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HomeMy WebLinkAbout2024-11-20 Retail Committee Summary MinutesRETAIL COMMITTEE SUMMARY MINUTES Page 1 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Regular Meeting November 20, 2024 The Retail Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 9:02 AM. Present In Person: Kou (Chair), Burt, Lythcott-Haims Present Remotely: None Absent: None Public Comment None Agenda Item 1. Study Session: Filling Retail Vacancies in the University Avenue Downtown City Manager Ed Shikada stated that ideas on how to best fill retail vacancies included addressing permitting issues and land use zoning, vacancy tax, or temporary pop-up uses. Staff suggested a study session to address this topic. Steve Guagliardo, Assistant to the City Manager, was responsible for coordinating the City’s economic development function. The staff report mentioned some City work that was underway, including increased overtime to address cleanliness downtown, power washing garages to make them more appealing, parking and wayfinding project for garages, and University Avenue streetscape projects. Moderator Aaron Aknin is a Principal with the Good City Company, a local government consultant firm based in Downtown Redwood City. The Good City Company worked with 25 to 30 cities throughout the Bay Area and Northern California, primarily focused on planning, economic development, and housing issues as well as City Manager type projects. Mr. Aknin previously was the Assistant Planning Director for the City of Palo Alto. Chair Kou invited Director Lait to provide an overview of the Council’s action from Monday night. Jonathan Lait, Director for Planning and Development Services, stated that the City SUMMARY MINUTES Page 2 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Council adopted a first reading of an ordinance to make changes to Palo Alto’s Zoning Code. The interim ordinance was effective immediately. The second reading is in a couple weeks. For California Avenue, the City previously required a Conditional Use Permit (CUP) if you had more than 10 nationally branded uses. The requirement was modified to only apply to restaurants with 50 or more sites within California. As a result of this change, Director Lait anticipated most uses did not require a CUP. The City Council amended the retail-like definition. If a land use did not fit within the list of permitted land uses, staff was now allowed to exercise judgment and permit the use if it created more foot traffic. New land uses were introduced into Ground-Floor Retail on University Avenue, Ground-Floor and Retail Combining Districts on California Avenue, and a few areas on Middlefield to allow auto dealership showrooms, pet grooming, and financial services provided there was a component of the use having pedestrian clientele or a public facing-component. The regulations previously required retail on ground floor in University Avenue and California Avenue areas but the City Council added a waiver procedure to allow a nonretail use to occupy a space. Panelists included Faith Bell from Bell’s Books, Brad Ehikian with Premier Properties, Matt Sweeney with the Econic Company, Steve Levy, John Shenk with Thoits Bros., and Charlie Weidanz with the Palo Alto Chamber of Commerce. The study session would include discussion of the entitlement and permitting process, the current retail landscape, and activating vacant storefronts. Mr. Aknin asked Mr. Weidanz if he had heard any comments from Chamber members on the permitting process in Palo Alto versus other areas. Mr. Weidanz heard from potential businesses and property owners looking to fill vacancies that the permitting process was time consuming and expensive at times. Some businesses might choose to go elsewhere instead of going through Palo Alto’s permitting process. Mr. Aknin invited Director Lait to discuss building changes. Director Lait stated that staff was working on the permitting process for new home construction, office development, and commercial development. There had been an ongoing and concerted effort especially since the pandemic to improve services, evaluate the people involved in the process, and evaluate how current processes were set up and who they were serving. The City was considering the use of technology to facilitate work. A couple years ago, the City Council authorized staff to make decisions at the counter. In the current budget cycle, City Council approved a new supervisory position at the Development Center to provide more oversight and make real-time decisions. As an internal policy, applicants who had an application come in for a second plan review could meet with staff to review corrections to ensure the success of the third submittal and answer the applicant’s questions about getting their permit issued. Tools were set up to help managers review timelines. Inspectors in the field hand out business cards with a QR code to a survey to elicit feedback from the community. The City was providing internal staff training focused on touchpoints with customers. Jodie, former Planning Manager, was the new Development Center Manager overseeing the counter and helping applicants move projects forward. SUMMARY MINUTES Page 3 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Mr. Aknin asked Mr. Shenk’s opinion on the zoning changes and what he wanted to see in future phases, as well as to comment on what he has heard from tenants about the permitting process and what could be improved. Mr. Shenk was elated with Monday night’s decision. Having a temporary parklet policy made it difficult to tell the rules to a prospective retailer. Downtown retail was not doing well pre-pandemic. Mr. Shenk appreciated the City allowing pet stores and other uses. Mr. Shenk worried about uses that should be approved but would not apply because somebody does not want to take a risk. Applicants were in a defensive position because of the negative reputation of the Palo Alto process. Mr. Shenk believed staff would say no when deciding if a use promoted a high level of pedestrian activity. Mr. Shenk wanted subjectivity eliminated. Mr. Shenk wondered what report an applicant would show at the counter to show their use would have a substantial increase in foot traffic. There was not a clear definition of substantial pedestrian activity. Chair Kou remarked that the City left it for staff to determine the definition. Councilmember Lythcott-Haims felt that the City was heading in a different direction and understood from Director Lait’s remarks that there was an attitude of yes, albeit not in all cases. Mr. Shenk thought it was helpful to have Jodie directly communicating with applicants. Mr. Shenk felt that City staff from Building, Permitting, and Public Works was predisposed to no. Staff in other Cities tried to figure out how to say yes such as by letting you know if you appealed using the wrong code section and which one to use. Mr. Shenk spoke about his request to plug a hole that was drilled in the sidewalk across the street and the drill went through to his garage below. Mr. Shenk believed it was a simple Public Works project but this sidewalk safety issue has taken months to resolve. Mr. Aknin asked Mr. Ehikian to talk about how the City of Redwood City handled retail vacancy. Mr. Ehikian thought Cities should make the process as easy as possible. Remove ambiguity in the code so applicants know what to expect. Mr. Ehikian applauded Council’s recent decision and thought the City was headed in the right direction. Businesses needed predictability. Mr. Ehikian thought the City needed to rebuild trust within the community