Citing economic hardships and an inability to land tenants, owners of two Palo Alto buildings are asking the council to waive the city's rule requiring ground-floor retail.
In a joint letter to the city's Assistant Planning Director Jonathan Lait, property owners Robert Wheatley and Christian Hansen of Alma Street Partners have requested the exemption from Palo Alto's recently enacted retail-protection ordinance after a nearly two-year search for a new tenant. The building at 999 Alma St. has been vacant since Anthropologie moved last year to Stanford Shopping Center.
In a separate request, the company D&B Properties has requested a similar waiver for its property at 425 Portage Ave., which was most recently occupied by Pet Food Depot.
The owners of the Alma building formally requested in July an exception from the ordinance, which mandates that all ground-floor spaces be used for retail. In their letter, they note that they had been "marketing the building to retail users for nineteen months at an unpriced rental asking rate."
"The rental rate was left unpriced to attract all interested groups but we have not received any offers for a whole building user," Wheatley and Hansen wrote.
The partners also had no luck in marketing the 10,000-square-foot building to smaller retail tenants. Given the lack of interest, they are requesting that the city allow them to use 5,000 square feet for the company's office, as the zoning code had allowed before the city adopted its retail-protection law.
"Without a tenant, our building is falling into disrepair and we are currently under extreme economic hardship," the letter states. "We have made every possible attempt to lease our building to retail users but simply stated -- nobody wants it."
They also included a letter from their broker, Josh Shumsky, who detailed his own efforts to market the property -- an effort that led to a number of tours and plenty of feedback, but no deal. Shumsky attributed the failure to find a tenant in large part to the site's location, at the periphery of downtown. With the departures of Anthropologie and The North Face from the Alma Street block, "there has been a documented flight to 'safe' retail zones such as Stanford Shopping Center."
"While we see that University Avenue has retained its iconic status and restaurant, fitness, and traditional retail users are still focused on expanding into that trade area, that is not the case city wide," Shumsky wrote. "The direct feedback we received of 999 Alma was that the location is far enough from the core downtown to not receive the foot traffic and retail synergy that (it) provides, yet is close enough to have limited drive by traffic and visibility, sitting off of El Camino Real."
Shumsky said he then considered expanding its targeted user type, which included private-education users. Their initial interest, however, wanted upon further investigation "due to limited available space for an outdoor play area, reducing the potential number of kids who could attend, and ultimately making the location cost prohibitive."
The broker thus came to the conclusion that "retail tenants do not consider this location viable for their use."
The request from Alma Partners is similar to the one that was made by the owner of 100 Addison Ave., former site of Addison Antiques. In August 2016, the council considered and rejected its formal waiver request. The council agreed, however, to create what planning staff calls a "less exacting standard" to evaluate future waiver requests. The change allows property owners to request adjustments to the retail space that must be retained, according to a report from the Department of Planning and Community Environment.
Alma Partners isn't the only property owner seeking an exemption. The council is also preparing to weigh on Nov. 6 a similar proposal from the owner of 425 Portage Ave., a building that was traditionally used as a warehouse. The building in the Ventura area has been vacant since March, when Pet Food Depot left.
Lund Smith, of D&B Properties, requested last year that his company be allowed to lease the entire building for private education use. Smith noted that the city's ordinance was drafted at the height of the office leasing market and that its purpose was to "preserve ground floor retail along the retail corridors."
"However, unlike other core retail areas, our building is clearly surrounded by office and does not provide the foot traffic needed to support a retail use," Smith wrote.