News

'Urgent' law aims to prevent retail loss

Palo Alto bans conversions of ground-floor retail to office use

Seeking to shield local shops against an office incursion, Palo Alto officials unanimously passed late Monday night an emergency law that they hope will halt the troubling trend.

It took more than three hours of tense and vigorous debate for the council to reach a consensus on an ordinance that every member has consistently supported over the past two months.

The new law prohibits the conversion of ground-floor retail in all sections of the city to office use. It also prohibits the existing practice that allows uses such as banks and medical offices to acquire permits and occupy sites intended for retail. Existing establishments that don't conform to the new retail ordinance would be preserved.

The provisions aim to address a trend that has recently become a council priority -- retail preservation. According to city planners, the city has lost about 70,000 square feet of retail space since 2008, with rising rents generally seen as the culprit.

The newly passed ordinance notes that while office and retail rents have both been on the rise, offices consistently fetch higher rents. While the average monthly rent for office has increased from $4.57 to $5.12 per square foot between 2013 and 2015, retail rent went up from $4.21 to $4.88 per square foot during the same time.

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Property owners have often heeded the advice of the free market and went ahead with the lucrative conversions. The list of retail operations converting to office use includes former sites of Zibibbo on Kipling Street, the former Fraiche Yogurt site on Emerson Street and Jungle Copy on High Street.

For the council, the solution seemed clear and straight-forward at two prior meetings in March and April, when all members agreed that the conversion of ground-floor retail to office use should be prohibited and directed staff to draft such an ordinance. In response, staff came back on Monday with an "urgency ordinance" that takes effect immediately and that lasts for 45 days, with an option to extend it for about two years. The interim ordinance is a stop-gap measure that will give staff time to draft a permanent law strengthening ground-floor protections.

"The public's health, safety and welfare are currently and immediately detrimentally affected as neighborhood-service retail service and related uses are priced-out by rising rents and replaced by uses that do not provide similar services or activate the street frontage by creating pedestrian activity and visual interest (i.e. shop windows and doors)," the ordinance states. "These changes affect neighborhood quality of life, and mean that local residents have to drive to similar retail destinations in other locations, diminishing the public health benefit when residents can walk to needed services and increasing traffic congestion, vehicle miles traveled and greenhouse gas emissions."

The 9-0 vote belied the tense and protracted nature of the council's discussion. Because the ordinance was an emergency law, it required eight votes for passage. Councilman Greg Scharff advised his colleagues early in the discussion not to modify the staff proposal too much because doing so would introduce potential schisms and reduce the bill's chance of passage. Council Cory Wolbach agreed.

"My strong inclination is to stick with something very clear and simple this evening," Wolbach said, noting that the real work of updating definitions should be performed on a permanent ordinance, rather an interim one.

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Instead, the opposite happened and the discussion transformed into a convoluted bout of legislative rigmarole featuring numerous amendments, multiple motions and tense, prolonged wrangling over procedures and details.

Councilman Eric Filseth proposed a series of modifications to the city's existing definition of "retail-like uses," as requested by staff, and the council debated and took a vote on each proposed change, ultimately adopting most. One proposal that proved an easy sell was including daycare centers in the definition of "retail," a use that is currently omitted and that easily won the council's unanimous support. Another, which added gas stations to the definition, also won support quickly. Councilwoman Liz Kniss called the inclusion of gas stations an "obvious" inclusion.

"Our real problem is lack of service stations," Kniss said. "There were far more five to 10 years ago. I'm not sure I heard of anyone recently who wanted to open a gas station."

Another Filseth proposal, to make sure retail is intended for the public at large rather than for a particular corporation (as in Palantir's downtown cafeteria) also won widespread acceptance.

But Filseth's suggestion to also include automotive service proved a tougher sell and initially failed by a 7-2 vote, with Marc Berman and Scharff the only dissenters. Councilman Tom DuBois spoke for the majority when he said Palo Alto is losing its auto-service spots.

"They're tending to convert to office," DuBois said. "I think it's worth protecting so people don't have to drive out of town to Mountain View or Redwood City to service their automobile."

But given the unusual procedure and the steep requirement, it was the two dissenters, Marc Berman and Scharff who prevailed. Both were loath to get to creative on the interim law, which was only intended as a bridge to get to the permanent one.

"We should not allow ourselves to open the floodgates to all other uses," Berman said.

