Building owners seek exemptions from 'retail protection' law | News | Palo Alto Online |


Building owners seek exemptions from 'retail protection' law

Palo Alto council to consider requests to waive ground-floor retail requirement at 999 Alma St. and 425 Portage Ave.

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.


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53 people like this
Posted by Tom
a resident of Downtown North
on Nov 1, 2017 at 1:37 pm

This is all about the sky high rents they want to charge. With reasonable rents they would have lots of takers. It is just greed; they can get startups to pay the extra $$ at the expense of retail.

15 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Nov 1, 2017 at 2:17 pm

I love retail, but I doubt very much if I would ever stop on either of these places on Alma to visit retail. I once went into North Face and never Anthropologie. I can understand why no retail wants the space.

Now the places I want retail are where they should be, like Midtown and University Avenue.

Some common sense, please.

49 people like this
Posted by poor WSJ
a resident of Evergreen Park
on Nov 1, 2017 at 2:39 pm

re 425 Portage Ave.
Just a note about Lund Smith, WSJ Properties,
Smith donated $1,000 to Greg Tanaka in 2016.

also Boyd Smith, WSJ Properties, Job Title: Partner - donated $1,000
to Greg Tanaka in Oct.2016
source: Campaign Financing filings as of 10/1/16

This BILLION dollar company WSJ which owns countless properties, says "we are currently under extreme economic hardship," They need our help?

55 people like this
Posted by Ken Horowitz
a resident of University South
on Nov 1, 2017 at 4:10 pm

Robert Wheatley and Chris Hansen leased the basement of 755 Page Mill Road to the Page Mill YMCA which moved out several years ago. They could have assisted the City and over 1200 Palo Alto residents who were senior members in finding new management to operate the 15000 square foot recreational facility which operated for over 30 years in that space
Instead they chose to convert half of that space to their business offices and the other half to a private gym for tenants of their building.
Now they want the City's help. They did not do right then so are we to forgive?

38 people like this
Posted by Abitarian
a resident of Downtown North
on Nov 1, 2017 at 5:26 pm

Abitarian is a registered user.

I agree with Tom. At the right price, property owners would be able to find tenants that comply with the ground-floor retail ordinance. The same was true for the grocery store at Edgewood Plaza that sat empty for so long.

In fact, Addison Antiques is the perfect example to make the case. People like to shop for antiques at brick-and-mortar stores. People go out of the way to visit antique stores. People drive to antique stores because they might buy an item too large or heavy to carry.

Addison Antiques succeeded for 10 years and only vacated because the landlord raised the rent to a level that was not affordable; see Web Link

Now, I *might* be willing consider a more flexible approach *if* the ground-floor retail ordinance had more teeth and better enforcement in the core downtown area where we see that what was once Rudy's Pub is now a Palantir (software development) office, what was once the Form Fitness Annex is now an Issuu (software development) office, etc., etc, and so forth.

BTW, it is my understanding that Rudy's and the Annex, both resident- and employee- and visitor-serving businesses wanted to stay in their downtown, ground-floor locations, but were ousted by landlords who chose to maximize their profits by instead leasing their spaces to private businesses that are not open to the public.

Because I do not believe there is any meaningful plan to reclaim for retail all of the many ground-floor spaces in the downtown core that are now occupied primarily by software development firms, I do not feel the city should compromise and give exemptions to landlords who are completely capable of filling their premises with retail-compliant businesses at a reasonable cost.

8 people like this
Posted by Abitarian
a resident of Downtown North
on Nov 1, 2017 at 6:02 pm

Abitarian is a registered user.

One more thing...

Rudy's Pub was owned by Megan Kawkab of Redwood City and the Annex was owned by Sassan Golafshan of Palo Alto, both local business people.

While I have never met Megan, I do know Sassan personally. He is the owner of Form Fitness at Lytton and Bryant -- the best gym in Palo Alto -- where I have been a member for many years.

In addition to providing a wonderful community at the Form, Sassan donates generously to many worthy programs and local organizations, see Web Link

Ensuring locally-owned, friendly businesses like the Form with civic-minded owners like Sassan can thrive in downtown Palo Alto is the safest bet for making our city truly vibrant.

