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Departure of Fry's Electronics leaves Palo Alto with a zoning dilemma

City Council to weigh in on whether property owner can retain existing uses without violating code

The Fry's building at 340 Portage Ave. was once home to the third-largest cannery in the world in 1920. Embarcadero Media file photo by Veronica Weber.

Few properties epitomize Palo Alto's planning failures better than 340 Portage Ave., which is zoned for high-density housing but which for decades has been dominated by retail, office and research uses.

In 1995, the City Council agreed that all nonconforming uses at the site should be concluded by July 2019, at which point the site would convert to housing. But in 2006, the council tried to mollify the site's anchor tenant, Fry's Electronics, but scrapping the termination clause and effectively allowing commercial use to be retained indefinitely.

That decision continues to reverberate today, as the city is looking to forge a new vision for the Ventura neighborhood, which includes 340 Portage, and to meet a regional mandate that calls for Palo Alto to plan for more than 6,000 new housing units between 2023 and 2031. Even though Fry's Electronics vacated its space in December 2019 and the Portage Avenue site remains listed on the city's housing inventory (with a "realistic capacity" of 221 residences), the council's action in 2006 means that the type of residential development that city leaders have long envisioned is unlikely to occur in the near future.

The site's owner, The Sobrato Organization, has resisted calls to redevelop the site as housing, even as it is proceeding with a different residential project, which includes 91 townhomes nearby at 200 Portage Ave. And while the city's zoning code states that nonconforming uses that are "discontinued" or "abandoned" for one year or more "shall not be resumed," suggesting that the Fry's space should now be used for housing, Sobrato has challenged this view and argued that even though Fry's had left more than a year ago, the space has not been "discontinued" or "abandoned."

"To the contrary, we have remained diligent, active and continuous in our efforts to re-tenant the vacant space during the COVID-19 global pandemic, which has created enormous challenges and affected retail even more than most other types of land use," Tim Steele, senior vice president for real estate development at Sobrato, wrote to the city in May.

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Even if the council buys this explanation and allows nonconforming uses to remain, it will have to answer another question: What types of businesses should be allowed to fill the 84,000-square-foot space left behind by Fry's?

On Monday, the council will try to answer the question by considering two different approaches to this dilemma. The zoning code requires nonconforming uses at the site — namely, retail, research-and-development, warehouse and storage — in "approximately the same ratio" that existed in 2006 and limits retail space to 60,000 square feet.

Planning staff had determined that this could be interpreted in two ways. Under one scenario, the departure of one tenant would require the property owner to reshuffle its leases to maintain the same ratio of nonconforming uses that existed in 2006. This would likely require Sobrato to terminate existing leases with tenants to achieve the needed balance, according to a report from planning staff.

Under another interpretation, which is supported by Sobrato, the ratio would not pertain to the mix of businesses but rather to the footprint of each existing nonconforming tenant in the building. As long as these uses don't expand, they would be allowed to remain in place even if another business leaves.

The council's interpretation of the zoning code could have a ripple effect well beyond 340 Portage. The site is a critical component of the 60-acre area for which the city is crafting a new vision as part of a process known as the North Ventura Coordinated Area Plan. What happens — or doesn't happen — at 340 Portage will thus likely influence the city's plans for other portions of the north Ventura area.

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The decision will also give the council a rare opportunity to exercise some power over the future of a critical site for potential housing after 15 years of helplessly watching commercial uses occupy it and leave. Planning Director Jonathan Lait, who typically makes zoning interpretations, cited in his report the "significant public interest in present and future uses of the site," which prompted him to seek direct guidance on the matter from the council.

"This code interpretation provides immediate clarity to the property owner and staff regarding the allowed mix of nonconforming uses in the building," Lait wrote. "Staff anticipates that the property owner would utilize the information to inform any future proposals for this property or to otherwise determine if the building is currently in conformance with the code."

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Departure of Fry's Electronics leaves Palo Alto with a zoning dilemma

City Council to weigh in on whether property owner can retain existing uses without violating code

by / Palo Alto Weekly

Uploaded: Fri, Jun 11, 2021, 6:59 am

Few properties epitomize Palo Alto's planning failures better than 340 Portage Ave., which is zoned for high-density housing but which for decades has been dominated by retail, office and research uses.

