Palo Alto's 'retail protection' law draws opposition

Planning commission criticizes proposed requirements for ground-floor retail; calls for more outreach

When Palo Alto adopted an emergency law last year prohibiting the conversion of ground-floor retail space to other uses, the goal was to protect shopping areas from being encroached upon by offices.

But now that the city is looking to firm up the law and make it permanent, the effort is running into some resistance, including from the city's own Planning and Transportation Commission. In its review of the new ordinance last week, several commissioners characterized the law as superficial, misguided and as likely to hurt the retail environment as to help it.

The new ordinance would build on the temporary law that the City Council adopted in 2015, which prohibits conversions of retail spaces to non-retail uses. It adds a few provisions to the interim law, including a ban on "personal service" businesses, like gyms and dance studios, in the ground-floor retail district along University Avenue. (These uses would still be allowed on the peripheral downtown blocks, however.)

The law would also expand downtown's ground-floor protection area to include several parcels on Emerson Street that were excluded from the area in 2009, when downtown was experiencing a rash of vacancies, and scrap a provision in the existing city code that allows tenants to dedicate 25 percent of the ground floor space to other uses.

The laws were inspired by a spate of visible conversions, with popular eateries such as Zibbibo and Rudy's Pub recently making way for offices. After adopting the interim ordinance last year, which is set to expire in April 2017, the council signaled its attempt in October to stay the course with the retail-protection ordinances and directed staff to further refine the rules before making them permanent.

The ordinance targeting downtown distinguishes between the uses permitted along University Avenue and those allowed in the peripheral portions of the commercial area. The commission also discussed a second interim ordinance, for which city staff prepared an update Wednesday, addressing ground-floor protection throughout the city.

While the council sees both ordinances as critical to keeping shops from converting to offices, which fetch a much higher rent, the new laws also have their critics. Michael Powers, chief financial officer of local development firm McNellis Partners urged the commission Wednesday to keep the definition of "retail" expansive. The nature of retail has changed in recent years, he said, with more people doing their shopping online or at Stanford Shopping Center. The city is already attracting some of the best retailers, just not in the downtown corridor. Expanding the ground-floor district to downtown's South of Forest Avenue (SOFA) area would create a "tremendous difficulty for those property owners in finding retailers who are interested."

Simon Cintz, whose family owns four commercial properties in Palo Alto, was more forceful in his opposition, calling the new ordinances a "one-size-fits-all approach to retail preservation."

"It doesn't matter what type of retail; it doesn't matter where the retail is located; it doesn't matter whether or not the retail is viable in this location," Cintz said. "It ignores most of the issues that should be considered in a carefully thought-out process."

Some conversions to non-retail use make sense, he said, pointing to a property on Emerson Street that in the 1960s was converted from an auto garage to a medical building. The garage, he said, was "just plain ugly," with a chain link fence and junk cars straddling the property. Palo Alto citizens have benefitted far more from having access to the medical services instead of the garage, he said.

The commission agreed with some of the speakers' points, namely that the ordinance shouldn't be too prescriptive and that more outreach to area businesses needs to happen.

Commissioner Eric Rosenblum called the downtown ordinance "too one-dimensional" and a "very surface-level analysis" of retail. Many retailers, he said, complain about the difficulty of attracting employees and aren't getting the support they need from the city. Simply mandating that ground floors be dedicated to retail doesn't address the root cause of the problem: the city's housing shortage. Rosenblum said the city should pursue a specific plan around "how retail, housing and employment work together."

"I find it frankly a little disturbing that a town that has this much talent is doing things this one-dimensionally," Rosenblum said.

Chair Michael Alcheck argued that the proposed downtown ordinance misses the mark in several ways: It was created without sufficient outreach and it fails to consider "the context" in which the effort was launched.

"I believe the pitchforks in town are being raised because of the traffic related to office," Alcheck said, adding that the problem was addressed through the council's recent adoption of an annual office cap and the interim retail-protection ordinance.

Even though downtown retail is coming off a historically strong year (when measured by vacancy rates and sales tax revenues), restricting retail uses could hurt – rather than help – local merchants, he and others argued.

"This notion that we're now going to expand what was pretty restrictive into a more restrictive, more encompassing and farther reaching thing seems counter-intuitive to me in general," Alcheck said.

