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It's not landlords versus tenants — everyone's losing

Original post made on Feb 12, 2021

Commercial real estate in Palo Alto is in its worst crisis since the dot-com bust and the 2008 recession. It's an 11-months-old disaster that has yet to see a clear end date or an elegant solution.

Read the full story here Web Link posted Friday, February 12, 2021, 6:57 AM

Comments (17)

Posted by Amie
a resident of Downtown North
on Feb 12, 2021 at 8:28 am

Amie is a registered user.

This is also a symptom of these towns not building high-density housing (i.e. customers) within and adjacent to retail areas. Our downtowns will continue to decline and struggle, pandemic or not, without an increase in perment customer base. The data is all there and those office workers we used to depend on may never come back. BOTTOM LINE - build housing and lots of it if you want your local retail to survive. Otherwise, kiss it goodbye.

Posted by Clyde Freeman
a resident of another community
on Feb 12, 2021 at 9:11 am

Clyde Freeman is a registered user.

How about turning the vacant office buildings into housing? The complexes are already there and this would negate the need for further land development.

No different than converting old factories into lofts and studios.

The solution is already within the grasps of the constituency.

The problem is that no one in PA town is putting on their thinking caps.

Posted by Nayeli
a resident of Midtown
on Feb 12, 2021 at 9:51 am

Nayeli is a registered user.

This area has long held an aversion to tall cluster buildings.

If you want Caltrain to work AND you want housing AND you want to ease traffic headaches AND you want to draw workers to certain areas AND keep them out of other areas...

...THEN why not build tall(ish) building office clusters near CALTRAIN?

I'm not saying that these should be built in Palo Alto (not at all). Rather, the region should take upon itself a plan to attract workers to office space and away from housing or residential roads.

In most cities and dense metropolitan areas, offices are primarily located in downtown tall buildings and along highways. This has the added benefit of keeping commuters from meandering inside of residential areas.

Imagine if cities zoned tall office buildings to such areas (near Caltrain). It would make sense to build up -- because every "up" is keeping people "in." More commuters could take advantage of Caltrain -- without feeling a need to bring a bike or park.

Posted by Allen Akin
a resident of Professorville
on Feb 12, 2021 at 10:09 am

Allen Akin is a registered user.

I did a search for information about the relationship between population density and retail space, and found a good study by Cushman & Wakefield here: Web Link

What this tells us is that as population density increases two things happen: (1) The total amount of retail space increases. (2) The amount of retail space per capita (and per household) *decreases*.

So if our goal is to restore the sort of retail environment that we used to enjoy, simply increasing population density isn't going to do that. It would create a different, more crowded and competitive, environment. This strikes me as good news for commercial property owners, but at best mixed news for residents and retailers.

There are other factors that would have to be addressed to preserve retail as we've known it -- for example, rents that are too high to support certain kinds of retail; competition from online sellers; property owner preferences for higher-margin tenants (particularly offices); etc. Increasing population density doesn't address those.

Increasing population density comes with downsides as well, including increased traffic congestion, more pressure on water supply, less green space, and so on. I don't think increasing the total amount of retail space, while decreasing the amount available per resident, is a compelling reason for taking on those other problems.

Posted by Allen Akin
a resident of Professorville
on Feb 12, 2021 at 10:25 am

Allen Akin is a registered user.

@Nayeli: You can find a good explanation of the development pattern for Silicon Valley in Margaret O'Mara's book "Cities of Knowledge". The short answer to your question is that offices here were spread out deliberately, in part because knowledge workers found that more attractive than high-density environments. Some studies as late as the 1980s concluded that multiple floors reduced communication!

Posted by Darin L.
a resident of another community
on Feb 12, 2021 at 10:59 am

Darin L. is a registered user.

Some Palo Altans have a way of over-intellectualizing the problems confronting them.

Just say NO to further development or continue developing.

It's as simple as that.

Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 12, 2021 at 11:12 am

Resident is a registered user.

Stop confusing me, @Allen Akin. Your facts are too complicated for my Progressive Values.

Posted by Chris
a resident of University South
on Feb 12, 2021 at 1:01 pm

Chris is a registered user.

With commercial tenants decreasing, Palo Alto needs to convert exist commercial zoning to residential just to support the reduced amount of retail..

There is no way all of the existing retail zoning will again be viable, the troglodytes on the City Council not withstanding. It is interesting ypthat Goldman accuses the CC of micromanaging. How could anyone ever get that impression?

Posted by TimR
a resident of Downtown North
on Feb 12, 2021 at 1:24 pm

TimR is a registered user.

Businesses aren't "suffering" because of the pandemic; the government has prevented businesses from operating during the pandemic. And for that, the government needs to compensate them. And no, that's not socialism, it's paying damages for the government's actions.

Posted by Tecsi
a resident of Los Altos Hills
on Feb 12, 2021 at 4:03 pm

Tecsi is a registered user.

This discussion have morphed from the Covid-related stress on small businesses to a worthwhile, but longer-term topic of housing density.

I would like to hear more about Alhouse Deaton, which received a $450,000 PPP loan, but hasn’t given any leeway to their suffering tenants. They need to speak up. If our PPP taxpayers dollars are going to corporations that aren’t the ones suffering, rather the ones actually suffering, then we have a fraud and greed problem.

Please investigate Alhouse Deaton and report on their actions and what they are doing with the $450,000 we are paying them.

Posted by citizen
a resident of Another Palo Alto neighborhood
on Feb 13, 2021 at 1:40 am

citizen is a registered user.