Filseth and Councilman Pat Burt both disagreed and lobbied to include automobile-service establishments.

"It seems artificial to me to allow an automobile dealership that has a service bay but not allow an automotive service place by itself that doesn't sell cars," Filseth said.

That vote was followed by procedural debate over whether the 7-2 vote was on a formal amendment or whether it was an informal "straw poll."

Councilman Pat Burt, a proponent of including automotive service in the definition of "retail," suggested attaching the amendment to include automotive services to the main motion, effectively daring Scharff and Berman to vote against the main motion and thus reject the retail-protection ordinance in its entirety. That didn't happen though, with council members recognizing that a defeat would merely lead to a new vote, this time without the amendment.

Ultimately, after much negotiation and an agreement by the majority to delete a separate amendment that Scharff didn't like involving a development on Park Boulevard, the inclusion of automotive-service establishments was accepted by all. The motion approving the emergency law then passed unanimously.

The new law would apply to all applications that were permitted or were operating as of March 2 or thereafter. Ultimately, the council plans to approve a permanent ordinance that would tailor retail-protection laws to particular neighborhoods. A staff report notes however that permanent revisions to the city ordinance would take "considerably more time, involving City Council input and direction, discussions with residents, property owners, merchants, and other stakeholders."

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'Urgent' law aims to prevent retail loss

Palo Alto bans conversions of ground-floor retail to office use

by / Palo Alto Weekly

Uploaded: Tue, May 12, 2015, 2:19 am

Seeking to shield local shops against an office incursion, Palo Alto officials unanimously passed late Monday night an emergency law that they hope will halt the troubling trend.

It took more than three hours of tense and vigorous debate for the council to reach a consensus on an ordinance that every member has consistently supported over the past two months.

The new law prohibits the conversion of ground-floor retail in all sections of the city to office use. It also prohibits the existing practice that allows uses such as banks and medical offices to acquire permits and occupy sites intended for retail. Existing establishments that don't conform to the new retail ordinance would be preserved.

The provisions aim to address a trend that has recently become a council priority -- retail preservation. According to city planners, the city has lost about 70,000 square feet of retail space since 2008, with rising rents generally seen as the culprit.

The newly passed ordinance notes that while office and retail rents have both been on the rise, offices consistently fetch higher rents. While the average monthly rent for office has increased from $4.57 to $5.12 per square foot between 2013 and 2015, retail rent went up from $4.21 to $4.88 per square foot during the same time.

Property owners have often heeded the advice of the free market and went ahead with the lucrative conversions. The list of retail operations converting to office use includes former sites of Zibibbo on Kipling Street, the former Fraiche Yogurt site on Emerson Street and Jungle Copy on High Street.

For the council, the solution seemed clear and straight-forward at two prior meetings in March and April, when all members agreed that the conversion of ground-floor retail to office use should be prohibited and directed staff to draft such an ordinance. In response, staff came back on Monday with an "urgency ordinance" that takes effect immediately and that lasts for 45 days, with an option to extend it for about two years. The interim ordinance is a stop-gap measure that will give staff time to draft a permanent law strengthening ground-floor protections.

"The public's health, safety and welfare are currently and immediately detrimentally affected as neighborhood-service retail service and related uses are priced-out by rising rents and replaced by uses that do not provide similar services or activate the street frontage by creating pedestrian activity and visual interest (i.e. shop windows and doors)," the ordinance states. "These changes affect neighborhood quality of life, and mean that local residents have to drive to similar retail destinations in other locations, diminishing the public health benefit when residents can walk to needed services and increasing traffic congestion, vehicle miles traveled and greenhouse gas emissions."

The 9-0 vote belied the tense and protracted nature of the council's discussion. Because the ordinance was an emergency law, it required eight votes for passage. Councilman Greg Scharff advised his colleagues early in the discussion not to modify the staff proposal too much because doing so would introduce potential schisms and reduce the bill's chance of passage. Council Cory Wolbach agreed.

"My strong inclination is to stick with something very clear and simple this evening," Wolbach said, noting that the real work of updating definitions should be performed on a permanent ordinance, rather an interim one.

Instead, the opposite happened and the discussion transformed into a convoluted bout of legislative rigmarole featuring numerous amendments, multiple motions and tense, prolonged wrangling over procedures and details.