Like Alcheck, Commissioner Greg Tanaka advocated for forming a stakeholder group that includes property owners and retail professionals to delve deeper into the issue and "really look at how do we make vibrant retail in Palo Alto." While the ordinance is a stick that forces property owners to devote their buildings to retail, the city should also consider carrots that would encourage them to do so on their own.

"It's 'drawn in' versus being 'forced in,'" Tanaka said. "If you try to force it, what happens is that you create vacancies."


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60 people like this
Posted by South of Oregon
a resident of Another Palo Alto neighborhood
on Dec 20, 2016 at 9:23 am

The real problem with retail is not, nor has it ever been the City's "housing shortage". The problem is Palo Alto becoming an office park (which then demands housing in Palo Alto). Burt was right, we need to think of how to reduce the footprint of larger office tenants with inertia to crowd out retail and all other civic life, like Roseblum's employer has, so that Palo Alto can be a place for startups and residents again.

Totally absent from this discussion is any recognition that development has made North Palo Alto less accessible for South Palo Altans and City policies have decimated and are decimating our retail centers and centers of civic life at Cal Ave, Alma Plaza, and now Midtown and Fry's. Someone please put together an initiative to at least ensure there is equal representation north and south of Oregon, because Council continues to treat SoPA like it's some kind of dumping ground.

(We used to go to Univ Ave at least twice a week, now, maybe twice a year. It has nothing to do with the Internet and everything to do with the loss of the retail, loss of the friendly environment, and inaccessibility due to traffic. We do go to Los Altos downtown instead now.)

[Portion removed.]

28 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Dec 20, 2016 at 9:34 am

I enjoy Midtown, the retail, the coffee shop and restaurants and the drugstore. I also use Safeway.

If they dare to spoil that then they will lose existing customers. Unless I can park as part of an errand run or on my way home, what's the point? I have walked or biked there in the past but that is not a good use of my time when I am driving in that area anyway. A 15 minute delay on the way home is very different from driving home and then walking there and back which would make the 15 minute quick errand turn into an hour's chore to put into my routine.

Does anybody have any sense? This is getting totally ridiculous. I will be forced to use the Internet more, not out of choice but out of necessity. And as for meeting a friend I may bump into and deciding to have coffee and a chat, forget it! It won't happen as I won't see anyone I know anymore amongst the newbies.

39 people like this
Posted by True Face
a resident of Crescent Park
on Dec 20, 2016 at 9:36 am

Greg Tanaka, who was so closed mouths about where he stands is showing his actual intentions.

Draw in vs. forced in baloney. What happened to governance?

And this is a glimpse of what Council will be like in the next 4 years.

22 people like this
Posted by Todd
a resident of Another Palo Alto neighborhood
on Dec 20, 2016 at 9:44 am

I can't imagine any downside to the city trying to micromanage commercial space, it's already been so successful with Edgewood plaza...

51 people like this
Posted by HMM
a resident of Old Palo Alto
on Dec 20, 2016 at 10:46 am

Eric Rosenblum actively promotes the interests of his employer, Palantir, which include more office space for it. Remember, Palantir turned Jungle Copy into a private lunch room. I hope the City Council acts in the best interest of residents and continues to protect retail.

43 people like this
Posted by Growth Myth
a resident of Palo Verde
on Dec 20, 2016 at 11:30 am

"Simply mandating that ground floors be dedicated to retail doesn't address the root cause of the problem: the city's housing shortage."

[Portion removed.]

We do not need more housing. Quality of life for the residents of Palo Alto -- we are the constituents -- is not suffering for lack of a place to live. We live here already! It's our town! We suffer from too much office space -- traffic, crime, encroachment of a lively place to shop, and have a cup of coffee....

We do not "need" to grow everything. There is no right to live here cheaply. There is enough housing in surrounding communities for that. I, for one, do not want cheap. I moved here for the "specialness" that was Palo Alto. I worked for it and paid for it. I want to keep it that way.

The developers are outsiders -- keep'em out! That's our right as voters. Wake up, speak up.

33 people like this
Posted by A neighbor
a resident of Barron Park
on Dec 20, 2016 at 1:07 pm

I support the efforts of the City Council. Yes, we need more retail space, no it has nothing to do with housing shortage.
I end up in downtown Los Altos a lot more frequently compared to our own downtown because there are so many useful shops in there.
I don't understand why Greg Tanaka doesn't include the residents of Palo Alto in his stakeholder group. I am quite disappointed in his thinking. His point of view is all about business, not the quality of life of the residents.