because the Palo Alto process was viewed as being difficult, taking a very long time, and had lot of challenges, hurdles and unknowns. Mr. Ehikian opined it was better to specifically say office was not allowed and leave the rest flexible. In Redwood City, a storefront on Broadway in the core business district lost a tenant during COVID and was vacant for a long time. The Redwood City Economic Department offered their assistance to Mr. Ehikian. The City of Redwood City bought ICSC tickets to try to find a tenant. It was helpful if tenants could get through the permitting process as fast as possible so the tenant can hire faster, open sooner, and start adding benefit to downtown. Mr. Ehikian suggested having an expeditor or ombudsman to help shepherd the applications through the various departments. Mr. Ehikian recalled Peter helped shepherd applications through when he was the Director of the Building Department. You called Peter if you had a problem and Peter would figure out where the delay was and was successful at getting projects through. Now, there were delays of weeks or months. SUMMARY MINUTES Page 4 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Ms. Bell commented on the negative impact of parklets. Ms. Bell had 15 parking spaces on her side of the block. There were five restaurants in the area and most of them wanted multiple parking spaces. Ms. Bell paid several hundred thousands of dollars over the years to build parking structures with the understanding they would provide customer and staff parking but about two-thirds of the parking spaces were committed to permit parking. Ms. Bell paid $800/year for a space in a garage she built. If the City allowed nonretail spaces, Ms. Bell suggested having in mind what you were trying to create. Think about the environment of the towns you like to shop in, maybe Carmel, San Mateo, or Mountain View. Do you want to walk down a block where half the block had one door for a financial institution and all their windows were blocked off because people do not want to be seen while they were making financial transactions? Ms. Bell opined that nobody would want to take a space next to a financial institution. Ms. Bell wondered if real estate agents could drop their prices. Ms. Bell recommended the City have maximum percentages for uses. The three bars on Ms. Bell’s block wanted to have parklets but she did not want people drinking and carousing on her entire block. Ms. Bell wanted Permitting to think about the impacts of certain uses. When a wood fire pizza place was allowed, Ms. Bell’s space was full of smoke. When Burger King was there, they did not have adequate filters and the greasy smoke came into Ms. Bell’s building. Books cannot be covered with smoky grease. Ms. Bell had some books worth hundreds of thousands of dollars. Ms. Bell was interested in hearing more information about restaurants being controlled but not retail on California Avenue and if it meant a Costco could come in. Ms. Bell wondered if the City wanted Palo Alto to be distinctly different and more elevated than other towns. Ms. Bell urged the City to think about what they were trying to create before opening the doors. Councilmember Burt stated it was necessary to have a discussion to identify commonalities of interest of property owners, prospective retailers and their representatives, and existing retailers and how to reconcile the differences. Besides new procedures, Councilmember Burt wondered how to organizationally address the culture that was not oriented toward getting to yes. Councilmember Burt thought there was a need to evaluate how the performance of managers and personnel was judged and measured. There was a strong safety culture among the staff issuing building permits but it had to be balanced against the culture of facilitating retailers in downtown or installation of solar and electrification. Councilmember Burt emphasized establishing mission goals and performance metrics to help move the things the City wanted to do organizationally. Mr. Ehikian remarked that third-party plan checkers sent him back multiple comments. Mr. Ehikian suggested incentivizing staff and outside plan checkers to align their interests with applicants and help speed up the process, maybe a performance standard or metric for how many applicants were approved. SUMMARY MINUTES Page 5 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Mr. Weidanz thanked Director Lait for sharing information in his opening statement. Mr. Weidanz could keep that information on his desk and relay it to people who called the Chamber. Mr. Aknin believed that broadcasting some of the changes made by City would result in people getting more confident over time. Councilmember Burt thought the City lacked a narrative describing the reforms in process or that will be done in retail and electrification. Mr. Levy thought the Council and Director Lait were moving in the right direction. Mr. Levy does not go to a retail store when he can buy online. The retail environment has changed. Instead of retail, Mr. Levy suggested filling vacant spaces with things he, his wife, and neighbors might go to on a regular basis. Daily or weekly, people go to the grocery store, pharmacy, or hardware store. Monthly, people may have hair, nails, massage, or repair services. With Philz Coffee, Verve, two Coupas, and Cafe Venetia, Mr. Levy did not think downtown needed more coffee places. Based on reading sales tax reports, Mr. Levy believed the City was doing well, beating the State and most cities. In downtown and Cal Ave, 60 or 70 percent of what is increasing is food and drink, which is where people spend money. In 25 years, Mr. Levy has not bought a book in a store except for his grandkids. Mr. Levy gets e-books and e-music. Mr. Levy urged moving in the right direction, not based on nostalgia, because some stuff was not coming back. Apple, the bike store, jewelry store, and eyewear store offered a great combination of retail and services. Moderator Aknin asked the panel what differences they have heard about Palo Alto’s permitting process versus other Cities. Mr. Sweeney responded that every City in the Bay Area experienced a similar trend of downsizing staff during COVID and then the world came back quickly so there was a huge backlog of applications. Palo Alto was perceived to have a slower permitting process than many cities. Mr. Sweeney encouraged looking at the last X number of permits to see Palo Alto’s average time from application to obtaining permits compared to peer cities. Mr. Sweeney stated that timing was a big complaint everywhere. Clarity and transparency on timing and process was hugely important for retailers. To apply for a CUP, retailers spend tens of thousands of dollars for attorneys, doing a layout, negotiations, and hiring consultants but there was no guaranteed timeframe for receiving a building permit. In the last year, Mr. Sweeney has seen the process average six months. For CUPs, make it known if the City was generally supportive of a certain use and what concerns to address so retailers have an educated approach and can mitigate the risk. If retailers were unclear on their chances of obtaining a CUP, they would not go through the effort. Public Comment: 1) Whitney Denson from 510 Waverley is a retail owner, commercial building owner, and resident. Ms. Denson was supportive of the City coming from a place of yes. The City had to embrace new ideas, new storefronts, and new companies. Office workers supported retail, so part of the challenge was to fill up offices. Ms. Denson had a business next to her that had been under construction for three years and was still empty. There was nothing open on Waverley during the day except Tai Pan and she SUMMARY MINUTES Page 6 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 heard they were leaving when their lease was up. Ms. Denson was very concerned and urged doing whatever possible to fill up Palo Alto vacancies. 