Councilman Eric Filseth proposed a series of modifications to the city's existing definition of "retail-like uses," as requested by staff, and the council debated and took a vote on each proposed change, ultimately adopting most. One proposal that proved an easy sell was including daycare centers in the definition of "retail," a use that is currently omitted and that easily won the council's unanimous support. Another, which added gas stations to the definition, also won support quickly. Councilwoman Liz Kniss called the inclusion of gas stations an "obvious" inclusion.

"Our real problem is lack of service stations," Kniss said. "There were far more five to 10 years ago. I'm not sure I heard of anyone recently who wanted to open a gas station."

Another Filseth proposal, to make sure retail is intended for the public at large rather than for a particular corporation (as in Palantir's downtown cafeteria) also won widespread acceptance.

But Filseth's suggestion to also include automotive service proved a tougher sell and initially failed by a 7-2 vote, with Marc Berman and Scharff the only dissenters. Councilman Tom DuBois spoke for the majority when he said Palo Alto is losing its auto-service spots.

"They're tending to convert to office," DuBois said. "I think it's worth protecting so people don't have to drive out of town to Mountain View or Redwood City to service their automobile."

But given the unusual procedure and the steep requirement, it was the two dissenters, Marc Berman and Scharff who prevailed. Both were loath to get to creative on the interim law, which was only intended as a bridge to get to the permanent one.

"We should not allow ourselves to open the floodgates to all other uses," Berman said.

Filseth and Councilman Pat Burt both disagreed and lobbied to include automobile-service establishments.

"It seems artificial to me to allow an automobile dealership that has a service bay but not allow an automotive service place by itself that doesn't sell cars," Filseth said.

That vote was followed by procedural debate over whether the 7-2 vote was on a formal amendment or whether it was an informal "straw poll."

Councilman Pat Burt, a proponent of including automotive service in the definition of "retail," suggested attaching the amendment to include automotive services to the main motion, effectively daring Scharff and Berman to vote against the main motion and thus reject the retail-protection ordinance in its entirety. That didn't happen though, with council members recognizing that a defeat would merely lead to a new vote, this time without the amendment.

Ultimately, after much negotiation and an agreement by the majority to delete a separate amendment that Scharff didn't like involving a development on Park Boulevard, the inclusion of automotive-service establishments was accepted by all. The motion approving the emergency law then passed unanimously.

The new law would apply to all applications that were permitted or were operating as of March 2 or thereafter. Ultimately, the council plans to approve a permanent ordinance that would tailor retail-protection laws to particular neighborhoods. A staff report notes however that permanent revisions to the city ordinance would take "considerably more time, involving City Council input and direction, discussions with residents, property owners, merchants, and other stakeholders."

Comments

Resident
Another Palo Alto neighborhood
on May 12, 2015 at 8:13 am
Resident, Another Palo Alto neighborhood
on May 12, 2015 at 8:13 am
5 people like this

To protect retail you also have to make it easy for people to use it.

A great idea to do that is to make street parking outside retail areas 30 minutes only. This will enable someone to do some shopping, but not to eat or have a business meeting.

A quick stop to get something is often chosen by the availability of being able to park nearby for a short time. 30 minute parking spots will help.


Gale Johnson
Adobe-Meadow
on May 12, 2015 at 9:37 am
Gale Johnson, Adobe-Meadow
on May 12, 2015 at 9:37 am
11 people like this

Good try but the horse got of of the barn several years ago, when all of the current wringing of hands and debate should have gone on. Face it, it's over. The type of retail we had will never come back. And, oh how happy I am to live in my weed covered under treed neighborhood. I can walk to Meissner's or Dave's to pick up my car after it's been serviced or repaired. And there are clusters of gas stations nearby. Bring your cars down here if you dare to cross Oregon Expressway. And if you do, let me know, you're invited to drop by for a cup of coffee at my house.

Of course property owners went for offices just for the reason pointed out. Retail can't compete unless you introduce rent control and I know that will never happen. I don't have a clue and I suspect CC members don't either of what the books of a small retailer look like. I don't know what inducement could be made to bring them back. So, maybe we'll just have to look at empty storefronts for a while.


enough!
Charleston Gardens
on May 12, 2015 at 10:29 am
enough!, Charleston Gardens
on May 12, 2015 at 10:29 am
5 people like this

Too little, too late. Shady Lane and others are gone. No parking. A parking ticket on Christmas Eve at 3 pm when no one is downtown and when SOME people get to park ANYWHERE with no ticket whenever they please. We ALL know the usual offenders. I have NO reason to patronize downtown Palo Alto anymore.