37 people like this
Posted by obvious
a resident of Downtown North
on Nov 1, 2017 at 8:14 pm

Since these two spaces were vacated, it's been obvious that their ploy was to keep them empty to circumvent the retail restriction eventually. [I thought there was an automatic trigger allowing them to do this if it was vacant for a certain time?] The idea that "nobody" wants it is laughable... Economics 101... it's always a question of price.

32 people like this
Posted by Palo Alto
a resident of Downtown North
on Nov 1, 2017 at 9:37 pm

Nice try landlords. It's all about the rent.

17 people like this
Posted by john_alderman
a resident of Crescent Park
on Nov 1, 2017 at 9:50 pm

john_alderman is a registered user.

I'm as residentialist as they come, but who cares about those spaces. The city has been way way too lenient about letting businesses take over retail space along University, and between Forest and Lytton. Same for California Ave and adjacent streets. That's where it matters, and there should be zero flexibility in the core downtown/retail areas. But these spaces get no foot traffic, and don't add value the core areas.

21 people like this
Posted by Stephen
a resident of Duveneck/St. Francis
on Nov 1, 2017 at 10:27 pm

I sec and the comments above - clearly this is an issue of the property owners preferring the rents associated with offices, not retail. I note that Philz and Ace Hardware, both also on this same stretch of Alma seem to be doing fine.

4 people like this
Posted by commonsense
a resident of Professorville
on Nov 2, 2017 at 12:10 pm

commonsense is a registered user.

Irrespective of many of the poster's feelings expressed above, this is a stupid place to require retail. The evil land owner trying to maximize their return is actually just common sense. Is asking for your current salary or, god forbid, a raise being greedy? Hopefully they will propose to build housing here.

5 people like this
Posted by C-
a resident of College Terrace
on Nov 2, 2017 at 12:46 pm

C- is a registered user.

I'm glad to see so many people in agreement on this topic. It is always about free market forces vs artificial manipulation. Of course, it's true that in a 'free market' if they dropped the cost of rent they would find a sweet spot where they would be flooded with takers.

It's also true, that retail, in recent years, has taken a huge hit from online retailers, but has also taken a hit from minimum wage and insurance requirements, regulatory fees and other burdens such as ADA requirements which contribute to the costs of doing business in CA. Bottom line, too expensive for them to stay.

Conversely, the idea of requiring retail to be limited to ground floor locations is not helping the situation. If there is office space available on the street, and supply is artificially limited to 2nd floor office space, that is manipulating the market as well. Opening those spaces to everyone should normalize some of the inflated costs being charged for office space now.

The less the city/state gets involved in trying to create the ideal image, the less equitable it is for everyone except those making the deals and receiving the kick backs.

Like this comment
Posted by C-
a resident of College Terrace
on Nov 2, 2017 at 12:48 pm

C- is a registered user.

Less is more...

The MORE the city/state. I should learn to proof read.

2 people like this
Posted by Chris
a resident of University South
on Nov 2, 2017 at 7:58 pm

What sense does it make to force retail into marginal sites?

Wouldn’t those be great sites for housing?

With Hewlett-Packard Enterprises leaving Palo Alto and 3000 Hanover, that opens up another great site for housing.

If the naysayers would open their eyes, they would see a lot of potential housing sites.

5 people like this
Posted by poor WSJ
a resident of Evergreen Park
on Nov 4, 2017 at 3:18 pm

One reason to deny zoning changes to these mega developers is that their strategy is to NIBBLE away at the zoning. A few feet higher here, a 70 foot corner tower there (like at Boyd Smith's 355 Alma), reduced parking here, reduced setback there, and on and on.
They are winning the NIBBLE game and the city is letting them.

Not irrelevant:
Boyd Smith donated $1,000 to Tanaka (Oct 2016 Campaign Report)
Lund Smith donated $1,000 to Tanaka " "

among others. But this story is about Smith and Wheatly (WSJ Properties).

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