2) Roxy Rapp grew up on University Avenue. Mr. Rapp said the problem with closing California Avenue, Ramona Street or anywhere else was that retail needed lights, horns honking, and other customers to get customers unconsciously excited about walking down the street to see what retail store was on the next block. Colors and cleanliness were important in retail. The atmosphere you create made retail successful. Burlingame was successful and they had a beautiful new sidewalk, colored benches, planters, and color hanging from trees, telephone poles and light poles, which created a good feeling, you unconsciously liked it and felt comfortable shopping. We should be ashamed of ourselves as a city to have dirty entranceways on California Avenue and Ramona Street. Mr. Rapp thought the City needed to get somebody that understood how to improve it and make it inviting. 3) Nancy Coupal from Coupa Café wanted the City to consider the expensive CUP required for restaurants to obtain their ABC license. Ms. Coupal said the City should reduce its fees and make it a faster process. Ms. Coupal’s ABC license sat on a desk for nine months before she received her CUP for Stanford Research Park. Ms. Coupal thought beautification should be a priority, which was easy to do and did not require spending $43 million to widen sidewalks to make University Avenue beautiful. Ms. Coupal suggested the City work with landlords and realtors to find businesses that would make Palo Alto interesting, especially to the Stanford community. Ms. Coupal recommended thinking about Palo Alto having a lot of young people with nowhere to go in town so they go to the Guild, Mountain View, and Redwood City. The UNICEF store is Ms. Coupal’s go-to for gifts. Ms. Coupal urged thinking about unique stores and not just chain stores. Think about what makes Palo Alto unique and why people should come here. Carmel was a great example of having wonderful stores and restaurants, and fantastic walking. Restaurants bring in sales tax, so do not ignore restaurants. Ms. Coupal wanted more communication on why empty spaces took so long to be built out. On Ramona Street, Ms. Coupal had been waiting for The Old Pro to open for four years and did not understand the delay. Mr. Aknin stated that people were less willing to take a risk as the economy goes down. People did not want to take additional risk when ambiguity was imposed by a CUP process. Mr. Aknin had seen many Cities adopt performance standards related to uses they wanted instead of having a CUP process. Councilmember Burt pointed out that retail customers included residents, office workers and visitors with different interests and some overlapping interests. When evaluating the retail strategy, we needed a better understanding of who were those customers, reconcile customers’ different interests, and what were our objectives. Councilmember Burt wondered how aesthetics could be addressed in the near term to start the process as opposed to a single long-term solution. SUMMARY MINUTES Page 7 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Chair Kou emphasized that vibrancy and a street full of activities did not equate to economic or financial success for businesses. Chair Kou heard from many businesses that when the street was shut down for activities it did not bring them business. Councilmember Lythcott-Haims wondered how the City could change the perception about its process and willingness to invite retail. Councilmember Lythcott-Haims thought the City’s Marketing and Communications Department could help as well as Mr. Weidanz. Regarding beautification, Councilmember Lythcott-Haims noted the visual intentionality in a recent Public Works project of putting in red brick at the crossing of Arastradero and El Camino, and she heard other people commenting on it. Public Comment: 1) Georgie Gleim owns Gleim the Jeweler, which had a downtown location until their needs changed and their rent increased during COVID. Ms. Gleim paid higher rent for their Stanford location but believed the rent was fair based on the traffic compared to Downtown Palo Alto. The benefits from being at Stanford Mall included cleanliness, beauty, and available parking, which made it a good environment for retail. Ms. Gleim’s primary complaint about downtown was the lack of attention to cleanliness. Ms. Gleim paid $800 parking permits for her employees when she was downtown. Ms. Gleim opened a second location in Downtown Los Altos that has worked out well. Ms. Gleim’s frustration with Los Altos permitting was not having a description of everything that needed to be done. Downtown Los Altos was more interesting and appealing, had streetscapes, many independent and interesting retailers, a vibrant Los Altos Village Association, and a different atmosphere. Los Altos Rotary helped to keep things interesting, clean, and vibrant. Ms. Gleim was sorry to leave Downtown Palo Alto after many decades but felt it was the right decision. 2) Elizabeth Wong is the manager of Ramona Post LP, which owns 532, 534 and 536 Ramona Street. Coupa Café’s parklet occupied two-thirds of the frontage of Ramona Post’s property. Ms. Wong asked the City to restrict Coupa Café’s parklet to the area in front of its own business, and allow Ms. Wong and her tenants to participate in the parklet program. Mr. Shenk recalled Street Sense said you cannot curate retail. We cannot decide a space will be for a certain use. The City needed to create a framework that allowed the market to work. Mr. Shenk advised to not market the City’s recent permitting and zoning changes. If somebody can get a permit in a normal course of time, brokers and tenants will know. You do not have to tell anybody. Word will spread because Downtown Palo Alto is a desirable market. To market it before you can do it would be a mistake. Property owners, retailers, and residents all want retail vibrancy. Keep up the cleanliness. Landscaping on University was needed because there was only dirt, trash, and feces. Mr. Levy wanted a discussion on a vision for how University Avenue and Downtown could fit into a city with many visitors, a research park, a shopping center, Town & Country, and office SUMMARY MINUTES Page 8 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 vacancies. Do not romanticize Burlingame Avenue where it took a long time to find a parking space at 1:30 PM. Mountain View closed Castro Street and was doing well. One block in Downtown Redwood City was closed. Mr. Sweeney spoke about reacting to the market. The retail landscape evolved in the last two decades. There were effects from Amazon, COVID and AI. The goal should be to create vibrant businesses that bring foot traffic, even if they were not traditional retail. Mr. Ehikian advocated for generalized retail zoning because traditional retail had changed. Retailers bring services. Be adaptive. Retail and restaurants had different needs and wants. It may cost a million dollars to convert a space to a restaurant. It took three years to convert retail to a restaurant on Waverley; three years of vacancy, no rent, and no operations. Mr. Ehikian relied on retailers to tell him if they wanted to be downtown because they know their business and where they can make money. Ms. Bell’s business was doing better than ever. Ms. Bell believed you need to have good retail and