11 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Dec 20, 2016 at 2:19 pm

Brick and mortar retail has multiple challenges. But one in Palo Alto is that office tenants are willing to pay $8-10 per square foot, and retail tenants mostly aren't. Commercial owners such as Mr Powers or Mr Cintz top choice is to find office tenants. If the ordinance prevents that, their second choice is to wait awhile and moan a lot about no retail interest (at those prices), and see if a future council will reverse the ordinance or grant them exemptions. Even if they lose a year or more of rent by leaving the building empty, a big office tenant premium when they do get that friendlier council will easily make up the difference over the life of the building.

The Commissioners know all this of course. But if Palo Altans didn't want to play this game, they wouldn't have voted the way they just did.

19 people like this
Posted by asleep at the wheel
a resident of College Terrace
on Dec 20, 2016 at 2:30 pm

Palo Altans are seriously asleep at the wheel if you honestly believe that the decline in retail has nothing to do with a lack of housing. I know quite a few retail owners in PA and what I hear repeatedly is that they can't afford to pay their workers enough to keep them. Even apartments in San Jose are way out of reach for a minimum wage retail worker. They have super high turnover because people can't sustain 2 hour commutes each day - and these are people often working more than one job. I hear about people sleeping in their cars before shifts because of the commutes. It's what's driving retailers to give up and either make way for very high end retail (think fancy useless boutiques and restaurants) or office space. Pay attention to how many help wanted signs you see when you walk around. Why don't you actually talk to some of the retailers you say you love so much?

1 person likes this
Posted by Baby in Bathwater
a resident of Old Palo Alto
on Dec 20, 2016 at 2:32 pm

Baby in Bathwater is a registered user.

I appreciate and thank staff for the spirit of this ordinance but it was written so broadly that it completely ruins small businesses in Palo Alto. Yes we need protection from big businesses trying to build huge office complexes. But what about small, one off retail locations that are not in downtown/Cal Ave locations? Should they be forced to continue and not allow owners to convert their use? What good is protecting bad retail locations? What about small, local businesses that have offices and are doing well? Is the 50,000 sf only going to large developers and companies? What about the little guys who have seen good fortune from living in Palo Alto and just need a little bit of space to expand? There is no foresight given to the impact of these policies on small, Palo Alto native offices who need a bit of space to expand. This ordinance protects NON-CONFORMING uses...uses that do not comply with zoning and comp plan. This needs to be re-done. We cannot let this happen.

13 people like this
Posted by midtown
a resident of Palo Verde
on Dec 20, 2016 at 2:41 pm

Yes, we've stopped going to University Ave, also. Too crowded, too many noisy restaurants, way too difficult to park, takes an hour-and-a-half to do a half-hour lunch or shopping. The same thing is happening to California Avenue. Los Altos and Mountain View downtowns have become much more attractive and easier to access.

22 people like this
Posted by mauricio
a resident of Embarcadero Oaks/Leland
on Dec 20, 2016 at 4:33 pm

mauricio is a registered user.

There was never any housing shortage. Rosenblum keeps inventing an imaginary problem and pushes for"solving it, with the barely covert influence of Palantir behind him. For the kind of lifestyle we Palo Alto residents desire and sacrificed for, we have just the housing we need. Palo Alto is already much too populated for the lifestyle and quality of life we desire. It's not up to Rosenblum, PAF and Palantir to decide what kind of lifestyle and quality of life we should have. He wants Palo Alto to continue tone an ever expanding office park with very dense population. We don't.

2 people like this
Posted by Time to move on
a resident of Charleston Meadows
on Dec 20, 2016 at 5:36 pm

Palo alto killed retail years ago with their rules about groceries and refusal to have chain stores. This is just a feel good measure from the council so they can say they tried to protect retail. Seriously when have you been able to do everyday shopping in the city?
[Portion removed.]

11 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Dec 20, 2016 at 6:12 pm

Asleep at the Wheel hasn’t thought through this far enough. If retail and personal-service workers can’t afford Palo Alto rents, then building new apartments isn’t going to change that, unless you think those new apartments will somehow suddenly rent for 50% less than the existing ones – not likely in this town, with so many high paid professional workers who would like to move here. Focusing on Housing as a solution for Palo Alto Retail is nonsensical.

