayor Karen Holman and accepted by her colleagues on April 6, the local law will specify that ground-floor establishments be "predominantly" retail rather than just have a retail component. This means they would have to provide "retail sale, rental, service, processing or repair of items primarily intended for consumer or household use." The city's ordinance includes a long list of examples, including groceries, books, cookie shops and mopeds.
Despite the high threshold for adopting an emergency ordinance, the council has thus far been unanimous in its desire to institute new retail requirements. Not everyone, however, shares the council's appetite for instituting new retail requirements. Judy Kleinberg, CEO of the Chamber of Commerce, urged the council on April 6 for caution regarding any expansion of a commercial zone. Such changes, she said, should be done with "incredible care."
"The more you dilute retail, the harder it is to create a pedestrian-friendly commercial zone," Kleinberg said. "You can't just say it will be retail and be supported well just by zoning it that way."
Scharff disagreed and pointed to two recent examples of ground-floor retail spaces that are thriving despite their peripheral locations. He pointed to 101 Lytton Ave., a former Shell station site that now houses a four-story building occupied by SurveyMonkey. Scharff made a push at that time to make sure the "retail" on the ground floor isn't a bank but something more akin to a food establishment or a coffee shop. Gelataio, a gelato shop, moved into the spot last summer. Scharff said he recently walked by Gelataio and "there was a line out the door." Philz Coffee, which is located in the Palantir building on Forest Avenue at Alma Street, is also routinely crowded, a sign that the location "works."
"This notion that retail should be compact? No," Scharff said. "Retail can be spread out so you get more pedestrian traffic."
If the council passes the new ordinance, it would stay in effect for 45 days, with an option to extend it for an additional 10 months and 15 days. In the meantime, city staff is working on a permanent ordinance that would take effect once the interim one expires.