an affordable space. Visitors were important. Vibrancy kept it exciting. Ms. Bell heard from four managers on University Avenue whose businesses were negatively impacted by parklets in front of their stores; therefore, Ms. Bell urged the City to restrict parklets to the space directly in front of the restaurant. Cars driving by need to see the front of your store from the street. Mr. Aknin posed the following questions to the panel: What types of businesses, services and experiences were in demand in today’s landscape? How could restarting the Business Improvement District (BID) help fill vacancies? Cleaning, security, and marketing issues for a downtown area were typically handled by a BID. Downtown Redwood City has had a BID for approximately the last 10 years. Why would a BID work or not work? What strategies could support and attract successful brick-and-mortar businesses downtown? Mr. Ehikian replied that restaurants have always been in high demand. Everybody likes to go out to eat. The restaurant industry was very resilient but restaurants had a high failure rate because tastes and trends change. Mr. Ehikian heard criticism about University Avenue being turned into restaurant row but restaurants make money and retail had been more challenging, especially soft goods retail. Mr. Ehikian had a few retail come in, design centers, and a bunch of coffee shops but restaurants were in most demand. Mr. Ehikian had a tenant who wanted to come in on University Avenue for financial services but was told they could not. Mr. Ehikian thought it would have been a great use. Mr. Ehikian was hopeful to bring the tenant back now that the City has opened up to medical and financial services. Mr. Sweeney stated that the definition of what constitutes retail had evolved from 10 or 20 years ago. Mr. Sweeney represents a major electric vehicle company whose first choice was to locate on University Avenue but because of zoning challenges ended up signing a deal at Stanford Mall. Even if it is not traditional retail, it may still accomplish the goal of vibrancy, foot traffic, and elevating downtown. SUMMARY MINUTES Page 9 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Mr. Aknin asked if cleanliness had an impact on filling vacant spaces in Downtown Palo Alto. Mr. Sweeney did not have a specific example but retailers evaluate their choices and cleanliness was another hurdle to going downtown versus the mall. Stanford is a controlled environment. Mr. Ehikian asked Mr. Sweeney how important parking was for his tenants. Mr. Sweeney responded that it depended on the use. Everybody loved walkability and pedestrian traffic but parking was hugely important for many retailers. The City of San Mateo recently embarked on a five-year program and two blocks of B Street would be closed for as a trial period. Mr. Sweeney knew multiple retailers who were leaving at the end of their leases and relocating. Some of the retailers in the closed area need quick drive-up parking. Councilmember Burt wondered why Stanford Shopping Center thrived when nobody parked in front of the store they were going to shop at. Mr. Sweeney explained that parking did not have to be directly in front of the store; it could be nearby garage parking somewhat convenient. A trip to Stanford was a multistore, several-hour long trip, and the retailer benefitted from a constant flow of foot traffic. Councilmember Burt commented that there had not been a discussion on the different identities of retail on University Avenue versus Downtown Los Altos, Downtown Mountain View, Stanford Shopping Center and Town & Country. Locations succeed because they accentuate differences in a positive way as opposed to all trying to be the same thing. The optometrist at Site for Sore Eyes told Mr. Shenk about their decrease in sales with the threat of a parklet. University was closed in front of Site for Sore Eyes for a while. The optometrist said their customers knew with a closed street they had to park elsewhere and walk to refill their contact lenses, or customers may drive by and if there was no available parking they go where it was more convenient. Mr. Shenk mentioned that all retailers needed drive-by traffic and opportunity for customers to park in front. Mr. Aknin remarked that complaints in Redwood City reduced by about 80 percent when they put up a digital sign on the Jefferson Garage with the amount of available spaces. Seeing available spaces every time you drive by builds certainty that if you go downtown you will find a parking space. Downtown Redwood City’s primary retail streets had time restrictions so shorter-term parkers could find more convenient spaces. People parking for a longer term would park in the garages where there were no time limits and it was priced differently. At Stanford, customers know they will find a parking space somewhere. Mr. Levy wished the discussion did not use the word ‘retail’ and instead talked about filling vacant spaces with things that attracted customers. When Mr. Levy went to Burlingame, he did not park in front of the store because workers parked in most of those spaces and moved their cars every two hours, so he parked in a parking lot two blocks from the location he was visiting. Mountain View had street and garage parking 1½ block from Castro. Mr. Levy thought it was wonderful to have no cars on Castro. Maybe service, entertainment or something else could fill SUMMARY MINUTES Page 10 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 vacancies with economically viable clients, which may not be as challenging as trying to make University Avenue into Stanford Shopping Center. Mr. Shenk was hesitant about restarting the BID because retailers would see it as paying another fee to do business. The vast majority of retailers paid Parking Assessment District Fees through their property taxes. Retailers were struggling. Retailers needed to know what they would get from a BID and how it would work. Mr. Shenk suggested that the Council first approve changes in zoning and permitting, and start repairing the City’s reputation. Then, maybe the downtown retail community could get together to discuss the BID. Chair Kou asked Mr. Aknin about Redwood City’s BID. Mr. Aknin stated that Redwood City’s BID started about 10 years ago when Redwood City was known as Deadwood City because there was not a lot of investment. The Downtown Precise Plan was adopted and the market came back, so there was a positive sentiment overall. The City put a lot of money toward redevelopment over the years to restore Courthouse Square. Visit Redwood City was a coordinated marketing approach but you also need operating businesses and events that are doing well. What Downtown Redwood City business owners most appreciated about the BID was almost daily steam cleaning of the sidewalks, daily trash pickup, and additional landscaping. Downtown Redwood City businesses were willing to tax themselves to have a BID; however, they probably would not be as likely to do so in a down economy. Increased development resulted in increased property tax assessments. A percentage of the property tax went toward Redwood City’s BID, which had an $800,000 or $900,000 budget to spend on the downtown area. Redwood City’s BID had been successful over the last 10 years. Mr. Shenk pointed out that the Redwood City BID was tied to a general plan. The City of Mountain View worked with businesses to facilitate getting what the City wanted, such as allowing Google to expand but asking them to build some apartments in exchange. Mr. Shenk wanted the City of Palo Alto to attract office to get what it wanted instead of imposing a