After flirting with the idea of allowing medical businesses at the Town & Country Village, the Palo Alto City Council abruptly dropped the idea on Monday night.
The idea was prompted by a request from the shopping center, which pointed to its growing vacancies and a persistent threat from e-commerce that is threatening some of its traditional retailers, particularly those in the apparel and furniture businesses. While the council was somewhat skeptical of the idea, members agreed in March to allow the city's Planning and Transportation Commission to further explore the idea and refine exactly what types of businesses would fit into the newly established category of "retail health."
The planning commission had similarly struggled to reach a consensus on the issue, ultimately voting 4-3 in May on a definition that excludes emergency care and urgent care services and that any leases with medical businesses should be signed before the end of 2023. The commission and staff had also agreed that medical uses should be limited to no more than 10% of the ground floor at the shopping center.
On Monday, however, the council majority proved reluctant to change the retail rules, even as Town & Country leaders maintained that they are still facing a long-term threat from online shopping.
Dean Rubinson, director of development for Ellis Partners, which owns the shopping center, noted that the shopping center's vacancy rate has recently grown from about 0.9% in 2015 to 6.4% in 2019 to the current level of 21.3%. Even though the rate is expected to drop to about 18% once the center welcomes in the vegan restaurant Wildseed and other eateries to fill the space left by the departure of Mayfield Bakery & Cafe, Rubinson argued that the online trend will continue to make it hard for many businesses to stay open.
"While we believe that online sales will no longer have the same dominance that they had last year, we believe the habits that were developed last year will remain and that the e-commerce growth will continue well past COVID-19," Rubinson said.
He suggested that the shopping center be allowed to bring on businesses that offer health services but also have a retail component. The list of possible tenants he presented include Modern Acupuncture; Carbon Health, a provider of primary and urgent care; and Orange Twist, which specializes in skin treatment.
The council didn't buy the explanation. Council member Greer Stone said he regularly comes to the shopping center, which is across the street from Palo Alto High School where he serves as student activities director, and often sees crowds there at all hours of the day. He pointed to the center's prime location at Embarcadero Road and El Camino Real and questioned the need to loosen retail rules for one particular shopping area.
"Other shopping centers are finding a way to thrive in our city," Stone said. "I believe Town & Country can too."
Most of his colleagues agreed and the council voted 5-2, with council members Alison Cormack and Greg Tanaka dissenting, to halt the city's monthslong exploration of the new "retail health" category. Mayor Tom DuBois suggested that the city had already spent too much time on this proposal.
"I'm not convinced it's a good process to just pass this ordinance for one address," DuBois said.
Cormack and Tanaka both disagreed and supported Town & Country's plan. While several residents spoke out against allowing medical uses at the shopping center and submitted letters opposing the change, Cormack said that allowing them at 10% of the shopping center would constitute a "minor experiment."
"I talk with people and they're interested in having these services available," Cormack said.
Tanaka went further and suggested that the issue is "dire" and that the city needs to "move quickly" to save retail at a time when it's struggling.
"There's pretty big competition to fill these retail spaces not just in our city but other cities," Tanaka said. "I'm concerned that if we keep waiting, we're going to have a lot more trouble filling the spots and the fragile retail environment that we already have is going to be hurt."
Most council members agreed that while it might be a good idea for the city to adopt a "retail health" definition, this should not be done at the behest of a single property owner, particularly as the COVID-19 situation is quickly evolving and California is preparing to end its business restrictions on June 15. Council member Eric Filseth likened the process to "the tail wagging the dog," while Vice Mayor Pat Burt said he would be reluctant to see shops get replaced with medical offices, even ones with retail components.
"I think the future is that we do need to look at refining this definition, but I don't want to just fling open the gates and start nearly equating medical offices with retail," Burt said. "I don't think we got this right here."