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By just about any measure, it’s been a grim year for Palo Alto’s retail community, with businesses all over the city losing money, reducing hours and closing up shop altogether.
City staff have identified at least 50 sites that, until recently, have been occupied by popular establishments such as Chipotle on El Camino Real, Lemonade, Tam Tam, Antonio’s Nut House and Dan Gordon’s, but that now stand empty. At Town & Country Village, long one of the city’s most vibrant shopping areas, the vacancy rate has climbed from about 6% to more than 20% during the pandemic, according to Jim Ellis, whose company Ellis Partners owns the center.
The City Council acknowledged the deep challenges facing the retail sector on Monday night, as it debated and agreed on several measures to help businesses stay afloat during the economic slump. During a wide-ranging discussion, council members voted to keep California and University avenues closed to traffic until May 31 and generally supported the idea of hiring a consultant who specializes in economic development to help guide the city’s retail strategy.
The council was less keen on moving ahead with more long-lasting changes to the city’s retail rules, including relaxing the zoning code to allow a broader range of businesses to fill buildings designated for retail. One such idea would expand the city’s definition of “retail” to include businesses such as banks, law firms and medical offices. Another would remove or modify an existing zoning law that requires ground-floor retail in commercial areas throughout the city.
With little consensus on these issues, the council directed its Planning and Transportation Commission to study ways to diversify retail uses and consider modifications to the ground-floor retail protection law. The key question that it will focus on is: Should the retail requirement apply citywide, as is currently the case, or exclusively to commercial cores such as downtown and California Avenue?
As in the past, the council split into two camps on retail protection, with some urging caution and others counseling aggressive action. Mayor Adrian Fine and council members Greg Tanaka, Liz Kniss and Alison Cormack all supported changing rules to allow for more flexibility for commercial sites. This includes expanding the definition of “retail” and allowing certain types of businesses that currently have a conditional use permit to open up as permitted uses.
Vice Mayor Tom DuBois and council members Eric Filseth and Lydia Kou all voted against having staff return with proposed change that would broaden the definition of retail and allow more offices. All three stressed the potentially permanent impacts of the proposed zone changes. Once an office occupies retail space, even purportedly on a temporary basis, it is unlikely to move out, even when zoning changes, they pointed out.
“If we loosen this, we’re only going to allow the rents to continue to stay high,” DuBois said. “I think we should continue with our retail protection ordinance until we have more data — and more nuanced data.”
Cormack agreed that the zone changes could have long-term effects but said that given the magnitude of the economic downturn, she is willing to be more flexible on uses.
“It’s an inflection point,” Cormack said. “That means it’s appropriate for us to make some changes.”
Kniss suggested that the city needs to streamline Palo Alto’s permitting processes for businesses looking to make improvements.
“I think we need to dispel the notion that Palo Alto doesn’t really want certain things and therefore drags their feet in the development department,” Kniss said. “I think it’s important that we work at changing whatever reputation we have that is out there, saying this is a tough city to do business in.”
Council members voted unanimously to direct the Planning and Transportation Commission to evaluate ways to diversify use of retail spaces. They also voted 6-1, with Kou dissenting, to direct the commission to explore changes to the ground-floor protection ordinance, a topic that has consistently divided the council. As in the past, Fine argued that the ordinance should not apply citywide. Others balked at moving ahead with the change but agreed to let the commission consider possible changes, including a more limited geography for the ground-floor retail requirement.
Tanaka also lobbied for a nimbler approach. A CEO of a company that specializes in retail analytics, Tanaka cited broad national trends that have made the environment challenging even before the pandemic — most notably, the large number of retail locations in the United States. He also noted that the businesses that have thrived during the pandemic are big-box stores such as Costco, Walmart and Home Depot. The types of small, specialty stores that are predominant in Palo Alto are precisely the types of retail operations that have taken the biggest hit.
“It’s the retail that we love in our city but it’s exactly the kind of retail that’s been totally hammered overall — not just in our city but in all cities,” Tanaka said.
Ellis agreed. To cope with the growing vacancies, Town & Country is preparing to ask the council to allow it to devote 20% of its ground-floor space to medical offices. The proposal would also permit the shopping center to fill 30% of its space with offices.
“The fact of the matter is that the pandemic has accelerated trends that are already underway, which has significantly impacted retailers.” Ellis said. “There are far fewer of them and the average size of retail use is much smaller.”
But many residents and some merchants strongly opposed revising the definition of “retail” or allowing more office use in retail areas. Jessica Roth, owner of The Cobblery on California Avenue, said she has great concerns about the proposed zone changes, which she argued could change the character of the eclectic strip.
“We need to add public art to these areas, we need to make them more community-friendly, not have office spaces and doctor’s offices,” Roth said. “I really hope you will strongly think about this. Something you do now will impact our businesses for generations, decades to come.”
The council was more unified when it came to extending the street closures on University and California avenues, authorizing staff to modify the design of the program. While DuBois supported reopening parts of University Avenue to cars to support retailers along the strip, the rest of the council voted to keep both streets closed until May 31. Kniss said the extension would make it easier for restaurant owners to invest in their outdoor-dining amenities, including heating and rain protection. Others, including Cormack and Fine, noted that the program has been extremely popular with residents.
“I think this is one of the silver linings of 2020 … in this hard year we’ve been through — reimagining what our two downtowns can look like,” Fine said shortly before the 6-1 vote.