tax on retailers to fund landscaping. Chair Kou queried how a BID was tied into the Chamber of Commerce. Mr. Aknin replied that a BID needed someone overseeing the BID. Mr. Aknin had served on the RCIA (Redwood City Community Improvement Association) as a City representative, and after that he stayed on to help with parking coordination. The RCIA put out an RFP to oversee the BID, pay the cleaners, facilitate board meetings, etc. The San Mateo County Chamber of Commerce (Redwood City, San Carlos, Menlo Park, Belmont, and unincorporated San Mateo County) won the bid. Chair Kou was interested in the City considering if a BID could be done in Palo Alto, and discuss how partnership with the Chamber and Rotary could support a BID. Mr. Guagliardo, Assistant to the City Manager, stated that the most successful BIDs were not convened by the City. A nonprofit partner needed to convene, run, and administer the BID. One of the value propositions of a BID was that businesses choose what they want to enhance beyond what the General Fund and the City could sustain, such as cleaning, marketing and SUMMARY MINUTES Page 11 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 promotions, and events. A BID was by the businesses, for the businesses. A BID provided consensus and a single voice to the City. Burlingame has a very active BID that provided information to the City, and was a unified point of contact when the City wanted to communicate to those businesses. For events, Burlingame businesses donated in-kind donations, generated interest, and provided some of the necessary effort. Based on City Manager Shikada’s prior experience, the City could not drive or impose a BID; it needed a partnership, identification of the common interests, and clarity on how the various parties would participate. Mr. Aknin addressed Councilmember Burt’s questions about BIDs. Cities were not contributors to the BIDs because BIDs were funded via property tax assessment. The City sits on the BID board. The City of Redwood City often matched funds. For example, the City of Redwood City staffed and matched some of the RCIA dollars for the digital displays and digital wayfinding. Office tenants were BID members. All properties located within the BID’s boundaries were taxed, and those taxes were often passed down to the tenants as part of their triple-net leases. Mr. Weidanz heard comments about how downtown businesses could support more cross- shopping. Hopefully someone visiting an auto showroom or pet groomer will get a cup of coffee or lunch or spend more time on the street. When visitors, students, or daytime workforce stop by the Chamber office and ask what they can do, the Chamber had a map of downtown and could direct them where to go. Mr. Weidanz wanted to have a continued conversation on this topic and he asked Mr. Shenk, Mr. Sweeney, Mr. Ehikian and Mr. Rapp what brick-and-mortar businesses could fill their vacancies that could create an experience for a person that they could not get online. Public Comment: 1) Roxy Rapp suggested having any type of business that was new and different. Mr. Rapp put in a lighting store downtown, which has been very successful and the manager says he is happy they are there. Roxy’s father used to tell him to find a need and fill it because you will be successful. It takes more than putting in merchandise. The right sales help, management to train the sales help, window trimming, keeping the front of your store and interior clean, paint, and advertisement were all components of good retail. In downtown, if you do not see a location, you forget about it and you will not shop there, which is why downtown needed traffic. Stanford Shopping Center has a big advertisement, you are going to one huge retailer, and you get out of your car and walk for the wonderful experience. Stanford had plants and fountains. The ambience they created in the Center is beautiful. You can pay to pet kittens in all Simon centers. 2) Elizabeth Wong commented that University Avenue was unique for its high-end retailers. The Apple Store is one of her tenants. The Apple Store had been there for over 20 years and renewed their lease. The Apple Store brings a lot of sales tax money to the City. Ms. Wong stated that downtown retailers needed a combination of customers that were students and professional business people. Apple Store has retail at Stanford Shopping Center and University Avenue but each store had different clientele. People SUMMARY MINUTES Page 12 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 who come to University Avenue were more engaged with their businesses and more professional. The people who go to Stanford Shopping Center were more the household clientele. Ms. Wong was very opposed to making major changes to University Avenue that would bring lots of construction downtown. Ms. Wong was a strong proponent of extremely clean, nice landscape, and no parklets on University Avenue. 3) Georgie Gleim pointed out that the Redwood City BID was an assessment of property owners whereas the previous Palo Alto BID chose to assess business owners. Ms. Gleim opined that a property owner BID would probably be more successful. Palo Alto’s previous BID’s budget could barely afford to pay a CEO to handle administrative work. The BID gave one voice for the City to listen to about what was going on in retail and it was a useful tool for the City. The Palo Alto City Council decided that the BID should not advocate for any issues. Ms. Gleim believed that BIDs must have the ability to advocate. The City did the billing for the BID but it could have been more efficient and there were lot of issues with miscommunication. 4) Michael Ekwall is owner of La Bodeguita on California Avenue. The California Avenue project has been ongoing for four years. Mr. Ekwall believed that California Avenue looked like a skid row and had a chaotic, unwelcoming vibe. Mr. Ekwall had been actively trying to meet with the Retail Committee since its inception last year. The current three committee members were not part of the original committee, resulting in inconsistency and issues not being addressed. Mr. Ekwall wanted Councilmembers to ask themselves what they have done in the last year to take actionable change to make California Avenue welcoming, which did not include hiring a consultant to work for the City and four years later hiring another group of consultants to create a plan. Other than putting up some banners on the bollards, nothing had happened. Two years ago, the City said they wanted the tents down and no sidewalls but there were still tents and sidewalls on California Avenue. Businesses were encouraged to use propane heaters and spend $2000 to obtain a permit to store propane tanks. Mr. Ekwall wanted to see the street reopen. Mr. Ekwall wanted the City to do something about the cyclists on California Avenue who do not obey the walk-your-bike sign. Mr. Ekwall was happy to meet offline to discuss these issues. Councilmember Lythcott-Haims wanted to hear from property owners about what they were doing to try to fill vacancies, particularly property owners who had multiple vacancies. Councilmember Lythcott-Haims was curious if City staff was doing any analysis on the trends in where the vacancies were and who owned those buildings. Mr. Shenk thought the City needed to change its parklet policy because of its impact to nonfood retailers. The parklet must be in front of the parklet user, not the neighbors. Mr. Shenk has one vacancy. Interest had been more on the service side instead of selling soft goods. Food folks were always interested. Mr. Shenk did not know if