In 1995, the City Council agreed that all nonconforming uses at the site should be concluded by July 2019, at which point the site would convert to housing. But in 2006, the council tried to mollify the site's anchor tenant, Fry's Electronics, but scrapping the termination clause and effectively allowing commercial use to be retained indefinitely.

That decision continues to reverberate today, as the city is looking to forge a new vision for the Ventura neighborhood, which includes 340 Portage, and to meet a regional mandate that calls for Palo Alto to plan for more than 6,000 new housing units between 2023 and 2031. Even though Fry's Electronics vacated its space in December 2019 and the Portage Avenue site remains listed on the city's housing inventory (with a "realistic capacity" of 221 residences), the council's action in 2006 means that the type of residential development that city leaders have long envisioned is unlikely to occur in the near future.

The site's owner, The Sobrato Organization, has resisted calls to redevelop the site as housing, even as it is proceeding with a different residential project, which includes 91 townhomes nearby at 200 Portage Ave. And while the city's zoning code states that nonconforming uses that are "discontinued" or "abandoned" for one year or more "shall not be resumed," suggesting that the Fry's space should now be used for housing, Sobrato has challenged this view and argued that even though Fry's had left more than a year ago, the space has not been "discontinued" or "abandoned."

"To the contrary, we have remained diligent, active and continuous in our efforts to re-tenant the vacant space during the COVID-19 global pandemic, which has created enormous challenges and affected retail even more than most other types of land use," Tim Steele, senior vice president for real estate development at Sobrato, wrote to the city in May.

Even if the council buys this explanation and allows nonconforming uses to remain, it will have to answer another question: What types of businesses should be allowed to fill the 84,000-square-foot space left behind by Fry's?

On Monday, the council will try to answer the question by considering two different approaches to this dilemma. The zoning code requires nonconforming uses at the site — namely, retail, research-and-development, warehouse and storage — in "approximately the same ratio" that existed in 2006 and limits retail space to 60,000 square feet.

Planning staff had determined that this could be interpreted in two ways. Under one scenario, the departure of one tenant would require the property owner to reshuffle its leases to maintain the same ratio of nonconforming uses that existed in 2006. This would likely require Sobrato to terminate existing leases with tenants to achieve the needed balance, according to a report from planning staff.

Under another interpretation, which is supported by Sobrato, the ratio would not pertain to the mix of businesses but rather to the footprint of each existing nonconforming tenant in the building. As long as these uses don't expand, they would be allowed to remain in place even if another business leaves.

The council's interpretation of the zoning code could have a ripple effect well beyond 340 Portage. The site is a critical component of the 60-acre area for which the city is crafting a new vision as part of a process known as the North Ventura Coordinated Area Plan. What happens — or doesn't happen — at 340 Portage will thus likely influence the city's plans for other portions of the north Ventura area.

The decision will also give the council a rare opportunity to exercise some power over the future of a critical site for potential housing after 15 years of helplessly watching commercial uses occupy it and leave. Planning Director Jonathan Lait, who typically makes zoning interpretations, cited in his report the "significant public interest in present and future uses of the site," which prompted him to seek direct guidance on the matter from the council.

"This code interpretation provides immediate clarity to the property owner and staff regarding the allowed mix of nonconforming uses in the building," Lait wrote. "Staff anticipates that the property owner would utilize the information to inform any future proposals for this property or to otherwise determine if the building is currently in conformance with the code."

Comments

Yo
Registered user
El Carmelo School
on Jun 11, 2021 at 7:39 am
Yo, El Carmelo School
Registered user
on Jun 11, 2021 at 7:39 am

The City Council should confirm for Sobrato what the zoning code states in regard to the discontinued nonconforming retail use of the site. The site is zoned for housing and since the retail use was discontinued for one year or more it shall not be resumed.

If Sobrato was really serious about continuing the nonconforming retail use they could have leased the entire building to a hot dog stand for a $1 per year until they got their act together.

