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."