chiropractors, psychologists, and Pilates studios fit in after Council’s decision on Monday night. They could not go into a ground-floor retail space on University Avenue because they were not typical and did not easily fit into the zoning ordinance. On Waverley Street, they found a furniture store tenant for the old toy store SUMMARY MINUTES Page 13 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 building. It was a beautiful furniture store with beautiful goods and a wonderful team. Mr. Shenk knew Restoration Hardware was going to leave, so he chose to put in a furniture store instead of a restaurant or something else that might pay more rent. Mr. Shenk tried to create an environment that was attractive and beneficial to the whole, not being selfish and putting in whoever could pay the most rent every time. Mr. Ehikian remarked that they have done fairly well in trying to fill their retail spaces. The vast majority of the 68 clients he represents in Palo Alto are mom-and-pop owners and they lose rent every month that a space was vacant. Owners need income coming in. They tried to do anything possible to get a tenant to come into their space, such as TIs or rent abatements. In most cases, they did not ask a rent on their spaces; they asked the tenant what worked best because the businesses know how much money they expected to make. If the business was successful, the property owner was successful. Mr. Ehikian thought it was nearly impossible to pull in a retailer by calling them if they were not looking to be in Palo Alto and did not know the market. Chair Kou spoke about the necessity for clarity and transparency on timing. Mr. Levy worried about more traditional tenants leaving as their leases come due. Mr. Aknin asked what percentage of tenants renewed their leases. Mr. Sweeney replied that it depended on the user but he had not seen a trend. Some tenants who were at the mall and downtown decided to keep only their mall location. Historically, rents in Downtown Palo Alto were stronger than Burlingame Avenue but now Burlingame Avenue had higher rents than University Avenue. The landlords have been dropping the rents to react to the market. Retailers who were unfamiliar with this area or the Bay Area will look for the safest way to roll out their expansion. Retailers will look at the various neighborhoods in San Francisco and down the Peninsula. There are established retail nodes in Downtown Burlingame, Stanford, Downtown Palo Alto, Valley Fair, Santana Row, and Downtown Los Gatos. Retailers will not go to San Mateo or Mountain View because it is safer to go where their peers are, where there are proven sales and cross- shopping. If it is a choice between going to University Avenue or the mall, you cannot combat market dynamics but having a more vibrant downtown with fewer vacancies will help your chances. Councilmember Burt queried if the adjustment in rents on University Avenue was having any impact. Mr. Sweeney thought it was slowly having an impact. Downtown Burlingame does not have a huge regional mall within a short distance. Councilmember Burt stated that we compete against ourselves. We have an incredibly successful Stanford Mall. Many of the high-end stores in Burlingame that are not on University Avenue are in Palo Alto at the mall or Town & Country. Councilmember Burt highlighted the four components to the identity of Downtown Palo Alto as a retail area versus others. (1) Historically and potentially going forward, Downtown Palo Alto is a combination of an attractive human-scale urban environment. Customers over the years have said it was like an East Coast or European city and you do not hear that about other cities in the SUMMARY MINUTES Page 14 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 area. (2) Palo Alto had an incredible history and strong identity as the epicenter of technology but the identity was underutilized in what we promote. (3) Palo Alto had its own vitality. Palo Alto had a lot of tech workers, Stanford students and visitors. (4) A potential fourth component to the identity and an expanding opportunity was a transit hub. The VTA Ad Hoc Committee had its first meeting yesterday, bringing together all the transit agencies (the City, Stanford, VTA, SamTrans, AC Transit, Caltrain and MTC) to revitalize the University Avenue Station. There were near, medium, and long-term prospects. VTA was investing significant dollars in the design. The University Avenue Station is the second biggest Caltrain Station and the biggest bus station in Santa Clara County; however, it was underappreciated. There was opportunity to unite the two sides of El Camino. The Committee took a five-minute break. Mr. Aknin opened up discussion on activating vacant storefronts with a pop-up retail or retail- like store as a shorter-term use, or a temporary art display to make the environment look better overall for folks in the downtown area. Mr. Ehikian utilized online resources to find temporary pop-up tenants, such as a Halloween or Christmas store. Mr. Ehikian spoke with Pace Gallery about putting an art gallery in a vacant space but nothing came from those discussions. If the space fits and it can be done fairly easily, it is a great solution. They were looking into putting art installations or window wraps in Redwood City but they found a tenant. Mr. Ehikian supported doing anything to increase the appearance. The University Avenue project would not get done until 2029. In the interim, the City could improve the process and make it easier; create a clean, safe place that people want to come to, clean our sidewalks, and improve the planters. Mr. Ehikian noted the recently increased homeless population had new homeless coming in who were more aggressive and confrontational. The environment needed to be welcoming, clean, walkable, and inviting. Mr. Sweeney pointed out that a pop-up use was short term, so he suggested fast-tracking the necessary permits for a pop-up use instead of a lengthy permit process. Maybe the building is not up to code for a permanent use, reduced to a shell condition, and has no restroom but maybe the City could give an exception for a pop-up use or find solutions without triggering costly and timely upgrades to building infrastructure. Mr. Aknin heard that building codes could sometimes be the biggest barrier when the building code had not been interpreted to have a nuance between longer-term and shorter-term uses. A longer-term use could take those costs over a seven-year time period or whatever their lease was but could not do so over a seven- month time period. Mr. Shenk thought the way to immediately address vacancies was to allow office use. Mr. Shenk gets more calls from startups than retailers. Startup folks will take a space in any condition; they move in, put up some Ikea desks and start working. Mr. Shenk advised not blocking off the front windows so you can see people working. Office workers go shopping because they do not have cafeterias onsite. Offices would fill empty spaces, add people to the SUMMARY MINUTES Page 15 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 downtown and there was not a big investment. Art was a great idea to make a vacant space not look as bad but the City needed to have a resource so he could find out what was approved to be in the window, the materials and attachment methods, and what costs he had to pay. Mr. Shenk urged the City to ensure that vacant spaces were truly vacant and not purposely kept vacant to utilize for storage or something else that should not be in a vacant space. Retail should be retail and not used to serve another function that would lower the demand