University Ave needs to be permanently closed to traffiy, sidewalks need to be leveled, trees need to be planted and art needs to be displayed. Then only will downtown businesses thrive! People will come from all over the Bay Area. Just look at pedestrian streets in Europe and China. They are all prime shopping and dining locations!
What a farce !
the City council majority wants to help secure maximum profits for property owners who have likely benefited for decades from the high rents they impose on tenants !
Let the property owners assume the risk they took on when they invested in real estate. For a short time rents might go down, which in turn would help other sectors of our community; businesses and residents alike with lower rents.
Meanwhile please solve the many real problems that face your constituents during a world wide pandemic and for many the grave economic and personal conditions they find themselves in.
Instead this slim majority on council
worrys about a slim minority of folks who are like to and should be able to ride out a slight temporary loss in profit.
This lack of focus is especially problematic with Cormack and Tanaka who will remain on council.
As always, for permanent closure Downtown the elephant-in-the-room is “Where do you put the traffic?”
Staff mentioned at last night’s Council meeting that traffic on Hamilton and Lytton is already back to pre-pandemic levels.
More traffic is coming. Work-from-home is not going to be a game-changer Downtown. No tenant is going to pay the extravagant Downtown lease rates for offices they leave empty; they’ll sublet some space, or renegotiate their leases to free up the space they’re not using. No property owner is going to leave vacant space unoccupied, and since Palo Alto office space is in high demand, they’ll be able to fill it more easily than landlords in the rest of the Valley.
And on top of that, Staff and some Council members want to replace retail space with more offices.
I think it’s fine to extend the closures through next Summer, but it would be irresponsible to make them permanent without first having a plan to solve the problems that will create.
Creating permanent malls on University and Cal Avenues – that’s what is being pushed by some on the Council, supported by yimbys and Palo Alto Forward.
Adrian Fine and Kniss will soon be off Council which may dampen this mall craze, along with attempts to undermine retail protections.
It’s ok to close streets to get through the Covid downturn if small retail businesses agree, but then open them to return to retail shopping rather than have just giant restaurant scenes. Cal Ave restaurants are even complaining to the city about the popular weekly farmers market taking up space for a few hours. Ridiculous.
The reason some European cities and towns close their centers to cars is tourism overwhelms, and old streets were never designed for cars. A false equivalent to Palo Alto when cited as justification.
WE don’t want our two primary city retail shopping areas to become permanent malls that were never designed for such use. Support retail protections and keep retail businesses on our retail avenues.
Maybe we can rehire the city’s Tourism Manager. Given the new moves to convert retail to offices we should face a real tourism boom as people come from all over the world to see our offices.
I almost laughed out loud when Alison suggested uses that would add vibrancy to retail areas. Such as real estate agents, title companies, etc.
Eric and Adrian may argue that the proximity to other shops is not necessary and share a laugh about their shopping experiences of getting donuts on El Camino and a beer at Ernie’s close by as an example of stand alone shops. But what this really demonstrates is that they are ill equipped to represent the majority of shoppers who want to be able to walk, bike, or park in ONE location to run errands in close proximity that are done on a fairly regular basis. Especially people who have busy lives.
A perfect example of what happens to retail when the definition of allowable “retail-like” businesses is broadened is California Avenue after Liz successfully argued to allow personal training studios to replace retail. In short order traditional retail was replaced by a plethora of personal training studios. This should be a cautionary example.
@Mall Madness
“Creating permanent malls”
It’s not malls the council majority want. It’s food courts and “office-like” businesses.
Then they should ban company cafeterias that hurt the local restaurants, downtown. A few years back I purposely booked a latish lunch there to avoid the business lunch rush. Only one other table was occupied. The waitress laughed at my “business lunch rush” comment, noting this has been typical ever since Palantir opened its nearby cafeteria.
Re added vibrancy, who could resist touring our Grande Boulevard — which they dubbed our very own Champs-Elysees (aka El Camino) — when heralding the Grande Boulevard Initiative. (Whatever happened to that??) Package that up with peeking through title company windows to watch people signing all those documents.
Fun, fun.
Who thinks the Chipotle on El Camino is closed? It was very much open on Sunday 11/8.
It’s useful to know that those streets will remain closed until May.
That tidbit took almost half of a paragraph. The rest of the article was about the council and others deciding the future of commercial zoning to deal with the pandemic and with systemic changes to the retail environment. That’s useful information too, but I suppose squeezing it into the heading might make the heading big enough to be an article all by itself.
Try this:
“Council Debates Future of Retail Zoning but Car-Free Zones to Remain Until May”
The land use debate would be more coherent if the public health context is explicit; namely, pre-vaccine or post vaccine. Taking the example of restaurants, the short-term outlook remains challenging with social distancing and capacity limits driven by COVID. The second half of 2021 should be a different ball game. Perhaps even the federal government transition may be helpful. Why not postpone permanent zoning changes, or even temporary uses that may be unlikely to revert, until the public health crisis is under better control — which is not the current situation. Although it may not be politically correct, I am partial to the type of vibrancy one sees in European cities with ground floor retail, 2nd floor offices, topped by residential mixed use (including some below market rate housing). A downtown with excessive percentage of offices (particularly in a work-from-home world), depleted retail and restaurant operations, and a dearth of housing may seem like a wasteland, or at least an opportunity wasted.