Online Name
Embarcadero Oaks/Leland
on May 12, 2015 at 11:28 am
Online Name, Embarcadero Oaks/Leland
on May 12, 2015 at 11:28 am
8 people like this

Auto service places aren't protected? I've been going to Mike at Independent Bimmer on Alma for decades. He's fair, honest and reasonable. And I'll be crushed if his place gets eaten up by offices.

I've already lost Harold's Auto Upholstery on Fabian because he's been forced out by Google. When I called, Brad (the owner) told me about how he's waiting to reopen someplace in Santa Clara but since it's so hard to get to he'd come and pick my car up for me and give me a loaner until he could bring my car back!

These are the kinds of service businesses we desparately need to protect.


Steve
Adobe-Meadow
on May 12, 2015 at 1:59 pm
Steve, Adobe-Meadow
on May 12, 2015 at 1:59 pm
5 people like this

The retail that I think is needed is large supermarkets. They seem to be forbidden in Palo Alto because people might use them and thus cause local traffic problems. Instead we have small, mostly very expensive 'super'markets and many people drive longer distances to Mountain View and Menlo Park.


Jane
Evergreen Park
on May 12, 2015 at 2:11 pm
Jane, Evergreen Park
on May 12, 2015 at 2:11 pm
11 people like this

During last night's debate Council member Liz Kniss, always a supporter of developers both during her previous council stint for 8 years and during these last two years on the council again, tried to persuade her council colleagues to cut a deal to and provide a loophole for property owners who want to convert retail to offices. Her position was that if a retail space was unrented for a year the property owner could claim hardship and be allowed to convert the retail space to offices.

During at least one, if not two economic downtowns, the council allowed property owners with empty retail spaces to "temporarily" convert the spaces to offices for two to three years until the economy rebounded. At which point the space was supposed to revert back to retail. As far as I know the then planning director(s) just let this slide and I'm willing to bet those "temporary" offices are still occupying the retail space.

At the time I found it hard to believe that if retail rents responded to market forces tenants couldn’t be found who would want to be located in Palo Alto. Or the rent renegotiated with the current tenants instead of pushing them out. But unfortunately it appeared that the council at the time provided an incentive to keep retail spaces empty for six months or a year and then be rewarded with what amounted to permanent conversion to offices.

This old loophole appears to be just what council member Liz Kniss advocated for last night.



Sparty
Registered user
another community
on May 12, 2015 at 3:02 pm
Sparty, another community
Registered user
on May 12, 2015 at 3:02 pm
Like this comment

I agree. Some people get to park wherever they want.

For example, backwards, in a red zone, under no parking sign while they are getting gyros.

Web Link


Gale Johnson
Adobe-Meadow
on May 12, 2015 at 5:03 pm
Gale Johnson, Adobe-Meadow
on May 12, 2015 at 5:03 pm
Like this comment

@enough!
I'm not understanding what all the references you make about 'Some' people who get to park 'Anywhere' are all about. Can you clarify and identify those people and places and what it's all about.

Thanks.


Gale Johnson
Adobe-Meadow
on May 12, 2015 at 5:27 pm
Gale Johnson, Adobe-Meadow
on May 12, 2015 at 5:27 pm
Like this comment

@Jane
I"m kinda getting into battle mode again. It get's my adrenaline going, but my powder is wet (a liberal trick I'm sure) so I'll never get to get a shot off. Dang! Yes, a lot of us know about Kniss's past voting record but in the end she will probably get her way again, and she knows it. She's a veteran, not a newbie. Just let storefronts go empty for some period of time and then the devolopers/owners will move back in and turn it back into offices. That's the way it works in my old town, lost in memory, and never to return.

Okay, enough of my babbling for today.


Agenda
Another Palo Alto neighborhood
on May 12, 2015 at 5:48 pm
Agenda, Another Palo Alto neighborhood
on May 12, 2015 at 5:48 pm
Like this comment

I am confuses, auto repair shops, restaurants, laundromats are considered retail???? I have lived in Palo Alto for 20+ years and in that time I have done little to no shopping in Palo Alto . Why? Because there is very few places in Palo Alto toshop for what most people need. And when you try to bring needed retail into the city, it will be shot down by the usual suspects who will complain about too much noise, too much traffic etc.
Also, I find it quite hypocritical of the council to be writing their hands over lost retail when they let an entire shopping plaza to be wiped out!!! Typical clueless leadership from our council.