from the landlord to lease it because they found another purpose. Mr. Aknin asked Elise DeMarzo with the Public Art Program if she had any initial thoughts on potential art displays or how a program like that could work. Ms. DeMarzo replied that Public Art was always thinking about how to activate spaces in new and inventive ways, including storefronts. During COVID, they did a temporary mural program printed on aluminum and placed on various walls downtown, which was great because people wanted new things to see. The original thought was that those murals could be placed on a storefront window without a property owner having to allow somebody access inside the property. The Cubberley Artist Studio program had a roster of community artists who would be happy to show their work in a gallery style within a storefront. Maybe there could be a pop-up use if people were to go inside. There was an online roster of muralists available for anyone who was interested in painting a mural on their private property. They could provide a list of local artists who might have works ready to show in a storefront. Mr. Levy recalled Street Sense and others said that one of the challenges was the loss of customers to Stanford Shopping Center and Town & Country, and work from home. Housing hopefully will not take two or three years. More residents and workers downtown would add customers. Mr. Levy wondered if the City could incentivize people who had office space in the second, third, and fourth floors to more easily fill the spaces. In the long term, add customers and fill vacant spaces with things that are attractive to residents, workers and visitors, and not necessarily nostalgia. There used to be Hobee’s, Good Earth, and other restaurants where families could go. When Mr. Levy’s son was a teenager, downtown was a teenage hangout place. Mr. Levy does not know if that was possible to replicate. There are a lot of Stanford people but those customers were not easily attracted to downtown because of economics or other alternatives. A few years ago, Mr. Shenk was approached by one of his venture capital tenants asking if there was a retail location where they could put one of their portfolio companies to obtain feedback from the public about their product. For example, they could have put DJI, the drone company, in a space for a couple months so the public could see and touch their products to see if they like it. It may technically be an office use because they were not selling something but it was public-facing and it temporarily filled a vacancy. Mr. Aknin had a similar conversation with Chair Kou in pre-meeting about expanding the showroom definition to other types of products. Mr. Ehikian commented about the demand for event places for art, for a tech company to show their product, or to hold an investor meeting. It was difficult to find spaces to gather. Spending SUMMARY MINUTES Page 16 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 $5000 on a wrap of your windows was not ideal and did not meet the objective of getting spaces leased. Mr. Ehikian believed it was helpful to have flexibility to upsize, downsize or switch uses based on market demands. Retailers do not hold stock when they use drop shipping. Mr. Ehikian thought that having the ability to modify ground-floor space might help with leasing. Mr. Ehikian had many tenants who needed 1000 or 1500 sf but there were not many spaces available of that size and there was a lot of demand. Mr. Ehikian had seen some mom-and-pop retailers taking a space that was too big or too small for their business requirements and it led to failure. Mr. Shenk stated that almost all the buildings downtown along University were 100 feet deep. A 25-foot wide front was a 2500 sf retail space, which was big for many retailers. To accommodate smaller retail spaces downtown, Mr. Shenk suggested cutting the space in half and let an office or other use have the rear part. Councilmember Burt wanted to consider microspaces or small spaces. Allowing a tech company to try out its product on a retail level tied into the identity of downtown as the center of technology and innovation. The downtown area has a series of incubators and accelerators but the City did not identify or promote itself as being a center for them. Councilmember Burt suggested having semi-permanent, longer-lasting code art exhibits. Councilmember Burt wanted the public to be aware that the former gym at Bryant Garage was going to open as La Comida senior food during the day and a teen center at night. The Varsity closed. Downtown needed more places for teens. Soon after the start of the year, the Home Key project will have transitional housing opportunities for unhoused people who were interested in wrap-around support services. Councilmember Burt said the City needed to decide what to do about unhoused displaying aggressive and unlawful behavior. Councilmember Lythcott-Haims loved Mr. Shenk’s comment about VCs with infant companies allowing the public to touch the next new thing. Palo Alto is the place where the startup concept was born and it is still happening. Perhaps in exchange for being allowed to use a space for a startup on a short-term basis, they have to put a sign in their window saying they are a startup or a Palo Alto startup. People visiting Stanford and Palo Alto could walk down University Avenue and see an indication of the startup culture. Those visitors may stroll down University Avenue and have a bite to eat or a cup of coffee and learn about the startup mindset. Councilmember Lythcott-Haims was deeply interested in what was needed to make shorter- term use permitting easier. Councilmember Lythcott-Haims wondered if the decision was made to proceed with this, when it could get it done. Vacant properties were contributing to a lack of vitality and the idea was to urgently activate vacancies on a short-term basis. Chair Kou asked what the average rents were in Palo Alto and Burlingame. Mr. Sweeney replied that it ranged, was based on size and restaurants generally paid more. Some recent deals of larger square footage on Burlingame Avenue were close to $90/sf/year. Spaces on the market on University in the same size range were $60-$65/sf/year. SUMMARY MINUTES Page 17 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Chair Kou was recently at the National League of Cities Convention in Tampa. The Coordinated Area Plan convention center was lovely and the sidewalks were clean. Chair Kou wondered if Palo Alto’s sidewalks needed a deep wash or slurry on the sidewalks to look whiter. Tampa connected their convention center to their historic downtown Ybor City. Tourists gathered around multiple storefronts that showed people wrapping cigars. Those types of activities draw curiosity. The walk to Tampa’s historic downtown was marked for wayfinding, well lit, and felt safe. Palo Alto’s alleyways needed to be lit. Chair Kou mentioned that Councilmember Burt takes visiting dignitaries on tours around Palo Alto. To help bring people in, Chair Kou suggested the Art Committee collaborate with property owners to create something for tourists to walk around and view. Chair Kou noted that people were familiar with University, Hamilton and Lytton but not the side streets like Waverley. Chair Kou wondered what property owners (or the BID if it was restarted) could do to direct people to stores or experiences located on side streets. When Chair Kou ordered water at a sushi restaurant, it was delivered by a little robot. Chair Kou suggested having a demonstration of robots from some of the startups, as long as the robot was not sitting in front of a computer