But he’s right local retailers have to pay workers more than retailers in San Jose, in order to entice them to commute. These retailers are also already paying twice the San Jose rents, if not more. If you now started making them bid for space directly against tech companies, then they’d be paying at least 50% higher rent even than they pay today. All that means an uphill battle for local retail, even without the internet.

The people who benefit most from this situation are the commercial property owners, aka the rent collectors, and they are also who would benefit from eliminating the retail ordinance: it would mean a windfall on their present retail property. Also possibly tech companies looking for expansion, though they might have to wait for rebuilds to make use of some of the space. But a much tougher picture for Retail, and for Palo Alto residents who would like to shop locally.

The city leadership is supposed to be on the side of the latter. But the article above looks like a mixed picture.

17 people like this
Posted by jh
a resident of Evergreen Park
on Dec 20, 2016 at 6:53 pm

jh is a registered user.

"Eric Rosenblum actively promotes the interests of his employer, Palantir. "

The city has a policy that council members who work for a company that has a financial interest in an item can not participate in the discussion or vote. Which is why council member Dubois, whose spouse works for Stanford University, left council chambers when any decision involving Stanford was on the agenda, including the Stanford Research Park even though her job was on the main campus and had nothing to do with the Research Park. Likewise former council member Kline during his terms on the council.

Does Palo Alto have the same policy for the Planning and Transportation Commission, of which Eric Rosenblum has been a member for the last two years? His employer, Palantir, currently leases a huge amount of office space in the downtown area. My understanding is approximately 240,000 sq ft in various commercial buildings, or a third of the downtown business district office space. (They may even own some of the buildings they occupy.) Palantir has a big interest in any downtown land use decisions. Was Rosenbloom required to excuse himself when the Commission's agenda might impact Palantir? Especially during the Commission's review of the current update of Palo Alto's Comprehensive Plan and their recommendations to the council regarding policy and land use that would affect the downtown business district. And if not, why not?

8 people like this
Posted by Chip
a resident of Professorville
on Dec 20, 2016 at 10:09 pm

I stopped shopping in Palo Alto quite a while ago. Traffic is terrible & parking is difficult. Los Altos & Menlo Park are vastly preferable & both have supermarkets other than the very precious Whole Food. Online shopping for retail goods also saves a lot of time & aggravation.
As a resident here for most of my life, I'm compelled to admit that Palo Alto has become a mini hive of business activity & offices which no longer serves the retail needs of locals. The city council caters to developers for offices & high-density garden-less housing.
Do I feel a loyalty to the community in which I live? Sadly, not so much, anymore. Moving is a lot of trouble but when I'm ready, I won't waste a glance in the rear-view mirror.

24 people like this
Posted by cm
a resident of Downtown North
on Dec 20, 2016 at 11:54 pm

The push against this ordinance to preserve retail by the business community has everything to do with property owner greediness. They want the most money to lease their properties and office space will lease at a higher rate than retail space. In fact many property owners claim they can't find retail tenants but the reality is that they won't lower their prices to make it affordable for retail. They don't care about residents or retail but just want to continue to destroy Palo Alto and milk it for cash while they still can. The planning and transportation commission is filled with shills for businesses and property owners.

4 people like this
Posted by mauricio
a resident of Embarcadero Oaks/Leland
on Dec 21, 2016 at 6:29 am

mauricio is a registered user.

@Time to move on: I own a house in Palo Alto, I spend two weekends a month in it, and I care about the town in which I spent the majority of my life. This is why I'm vocal about the destruction of this town.

10 people like this
Posted by Thoughtful
a resident of Professorville
on Dec 21, 2016 at 9:04 am

The lack of variety of retail has multiple causes -- cost of labor for those coming from afar, the internet which has shifted where people buy things, the lack of a diverse populace that has multiple needs (lower-wage folks who have distinctly different needs than a Tesla showroom or a high end restaurant), not enough inventory for 'start ups' that can keep our community vibrant and creative. Let's not vilify one industry, or one company -- this is a systemic issue and should be dealt with thoughtfully. I bet if we had allowed chain stores in DT PA the character of the area would be distinctly different and as you're buying so much online now, why bother going to a chain store anymore?