In the 1918 flu epidemic, places with the most strict measures recovered fastest economically
Web Link

There's evidence this is so now, too, e.g. places like South Korea, which at ~ 50 million people has had only ~ 1,500 deaths, even though they were hit earlier and we had more time to respond (and they tried to help us).

So, if we'd responded as they did, with good leadership and mature population response to a crisis, the equivalent number of deaths here for our population would be ~ 10 or 11 thousand. Total. Instead it's been more people than died in WWII, ~ 481,000 to date. That's almost 50 times the number of deaths per capita than S Korea. To the economic point, because they responded with a competent national response, they had next to no recession.

Geez, we hear way too much bellyaching about "nanny state" yada yada from people who want to act like toddlers with respect to personal responsibility and competent governance. It would be funny except the rest of us have to live with the deadly/horrible economic consequences over & over while people who supposedly care ideologically about personal responsibility just lie to themselves and us, and blame others.

Competent governance matters. The government is us in this country, and those who serve have a hard job, overlaid with a whole dangerous crazy element now that supposedly loves the Constitution but hates the government it establishes.

NYT recently published an article about the economic research looking at how the economy does under Democratic & Republican presidents, and found it does so much better under Democrats for the last 100 years, we'd all be making twice as much now if we hadn't had Republicans (interesting, since they never win now with majorities or even the most votes). The article pointed out the probable reason is that Democrats tend to be more pragmatic and Republicans ideological. Same with Covid.

Posted by E Delouise
a resident of Downtown North
on Feb 13, 2021 at 11:46 am

E Delouise is a registered user.

LEGALLY I believe an "Act of God" (coronavirus pandemic) negates an ongoing or term lease contract in place.

Consequences should be minimal for these lease tenants. Suppose a fire wiped out all these buildings? "Act of God"
Tenants don't pay rent, Government officials would not allow them to open business in a burnt-out shell building.

How is Prop 19 affecting the commercial building owners? Have their tax basis' been reassessed?

Courts are limiting & mostly aren't even taking these cases. Criminals with life sentences are being freed-when they never otherwise would have seen the light of day again. No bail system for criminals, regardless of multiple offenses.

Everyone has the same thing in common: free choice.

Why aren't these small businesses uniting? Investigate if your Commercial landlord took out a government no-payback loan. Get smart stop playing the PC (politically correct) game, its only valid when there are many flourishing wealthy businesses and the community can afford to play that game.

Posted by TimR
a resident of Downtown North
on Feb 16, 2021 at 4:04 pm

TimR is a registered user.

"So, if we'd responded as they [South Korea] did..."

Yes, if wishes were horses, beggars would ride.

But we didn't respond like they did, did we? Making economic policy now on an imagined, ideal past that never happened is pretty insane. Let's stick to the facts, shall we? And the facts are that, unlike South Korea, US state and local governments forced businesses to close against their will, robbing them of income. And for that, such businesses need to be made whole.

Posted by jr1
a resident of Greenmeadow
on Feb 17, 2021 at 10:54 am

jr1 is a registered user.

During the last year, I give society high marks on handling the situation. My major complaint would be the lack of discipline from our elected leaders. Government officials rarely answer questions-they dictated. The community has worked together and we will get through the situation. The economy will survive, but society needs to understand working together can solve many problems. We all know some landlords are good, others are poor. No amount of legislation is going to improve some landlords. I've owned property before and learned most renters are good, some are bad. I've learned to deal with them without government interference.

Posted by Oh well.....
a resident of Old Palo Alto
on Feb 18, 2021 at 11:10 am

Oh well..... is a registered user.

Thanks to Government shutting down entire economy.

Posted by PA Female Resident
a resident of College Terrace
on Feb 20, 2021 at 12:00 am

PA Female Resident is a registered user.

These landlords are not willing to lower rents. They are willing to kick out tenants when rents go up, and then ask for relief or rezoning when rents should be coming down. Do not convert to medical or other uses. We've lost so much diversity in Palo Alto because of high rents. $2 square foot could transform our community vs. $4-$5. Let's have rents come down and allow more community benefit uses in retail spaces. [Portion removed.]

Posted by Gale Johnson
a resident of Adobe-Meadow
on Feb 22, 2021 at 3:26 pm

Gale Johnson is a registered user.

I've been on sabbatical leave (that's a joke) so I haven't chimed in for a while but this discussion rudely awakened me from my slumber.

My thinking from 5-6 years ago, when so much was done to try to save retail in PA, hasn't changed...much. Literally hundreds, maybe thousands, of hours were spent by city staff and CC on how to deal with the problem. Reserving/limiting street level to retail in all the developers' grand multi-use plans sounded like a good idea for many. Then sprinkle in a few small apartments and a whole lot of office space for the high flying, well funded, and able to pay renters. A developer's dream come true. Oh, on top of that, if no retailers came forward to rent the allocated space, after a period of time that space could be converted into office space.

What could go wrong? Well, to all those who spent so much time studying the should have just called me. lol! Big box stores and online purchasing had already been well established as methods of buying without going to your well remembered and loved, but lost forever, mom and pop, and family owned stores in town.

This latest online discussion seems to be a debate about what effect housing density, more people living in PA, will have on retail business.

I'll go with Allen Akin's take on it. I'm not a Mensa candidate but I am smart enough to understand what he says...I think! But thanks, "citizen" for your history lesson on the pandemic and how other countries handled it. But we're "here" and the time is "now" so let's deal with it in our country in the "here and now".

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