and working in an office. Maybe property owners could provide temporary space for Palo Alto High School or Gunn High School’s robotic team to display their robots. Letter Perfect was another nostalgic store. Chair Kou wanted to hear from Gwen about their success, how they were adapting to changing trends, and what kinds of things they do. Chair Kou thought art wrap or popups were needed to immediately activate vacant storefronts. The permitting process and building codes needed to differentiate between temporary and long-term uses. Councilmember Lythcott-Haims spoke about the need to bring more kids and families to University Avenue. Maker spaces were popular with kids and families and could go in a popup temporary space. MakeX at Cubberley could have a space uptown and would be consistent with Palo Alto’s innovative history and startup culture. Teaching kids how to use their hands and brains to make things was the root of how people make inventions that change the world. Public Comment: 1) Elizabeth Wong is a property owner in Downtown Palo Alto. Ms. Wong spoke of the high cost of maintaining empty buildings. Ms. Wong was trying everything possible to fill those buildings. Ms. Wong did not like to display art or anything on her windows because when stores look vacant it prompted people to call her to see her space but she did not believe they would call if there was something distracting them. There was a difference in insurance between a vacant building and one with tenants. Ms. Wong noted a change in the last week in people calling in for spaces, people were more hopeful about the future but they were asking for a lot of concessions. Normally, they give one or two months of free rent because her buildings are in top shape when they are rented. One of her tenants asked for one year of free rent and he has not yet gone to the City to obtain a CUP. SUMMARY MINUTES Page 18 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Mr. Aknin asked the panel for their closing comments, concentrating on actionable items. In Mr. Sweeney’s work with ground-floor retail for mixed-use residential builders, usually the bulk of the parking was in a garage but teaser parking was built along the front. The perception that you might get a parking spot brought customers even if they ultimately parked in the garage. A good solution other cities have found was to put parklets directly in front of the tenants. Mr. Sweeney had a vacant space on University Avenue and a retail tenant was not willing to move forward because there was a dining parklet in front of their storefront. Retailers want their customer to see their facade and storefront unobstructed. Mr. Levy encouraged continued engagement on this topic but it ultimately had to make financial sense to property owners and their tenants. Mr. Shenk agreed with modifying the parklet policy. Retailers will not move in knowing there was a risk of losing visibility and parking if somebody else put a parklet in front of them. In the mornings when the retailers open for business and the restaurant does not open until lunchtime or dinner, the front of the retailer is a greasy mess from the parklet. Maybe the restaurant straightened up but somebody overnight moved the furniture around. The popup showroom idea had great merit. Mr. Shenk would like to have the ability to walk into the Development Center and get all the necessary permits to open a business at the counter with a simple check-box form; however, he recognized that safety and code issues need to be respected if there is construction. If they are going to put in some tables and chairs, a little paint on the wall, let it happen. If it is supposed to be short term, it cannot take six months to get a yes. Chair Kou thought the team needed to get together with the other departments to determine what was necessary. On December 4, Mr. Weidanz will have an initial meeting with leaders from the Palo Alto Museum, Councilmember Burt, Steve, and Richard Hackmann from the Chamber Board. They will put together a walking tour of downtown that includes all the highlights, landmarks, and historical points. Chair Kou asked that the walking tour pathways be documented with imprints on the pavement or signage to help guide tourists on their self-tour. Chair Kou thought some permanency needed to be developed and asked what the long-term goal of the tour was. Councilmember Lythcott-Haims suggested having an app for the tour. Mr. Weidanz was looking into an app, maybe allowing visitors to select on their phone where they want to go when they arrive. Mr. Weidanz will follow up with Director Lait and his team so the Chamber could have information on hand when they were asked questions. Mr. Weidanz stated that the Chamber had spoken about the importance of communicating everything that was happening downtown with retail, housing, streetscape, parking, public safety and the transit center. Chair Kou shared a Kansas City brochure and suggested something similar could be on an app for Palo Alto visitors. SUMMARY MINUTES Page 19 of 19 Retail Committee Meeting Summary Minutes: 11/20/2024 Councilmember Lythcott-Haims wondered if any property owner was deliberately waiting for higher rents. Doing so was anti-vitality and Councilmember Lythcott-Haims wanted to know what could be done about it. We should all be interested in Palo Alto thriving. Chair Kou cautioned about having too much of one use. Have percentages for nail salons or beauty shops. Make sure there are retail and a variety of uses. Mr. Guagliardo, Assistant to the City Manager, stated that staff will incorporate this feedback into development of next steps. Mr. Guagliardo acknowledged the interest in cleanliness and safety of downtown. Mr. Guagliardo agreed with having a sense of identity and place. We do not want University Avenue to be Santana Row. Bell’s Books offered something that was not Amazon. We do not want merchants buying something wholesale and selling it at retail prices. Bell’s Books and Letter Perfect provided compelling retail experiences where people want to go in and buy in person. The Street Sense report noted that University Avenue provided neighborhood-serving retail and compelling retail experiences for office workers and others who visit the area. Chair Kou asked for a timeline. City Manager Shikada replied that staff would bring something back for the next Retail Committee meeting. Mr. Guagliardo was planning for a meeting on December 18, the third Wednesday. Chair Kou inquired if there would be discussion about Cal Ave. Mr. Guagliardo will follow up with Chair Kou on what topics to cover during the next meeting. Mr. Guagliardo could see if stakeholders were able to convene to do a similar panel for Cal Ave on December 18 or shortly after. Councilmember Lythcott-Haims recalled hearing this would be a two-day session, reserving December 4 but now it did not sound like there was a Part 2 scheduled. Mr. Guagliardo confirmed there was no meeting planned for December 4. It was difficult to hold people for the time allotted for this meeting, so the logistics of a second meeting were also difficult. Mr. Guagliardo said that staff would convene internally to identify actionable next steps to discuss with the Committee on December 18. Mr. Shenk advocated for a double session. Mr. Shenk suggested scheduling a similar session to have free flowing conversation and thoughts on the Q&A maybe when staff could come back with a draft policy or ordinance. Mr. Shenk wanted to round table it before it went to Council where the conversation cannot happen. No action taken. Adjournment: The meeting was adjourned at 12:15 PM.