Palo Alto officials turned back the zoning clock on an eclectic downtown block Monday night, April 8, when they passed a law requiring property owners to devote ground-floor space to retail.
The move was similar to one that Pleasanton officials once considered, but without success.
The City Council voted 6-3, with Vice Mayor Nancy Shepherd and Council members Larry Klein and Gail Price dissenting, to institute ground-floor protections to the 600 block of Emerson Street. Existing tenants on that block, which lies between Hamilton and Forest avenues, include Gordon Biersch, Buca di Beppo and the Empire Grill and Tap Room. Several retailers, most recently Fraiche Yogurt, have moved and the spaces were filled by offices.
The council's vote effectively reverses the trend that the city set out on four years. In 2009, with the downtown economy on the wane and the city concerned about vacancies, the council struck down the retail protection on 13 properties on peripheral downtown blocks to give property owners more flexibility.
These days, with the downtown vacancy rate at about 2% and rents at historic highs, the main concern is no longer vacancies but a takeover by offices. Last year, three council members argued in a memo that the Emerson block is particularly likely to change.
Karen Holman, Greg Schmid and Greg Scharff also highlighted the block's critical function as a corridor connecting the heart of downtown at University Avenue and the South of Forest Avenue area.
"We have lost some of the retail and service businesses to office," Holman said Monday. "It's our responsibility as council members to help support to the best extent we can the vitality of the city."
"There's a place for offices, but in these kinds of locations it's not in the best interests of the community."
Schmid agreed and noted that retail not only creates vibrancy but helps the city with the bottom line because of the tax revenues that stores generate.
"The city has a vital and important financial interest in making sure that our downtown retail-serving businesses are effective and widespread," Schmid said.
The three council members who dissented on Monday agreed that retail should be protected but objected to the piece-meal approach. The block, they argued, should be evaluated as part of a broader analysis of downtown development that the city is currently undertaking. Gail Price called the Monday action "premature" and Shepherd argued that certain buildings on the block aren't designed for retail and should not be required to house it.
Downtown developers also urged the council to slow down. Charles "Chop" Keenan, who owns several properties on the 600 block of Emerson, called the change "spot zoning" and asked the council not to make the change. Keenan was one of the stakeholders who worked with the city on the 2009 zone change, which included adding and removing certain properties from the ground-floor-retail protection district. He criticized the proposed ordinance for making it difficult for a property owner on the block to rent to a retailer, knowing he would not be able to go back to an office tenant if the retailer were to fail.
The ordinance allows buildings that currently rent to office tenants to retain the space for office use until there's a vacancy for 12 months, at which point the ground-floor-retail requirement would kick in.
"You wouldn't want to be in a situation where once it's retail, you can't go back to office," Keenan said. "No one is going to take a chance on retail. This spot zoning is not very well thought out."
Roxy Rapp, who owns the property at 644 Emerson St., also advised against the change and told the council that when it comes to downtown Palo Alto, the old maxim "Location, location, location" applies. Stores outside the "downtown core" of University Avenue often have a hard time staying in business. Rapp gave as an example his building, where two successive shoe businesses came and went after brief stints and where Fraiche Yogurt leased space for three years before moving elsewhere (an office now occupies the building).
"Retail is so tough today that it's very tough to make it out of the core," Rapp said.
But the majority on the council agreed that if the city doesn't act soon, more retailers will disappear and more buildings will be taken over by offices, which typically generate higher rent than retail. Planning Director Curtis Williams said that at least two property owners have recently expressed an interest in switching from retail tenants to offices but were dissuaded from taking that action.
The Planning and Transportation Commission had also recommended by a 5-2 vote reinstating the retail requirement for the Emerson block.