City Council: Send Sobrato the clear message that the ship has sailed on retail use of the site so they can either plan to develop housing or sell to someone who will. Sobrato: No more empty threats about leaving the site vacant to become a blight upon our community.


Resident 1-Adobe Meadows
Registered user
Adobe-Meadow
on Jun 11, 2021 at 8:20 am
Resident 1-Adobe Meadows, Adobe-Meadow
Registered user
on Jun 11, 2021 at 8:20 am

Sobrato postures itself as the Newsome / Pelosi groupies for the state, attending events where they get celebrated. If they cannot conform to the latest directives from the Gov for more housing then take the property by eminent domain. Eminent domain uses the tax base of a property to pay-off the owners. The tax base on this property must be extremely low. Sobrato will not come ahead. Shame on them.

SU has a housing project in process at RWC, Woodside Road and Industrial - a huge piece of land which is similar in size which has now been cleared of buildings and is starting to be built. There are existing local projects which have been approved as examples of mixed use development. No one needs to start from scratch here. Use existing local projects which have been approved and tweak them to fit the property size.


Novelera
Registered user
Midtown
on Jun 11, 2021 at 5:14 pm
Novelera, Midtown
Registered user
on Jun 11, 2021 at 5:14 pm

First of all, it puts my teeth on edge how often commenters on Palo Alto Online misspell the Governor's name. It's Newsom, Not Newsome. I could give you all the benefit of the doubt that it's auto-correct doing it, but I'm not feeling that generous. I get hit with false auto-correct a lot, but I read my posts before clicking the "submit" button.

And second of all, my heartfelt thanks to Gennady for the excellent, clear reporting on this complicated zoning matter.

I hope the site and the area can be developed as housing, with a reasonable amount of low-income housing included. 20% would be great. If Sobrato continues to be difficult, maybe the eminent domain idea by another commenter would push housing forward. In any case, I sincerely hope our City Council and Planning Department don't cave at the first hint of a lawsuit to force the city into letting them build more office space. This is the very last thing Palo Alto needs more of.


Samuel Jackson
Registered user
Evergreen Park
on Jun 11, 2021 at 6:50 pm
Samuel Jackson, Evergreen Park
Registered user
on Jun 11, 2021 at 6:50 pm

Just build more housing.

I work at 380 portage and run past the whole site regularly. I can't say I've seen rigorous efforts to prepare and market the site... It's even taken a long time to fully clear the Fry's detritus.

We need housing. City Council should act with all haste to make it so. Easy choices.


PST
Registered user
South of Midtown
on Jun 12, 2021 at 3:48 pm
PST, South of Midtown
Registered user
on Jun 12, 2021 at 3:48 pm

The city just spent $23 million to install a more expensive bridge than necessary over 101 this weekend. Time for the city to step up for housing, Acquire all the land through purchase or eminent domain. Accommodate current residents into future housing. Build Extremely Low Income and Below Market Rate housing, parks, and perhaps some retail. No offices! Structure it so the newly built housing stock will remain ELI or BMR housing upon change of ownership. It’s a question of priorities and the will to do something for real.


Diane Reklis
Registered user
Palo Verde
on Jun 14, 2021 at 3:26 pm
Diane Reklis, Palo Verde
Registered user
on Jun 14, 2021 at 3:26 pm

Please don't settle for the "least-worst solution" here. Good people worked on this and did not reach a conclusion that works for our future. Members of the committee should be invited to continue and the committee should be expanded to include more city residents. The next round of meetings should invite new ideas. This is too important to just settle. Keep looking and a really good solution will emerge. Palo Alto needs to get back to the creative thinking that built this wonderful city.


Clifton DePaul
Registered user
another community
on Jun 14, 2021 at 3:44 pm
Clifton DePaul, another community
Registered user
on Jun 14, 2021 at 3:44 pm

Just build high-rise apartments with underground garages and add a small shopping mall with a grocery store, gas station, pharmacy, and maybe a Round Table Pizza or some other small dining option. Done deal.

Why so much debate over trivial matters?

If you build it, they will come...providing everything is reasonably priced.


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