Slow Down
Registered user
Community Center
on May 12, 2015 at 6:06 pm
Slow Down, Community Center
Registered user
on May 12, 2015 at 6:06 pm
1 person likes this

@Sparty - you should have thanked them for the courtesy of not taking a valuable parking spot.


Sparty
Registered user
another community
on May 12, 2015 at 6:31 pm
Sparty, another community
Registered user
on May 12, 2015 at 6:31 pm
3 people like this

>you should have thanked them for the courtesy of not taking a valuable parking spot.

and for blocking a driveway. If we blocked all the driveways, fewer people would drive.


jim
Crescent Park
on May 12, 2015 at 7:11 pm
jim, Crescent Park
on May 12, 2015 at 7:11 pm
7 people like this

This is not rocket science.
Retail has been hurt by high rents.
The rents are high because of the high rents offices generate.
Therefore we make the ground floor retail only and offices upstairs.
The owners then realize that they will have empty space unless they lower the rents on the ground floor.
Then the retailers may be able to return.


the right values
Another Palo Alto neighborhood
on May 12, 2015 at 8:07 pm
the right values, Another Palo Alto neighborhood
on May 12, 2015 at 8:07 pm
8 people like this

Good to see the Council focusing on "public health, safety, and welfare",
"neighborhood quality of life", increasing "traffic congestion". The right
values, the right framework for policy and decision-making. It's very late-
but this is a good start on a long road back.


Robert
another community
on May 12, 2015 at 8:40 pm
Robert, another community
on May 12, 2015 at 8:40 pm
Like this comment

@jim

And I'm sure if the end result is a bunch of empty storefronts downtown, you'll place the blame on those pushing for and enacting these protections, and not on those GREEDY LANDLORDS.


R Wray
Palo Verde
on May 13, 2015 at 10:10 am
R Wray, Palo Verde
on May 13, 2015 at 10:10 am
Like this comment

This "urgent" law smells.


resident
College Terrace
on May 13, 2015 at 10:25 am
resident, College Terrace
on May 13, 2015 at 10:25 am
Like this comment

Oh, no one mentions this honest words - Rent Control. That's how is done.


Slow Down
Registered user
Community Center
on May 13, 2015 at 10:31 am
Slow Down, Community Center
Registered user
on May 13, 2015 at 10:31 am
Like this comment

@resident - rent control for businesses? Talk about corporate welfare. bleh. You want to be subsidizing Starbucks, Cheesecake Factory, American Apparel, Vans, Keen??


Jane
Evergreen Park
on May 13, 2015 at 7:27 pm
Jane, Evergreen Park
on May 13, 2015 at 7:27 pm
1 person likes this

@Agenda
" I find it quite hypocritical of the council to be wringing their hands over lost retail when they let an entire shopping plaza to be wiped out!!! Typical clueless leadership from our council."

It's past council members who are long gone and not wringing their hands who many of us believe steered the city in a direction that was detrimental to our quality of life. However, after the elections last fall we finally have a majority of council members who are willing to stand up and if not undo at least slow down the forces that have done so much to change the character of Palo Alto.

As for Liz Kniss, if you watch her at council meetings she appears to be quite ticked off and mostly at odds with the new council majority. Although she can generally count on Marc Berman, Greg Scharff, and her protege Cory Wolbach, to vote with her. But the interests they tend to represent no longer have the council majority.

Unfortunately the previous council majority stacked the powerful and influential Planning and Transport Commission with like minded members who represent the same interests. They have hijacked the draft for the new Comprehensive Plan that will set Palo Alto's direction until 2030.


Abitarian
Downtown North
on May 14, 2015 at 8:46 am
Abitarian, Downtown North
on May 14, 2015 at 8:46 am
4 people like this

This is a step in the right direction, but it seems there are two rather large holes.

It appears that the law does not address converting first floor offices back to retail, say when the current office tenant moves out.

Also, it is not clear how this will be enforced. Is there to be a fine or some other penalty imposed on the landlord and/or office tenant?

Hopefully this will not be just another Palo Alto "feel good" ordinance.


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