Also, we're in a boom time and we all know the bubble will burst again as it always does. We have to be flexible for the next downturn -- remember the last one when storefronts were all empty? That's why the startups were able to rent those spaces -- no one else could use them as the economy was in a tailspin. Have a longer vision, don't be reactive to today's situation and let's have a thoughtful discussion instead of casting aspersions and vilifying "big" corporations. And stop with the personal attacks -- they're not becoming to you. These Commissioners are serving our community with their time and energy and trying to do the right thing. You may not agree, but really stop with the angry pitchfork rhetoric -- do you you want to live in where people yell and scream all the time? Feels like the national scene and I don't think anyone here wants to be like that.

1 person likes this
Posted by Palantir pressure
a resident of Downtown North
on Dec 21, 2016 at 10:35 am

[Post removed.]

12 people like this
Posted by I_Got_Mine
a resident of Mountain View
on Dec 21, 2016 at 10:57 am

FYI: Google is building another campus in Boulder, CO. For the amount techies pay for a month's rent, they can OWN a brand new house around Boulder, CO. More open space, more close activities and more educated people. Google knows this. How many other high tech industries will figure this out?

10 people like this
Posted by South of Oregon
a resident of Another Palo Alto neighborhood
on Dec 21, 2016 at 11:33 am

Boulder is under its own pressure now for the reasons you cited. It's a desirable place, companies are locating there, and it's growing more than is comfortable, though not as much as here. This is a vast nation - creating yet more desirable places to attract growing businesses, is a far better course than allowing a few greedy developers to overbuild a few. The recent election should have underscored that point.

2 people like this
Posted by Rent Rent Rent
a resident of Midtown
on Dec 21, 2016 at 2:37 pm

The real issue with first floor retail is the high rents mandated by Palo Alto landlords.

If you look at the $/sf rents in downtown, you quickly recognise that outside of Apple and a few other high margin retailers, there is almost no economic model that supports unique small independent retail businesses.

To have a thriving, interesting, and meaningful retail corridor, you need to figure some way to reduce rents. Given the proforma required to purchase/develop land on University Avenue, I can see no plausible solution short of the model developed at the end of the 19th century where Cities set up municipal markets and rented stalls to independent grocers and retailers (Think Philadelphia Redding Market or Baltimore Lexington Market). And ladies and gentleman...this is not happening in Palo Alto.

3 people like this
Posted by JoAnn
a resident of another community
on Dec 21, 2016 at 4:43 pm

I see the developers' fan club, otherwise known as the Planning Commission, is whining about this ordinance. One thing I would say: only wealthy, overpriced retail can afford University Ave. True Mom and Pop stuff works better on the "peripheral" streets. Leave it all alone and put some more money into public transportation so they can live in crowded housing elsewhere.

8 people like this
Posted by Abitarian
a resident of Downtown North
on Dec 21, 2016 at 6:01 pm

My feeling is that we do need an ordinance to protect ground floor retail. Otherwise, that space will be completely consumed by technology firms.

That said, current plans fall short of what is truly needed. For example, the law should ensure that ground floor space that has been converted to offices is reverted back to retail.

The ordinance contains odd details, such as banning fitness and dance facilities from University, but does not seem to address the big picture.

Consider, the city plans to allow large amounts of supposedly more affordable housing downtown and expects a sizeable portion of the new residents will not drive cars.

The new ordinance, however, is not targeted to help downtown dwellers meet their needs within the neighborhood. Additional high-priced boutiques will not provide the necessities.

2 people like this
Posted by Sunshine
a resident of Barron Park
on Dec 23, 2016 at 9:54 pm

The current lack of decent varied retail in Palo Alto leaves residents no choice. If we want to shop for anything except food we must go to Los altos or one of the shopping centers. Gone are all the shops that sold anything interesting that was reasonably priced. All that remains in the retail sector is highly over priced or strange. Palo Alto, both downtown university ave area and California ave areas offer very little by way of retail.
Add to the lack of places to shop the special parking permits and the situation becomes untenable.
When will Council come to their collective senses and realize that offic space that does not directly and immediately serve the public does not belong in the main dowmtown area--put it on the side streets and business parks.

Sorry, but further commenting on this topic has been closed.

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