Palo Alto Weekly

News - November 9, 2012

City hopes to keep retailers on key downtown block

Palo Alto looks to prevent offices from replacing shops, restaurants on Emerson Street block

by Gennady Sheyner

Concerned about a wave of offices replacing downtown shops and restaurants, the Palo Alto City Council signaled its commitment to preserve the area's retail character when it directed staff Monday night, Nov. 5, to come up with zoning changes that would protect a particularly vulnerable block.

By an 8-1 vote, with Nancy Shepherd dissenting, the council asked staff for a proposal that would keep retail alive on a bustling block of Emerson Street between Hamilton and Forest avenues. The strip is one block south of the city's main commercial artery, University Avenue, and falls just outside downtown's "ground-floor overlay" district, which requires that the first floor of buildings be used for retail. The council had in 2009 removed the ground-floor protection from some of the peripheral downtown blocks because of the faltering economy and an increase in vacancies.

But on Monday, the council agreed that times have changed. Downtown vacancies are once again rare, the local real-estate market is soaring and the city has been weighing several ambitious proposals for office developments downtown, including the recently approved four-story Lytton Gateway building; the four-story office building proposed for 135 Hamilton Ave. (it is currently undergoing a design review), and John Arrillaga's idea for four office towers and a theater as part of a new "arts and innovation district" on University Avenue near El Camino Real. The trend, and the recent conversion of several downtown retail spaces into offices (including Fraiche Yogurt, the Blue Chalk Cafe and Jungle Copy), has prompted Vice Mayor Greg Scharff, Councilwoman Karen Holman and Councilman Greg Schmid to put forth a memo calling for more retail protection.

"Given the changes in the economic climate in Palo Alto and Silicon Valley, particularly recent and proposed substantial increases in downtown office space, the city should examine options to assure a vital retail environment and services to support downtown and the community," the memo stated.

Schmid, an economist, pointed to the shifting economic climate and noted that office buildings are far more lucrative for developers than shops. Bob Moss, a land-use watchdog, estimated that while the monthly rent for retail tenants is about $2.50 to $3 per square foot, office rents are $4.50 to $5.50 per square foot. Scharff estimated that the monthly rent for office space downtown could be as high as $7.50 per square foot.

Commercial office space, Schmid said, is doing "tremendously well, so there is an economic incentive to create or transform retail into commercial space."

The council agreed that the vibrant Emerson block, which includes Gordon Biersch, Mantra, Empire Grill and Tap Room, Buca de Beppo, Stanford Florist and Richard Sumner Gallery, should be a priority.

"We need to move forward and protect that corridor fairly quickly," Scharff said.

"Once you lose and break those retail connections, you don't get them back," he later added. "This is not something we can take a wait-and-see attitude (toward). We've lost a few restaurants."

Holman agreed and called the Emerson block a "very important corridor" and a key connector between the heart of downtown and the mixed-use downtown neighborhood known as SOFA 2 (South of Forest Avenue).

Scharff and Councilman Pat Burt proposed consideration of broader changes, including revisions to the ground-floor overlay district and to the regulations for non-conforming uses in the district. Scharff said it's important to look at "the flow of retail" downtown. Retail, he said, works best when "it's not broken up by non-retail use," he said.

Burt agreed that the time is ripe to revisit the council's 2009 decision to change the downtown zoning.

"A couple of years have passed, and quite clearly the incentives are there," Burt said. "For public benefit, it makes sense to enhance the vitality of the district by protecting ground-floor retail throughout (the district)."

But the council decided that broader actions would be premature. Councilman Larry Klein said he doesn't see the problem his colleagues are trying to solve. Downtown, he said, is already "remarkably vibrant."

"Not only do I see a lot of people, I see retail spaces being remodeled that weren't remodeled before," Klein said.

He agreed to support the zoning changes for Emerson Street but urged his colleagues not to pursue the broader retail-protection measures for which Burt, Scharff, Holman and Schmid had advocated.

Councilwoman Gail Price said the city needs to look at downtown zoning "in a more systematic way." On Nov. 13, the council is scheduled to approve a contract for a "downtown cap" study that will evaluate recent and projected downtown developments and consider the area's capacity for parking and future projects. Proceeding with these efforts on a "piecemeal" basis, Price said, "feels a little premature."

Shepherd had a similar concern. She told the Weekly after the meeting that she dissented from the vote because she felt considering ground-floor protection at this time was redundant, given that the city is about to proceed with the downtown development study that would look at similar issues.

The council agreed to prioritize protection of the Emerson block and asked staff to return with an estimate of how much work it would take to come up with the broader revisions.

Russ Cohen, executive director of the Downtown Business and Professional Association, urged caution and asked the council to consider the "unintended consequences" of new zoning regulations downtown. He said members from his association met with city planners recently to consider the proposed changes and "concluded unanimously that there were no more changes necessary."

"This is really too soon to re-evaluate the 2009 changes," Cohen said.

Staff Writer Gennady Sheyner can be emailed at gsheyner@paweekly.com.

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